Cryptocurrencies are gaining speed every week and every day. The straightforward question comes: how to exchange everyday cash for a position in Bitcoin, or any other hot or trending digital coin. The answer to that is not quite straightforward, as there are several ways to get in and out of holding a cryptocurrency.
Is it easy or hard to move from fiat money to cryptocoins and back? Is it getting easier as cryptocoins are becoming more popular? We will look at the availability of transactions, buying and selling speed and the risk of fluctuations. We will do this for a number of cryptocoins available for purchase for USD or EUR.
Since the beginning of 2017, the influx of funds into cryptocurrencies suggests a great interest in buying. But the experience is quite far from a hassle-free online shopping for a bit of risk and a quick gain. While exchanges and vendors are trying to offer new and easier ways to deliver cryptocoins, there remain enough hidden costs and problems to make the process a bit rough for a new investor, requiring some dedication to prevent the slowdowns. However, for a determined investor or for new buyers willing to store value in cryptocoins portfolios, the task is doable.
Online Exchanges: The Popular Way In
For a new investor, an online exchange is a good starting point, allowing for easy purchase and withdrawal of funds. However, while new exchanges add EUR or USD purchase options, there are still time lags, withdrawal limitations and some time lag for bank account verification. For Coinbase, the site itself claims to be the easiest ramp to the world of cryptocurrencies. Still, the process of registration may be something of a hassle, requiring an ID document verification. Some buyers may not be comfortable revealing picture IDs for trading. However, if this is your chosen mode of buying, it is best to complete the verification at the beginning, as it may take a while to scan and verify the documents. Then, when you are ready to make a purchase, you can do it faster.
Right now, a warning message on the main page is showing that even for Coinbase, a market massacre of a cryptocoin might create problems when sellers try to leave the market and cash out. The number two cryptocurrency, Ethereum suffered a sharp correction at the end of last week (EUR 246, down from EUR 340).
Coinbase, which is a regularly visited transactions platform, faced withdrawal delays for Ethereum with a significant backlog (as of June 26th). While this might be a temporary glitch, it still has the potential to cause panic to the newbie investor. It might not be so easy to untangle cash from cryptocurrency exchanges, so it is best to have a sum earmarked for trading, an amount which may be affordable enough to lose. The technology may just not be fast enough to allow for timely profit-taking.
BitPanda also looks like a sleek and friendly entrance to cryptocurrencies, allowing for EUR purchases of several selected leading coins with large market caps and high credibility. Bitcoin, of course, but along with it, Ethereum, Dash, and Litecoin, the leading market capitalization coins with the liveliest supporting communities. The major glitch of this platform is the time lag to verify and connect the bank account, which may take days initially. Also, the price quoted on Buy page is rarely the same as the settlement price.
The advantage is that card options are available, as well as vouchers and the Skrill payment method. BitPanda makes advantage of the SEPA Euro area payment system. Along with the USD, EUR is a rather smooth fiat currency to enter the world of cryptocoins. Still, even a European Union passport holder with a bank account in a European bank faces some hardships.
Keep in mind that easier buying may inflate the price of a crypto asset rather quickly. BitPanda re-introduced and integrated Litecoin in April-May, and saw activity skyrocketed on the back of the general trend. New buyers flocked to Litecoin as its price almost touched EUR 50, doubling in about two weeks. BitPanda increased its daily purchase limit for Litecoin to EUR 10,000 per day.
If global online exchanges fail, there are always individual transactions, as local vendors allow small purchases and sell-offs. However, this may be subject to volume limitations and depends on availability. Also, the quoted price for major cryptocurrencies may vary wider between vendors.
Perhaps the best option for fast and reliable switching between cryptocurrencies and fiat money are the ATMs allowing a quick exchange and withdrawal of funds. However, this might not be the right tool for investors, speculative buyers or just the curious. The availability of specialized ATM is dependent on countries and communities, and while some cities may offer the service on every corner, still other areas of the world are completely cut off from a viable connection. Moreover, the ATM most often works with Bitcoin portfolios, which requires another step to exchange the chosen asset into Bitcoin, and then into fiat currency.
Then there is the old and trusted online payment method, PayPal. While in 2014 PayPal only made slow steps toward the crypto markets, now several exchanges are cooperating and allow for a faster mode of transaction. However, do not rush to hand over your money- the warning about liquidity problems still applies. A shiny, friendly-looking website offers no guarantees for a liquid, fast exchange of funds. So while it may look appealing to get in and out of Ethereum in a week or two of buying the dips, funds may remain stranded somewhere on the Web, without a way to salvage them. Buying may be disproportionately easier than selling. Recently, WeSellCrypto.com, promising quick and easy PayPal transactions, halted trading until further notice. Other smaller online exchanges have minimum requirements for withdrawing funds to PayPal. A requirement for $1,000 may mean any lesser sum would be stuck on the exchange, so small test trades would not be possible.
Security and Anonymity
Some exchanges will invite users to store funds on their platforms- but this is an outright security risk. Storing the cryptocoins should require some research for an accessible, convenient and secure wallet, to avoid loss by hacking. For new investors, creating and keeping wallets may be something of a learning curve, but it is the best way to avoid too-easy losses and liquidity backlogs. Desktop wallets or even paper wallets may work the best, as cryptocoins could be transferred and exchanged over other networks and marketplaces, global or local.
While verification may be a hassle, total anonymity means a greater risk of funds loss, with no proof of transactions. And it is not rare for lesser exchanges to go offline, remove features, give up on PayPal payments or disappear altogether. It is best to beware lesser-known names and stick to well-established exchanges.
And the better-known and established vendors or exchanges will usually sell a smaller range of currencies. This may decrease risk, as Bitcoin, Ethereum, Dash, and Litecoin have more liquidity and a higher marker-cap, as well as loyal communities around them. But as we watched the movements in the past couple of weeks, the cycle of rising and falling is still too suggestive of a pump-and-dump scheme. Keep this in mind when thinking of the time horizon and the ease of use. It is best to try out the preferred exchange or wallets with a smaller sum and remember the buy and sell process well, to react just in time.
Basics Still Apply
For new investors, it is still the best approach to learn wallets and to be comfortable with moving from one cryptocurrency to another. Having only one route to buy and then attempt to cash out may lead to losses. So while exchanging fiat money for cryptocoins is getting technically easier and available, don’t do it in a rush. Credit card, Epay, PayPal, Skrill or bank accounts all offer access to investing but only look simple on the surface.
A dedicated bank account and a credit card, used just for cryptocurrency purchases, may be a relatively safe tool for a new investor. Put a cap on the funds for testing the markets, and keep in mind the fluctuations and sell-offs. While cryptocurrencies may be an option for financial independence and ease of international transactions, they also hold much volatility and risk as more investors try out the potential of better or lesser-known coins. With popular exchanges such as Kraken, there is also the issue of commissions and fees, which may take a bite off the profits, so the funds withdrawn may be less than expected.
As a final note, sometimes technological updates on online exchanges can point to renewed buyer interest. Keep an eye out for rising daily limits, fast and easy transactions and high activity- they may be pointers to the next big mover.
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