/
47 views

Bitcoin ATM growth underscores consumer adoption of cryptocurrencies

The pioneering cryptocurrency continues to lead the crypto space in expanding access and infrastructure.

Bitcoin ATM machine
Advertisements

People don’t want to touch cash or coins.

Up to 80% of bills in circulation have traces of cocaine, 94% have traces of fecal matter. The flu strain can stay viable on a dollar bill – for 17 days. 

Why does this matter? Well, amid this rumored coin shortage and rush to use debit and credit cards instead of hard currency, a business that is doing the exact opposite is flourishing at an unbelievable rate.

That company happens to be Coinme, better known as the parent company of CoinStar. You may remember CoinStar machines from your local grocery store. You’d bring in a big jar of pocket change you had diligently stowed away over time and exchange it for bills.

CoinStar meets Bitcoin

Back in March 2020, while you panicked and bought toilet paper that you still haven’t used, you probably missed that CoinStar machines at your grocery store were outfitted with a new feature — the ability to buy Bitcoin.

Bitcoin ATMs, or BTMs, are automated machines that accept change and cash in exchange for Bitcoin, and they’re being built on a massive scale. Coinme reported in December that they already outfitted 5,000 of their machines with bitcoin functionality, and their footprint is being felt nearly everywhere.

“There is a CoinStar kiosk located within five miles of 90% of the American population,” said Neil Bergquist, co-founder and CEO of Coinme. “So the collective opportunity here is to be able to give the majority of the U.S. population access to digital currencies.”

Bitcoin ATMs will go ahead and take your Jefferson nickels, and your Benjamins. Through a form of digital alchemy, they’ll exchange them for Bitcoin. 

Bitcoin ATM in Kent, England. Credit: u/V6Greg

Of course, those who are “hodling” Bitcoin already know that transactions involving the cryptocurrency work a little different than traditional electronic transfers.

How Bitcoin ATMs work

This is definitely the case for Bitcoin ATMs. Unlike traditional ATMs, Bitcoin ATMs don’t accept debit, credit, or other ATM cards.

Coinstar’s Bitcoin ATMs can facilitate transactions up to $2500. The transaction fee is somewhere in the neighborhood of 7-9%. That’s actually 3% less than what they charge for copperheads (aka, dirty pennies)

Considering the crypto part of the transaction, many wondered if Bitcoin ATM transactions are anonymous. In the United States, if you want to open an account, you’ll have to provide Know Your Customer (KYC) information, which is similar to what you’d provide a bank or exchanges if you were opening a new account.

Bitcoin ATMs vary from here in their steps. In the case of CoinStar, you get a voucher with a Bitcoin redemption code. After going online, you can deposit the voucher in your existing Bitcoin account.

You don’t own CoinMe crypto

However, the account has to be with CoinMe. Currently, Coinme’s “custodial” wallet, offered through CoinStar, does not provide account holders with their wallet’s private keys. There’s an old saying in the crypto space: If you don’t own your keys, you don’t own crypto.

Still, Bitcoin ATM expansion does give people without bank accounts another point of access to the cryptocurrency space.

Users using CoinStar ATMs have the same level of ownership of their crypto in CoinMe as retail investors do over stocks they “own” in their brokerage accounts. The ownership level in each case is less ownership in the way most people understand it. It’s more of an IOU in your account from Coinme and or your stock broker. 

“People aren’t there yet in terms of education, people aren’t there in terms of technology,” Pantera Capital (who invested heavily in Coinme) partner Paul Veradittakit said back in May 2020. “This is the way to get the mainstream user, the general public, the folks that are going to grocery stores [to buy Bitcoin].” 

Bitcoin ATMs are booming

Investment into Bitcoin ATMs is a global trend, especially where KYC requirements are more lax than in the United States. A report published in August 2020 titled Crypto ATM – Global Market Outlook (2019-2027) determined that “the global crypto ATM market accounted for $18.35 million in 2019 and is expected to reach $542.52 million by 2027.”

As of January 2021 CoinStar had only outfitted 5,000 of its 20,000 machines as Bitcoin ATMs.

CoinStar Bitcoin ATM in a grocery store

Those who won’t be crowing about missing out are companies that provide digital platforms that have embraced Bitcoin trading. PayPal and Square are a couple examples, as their acceptance of cryptocurrency is attracting investors — a lot of them. 

In mid-January, company filings by the world’s largest asset manager, BlackRock Inc, indicated that Bitcoin is on the list of potential investments for two of its funds. 

Bitcoin ATMs are the gateway for cryptocurrency

Like a gateway drug, Bitcoin ATMs and online venues for moving money are introducing the masses.

Mass adoption of cryptocurrency wouldn’t require significant habit changes on behalf of the consumer. We are already well adjusted to using digital currencies in the form of sending cash to our friends via Venmo and paying for goods and bills online. These established habits will make the path to mass adoption of these services much easier. 

And for that reason, PayPal and Square are doubling down, as they’re investing some of their reserve cash into crypto companies. That’s a heavy bet with big implications for their valuations. 

“Look at Square,” said Hong Fang, CEO of OKCoin, a cryptocurrency exchange. “A lot of its growth is from its Bitcoin business. Square is now a crypto stock, to be honest.” 

Bitcoin price volatility

As such, the shares PayPal, Square, MicroStrategy, and other public companies that have taken on large amounts of Bitcoin on their balance sheets, are implicitly taking on Bitcoin’s volatility.

In Early 2020, then-newly appointed Treasury Secretary Janet Yellen did the crypto market no favors by saying cryptocurrencies were instruments of “illicit finance.” She walked that stance back later in written remarks, where she actually said the crypto market has potential upside

This sent Bitcoin’s price cascading down a mountain. A Bank of America executive said Bitcoin, “blows-the-doors-off prior bubbles.” Just six months later, the company had made a 180 on the issue. Earlier this week, Bank of America announced new crypto research efforts. Moreover, a company’s analyst reported the cryptocurrency space is “just in its first inning.”

JP Morgan Chase report said that Bitcoin could soon trade as high as $146,000.

Part of JP Morgan Chase’s reasoning is that Bitcoin could replace gold as a commodity investment. Millennials and Gen Z are more likely to invest in cryptocurrency than precious metals like gold and silver. That’s at least in part due to the expansion of infrastructure and easier buying access.

Indeed, investors are banking that you’ll adopt the cryptocurrency market as a new found commodity, and so will everyone else. Once that happens, Bitcoins price should stabilize. But until that happens, hold onto your wallet, it’s reasonable to expect big fluctuations.

When in doubt, zoom out

One year ago today, Bitcoin was trading for just under $11,000. On days of volatility, zooming out on the Bitcoin chart shows us that patience is key. Historically, those who have been able to stomach the flagship cryptocurrency have netted big gains. 

Today Bitcoin’s price has been flirting with $55,000. Just three months ago, a big downswing had many questioning this halving cycle’s bull run has peaked. 

With politicians calling for more regulation (or in some cases, leveraging as a tool against national debt) on the nascent, alternative economy and bigger players jumping in, Bitcoin is increasing it’s position in the mainstream narrative and with the very people who long denied it’s legitimacy.

Matthew Black was born and raised in Seattle, WA and currently resides in San Diego, CA.

He received an honors degree in history from the University of Washington and has since published a book and hundreds of web and print articles on a vast array of subjects. A man of many interests, he coached soccer and travels the world when he's not coming up with the next great idea for Upside Chronicles.

Leave a Reply