It’s been two years since the first bitcoin ATM went live in Vancouver, Canada on 29th October 2013. So what has been achieved over this time and what are the current dynamics of this newly evolving market?
As it is seen on the following chart number of bitcoin ATMs is steadily increasing. However, the speed is lower compared to the first year. During the first year there were 284 bitcoin ATMs installed and in the second year only 187 new bitcoin ATM locations were added and not removed later. This is lower than we forecasted a year ago based on the growth rate of traditional bank ATMs in the beginning of 70-s. It was calculated that there will be about 562 bitcoin ATMs installed by this time, however, there are only 471 in the world.
This diminishing growth can be explained by several factors:
- First of all, the price of bitcoin machines is still pretty high. Average buy-only bitcoin ATM costs about $5K, while two-way machine prices start at $7-8K per unit;
- Another reason for such a slowing growth might be a lack of good locations. It has many times been reported and discussed privately with operators that it is really hard to find a good location. Sometimes owners don’t want to be associated with anything “bitcoin” based on its “reputation”, sometimes location has low traffic or is very expensive, as for example installing ATM at mall shops. The dreams of buying bitcoin ATM and get a full return in couple of months quickly disappeared. We collected the profitability examples of real-life bitcoin ATMs and this post shows, that although there are some high volume locations present, it is rather an exclusion from the rule. On average locations don’t bring much volume, hence making return on machine a matter of far future;
- Regulators also brought obstacles to operating bitcoin ATMs. Close supervision by authorities sometimes forced bitcoin ATM operators to close their businesses or adjust. Also making your business compliant with AML/KYC rules increases the costs of running a bitcoin ATM dramatically;
- Apart from bitcoin ATMs there are many competing services arose to exchange cash for bitcoin and bitcoin for cash. Just look at our map to see how many alternative locations there are.
Split of bitcoin ATMs growth per manufacturer shows how the production dominance changed over time. It is seen that higher than average rates of installations show Genesis Coin and General Bytes bitcoin ATM producers. To some extent this could be explained with flexible market adjustments done by these companies, e.g. Genesis Coin having two-way Genesis1 bitcoin ATM launched one-way product Satoshi1 and General Bytes on the other hand having one-way bitcoin machine BATMTwo launched its two-way model BATMThree. Also high reliability and on-time support from both providers have been reported by many operators.
Lamassu and BitAccess had initial growth impulse, but in the latest time we see a slow down in number of their new installations worldwide. For example, for Lamassu machines there are about 130 locations since beginning of June 2015 and has not changed over last 5 months.
There are also Robocoin and Skyhook bitcoin ATM producers, who also had achieved a substantial market share of installations in the past. However, for these manufacturers the number of installed machines is decreasing. Robocoin has received a bad reputation over several cases of not delivery to customers and also ruining some businesses by switching operational model at own wish. This resulted in basically no more purchases of Robocoin machines, and existing ones are either removed or switched to new software provided by General Bytes or BitAccess.
Skyhook was a cheap solution with costs of unit about $1K. However, the project is not developed anymore. There were many bugs reported and people complained of no response from official support. Some users reported that they purchased and paid machines, but never heard back from the company and no delivery happened. Some alternative custom software has been developed by operators, but this doesn’t allow the number of machines to grow, only to support existing ones.
Distribution of bitcoin ATMs across continents is not even. More than half of all machines (260) are in North America, with a dominance of U.S. locations. Canada has the second largest share there.
In Europe the lead is taken by UK (19%) and Spain (15%). Czech Republic, Switzerland, Finland and Italy are the next countries with 6-8% shares. Other European countries have smaller shares and are seen on the chart below.
Speaking about split between buy only bitcoin ATMs and bitcoin machines which allow to buy and sell bitcoins – the split is about 40/60 with dominance of one-way machines.
On the history chart below it is seen that initially number of both categories was about the same, however in August 2014 the growth of buy-only bitcoin ATM installation substantially overtaken the two-way machines. This can be explained with a lot of new cheap Skyhook bitcoin machines installed at this time. However, later due to slow down in one-way bitcoin ATM installations the shares of buy-only vs. two-way stayed at about the same level or even were moving towards more two-way bitcoin ATM installations.
Bitcoin ATM fees have always been a hot topic on bitcoin ATM services discussions. However, despite the belief that higher competition will bring prices/fees lower, we observe the opposite situation on the market. The average bitcoin buy fees are at 7.45% (based on 330 machines), and the average bitcoin sell fees are at 5.57% (based on 169 machines). We collect daily stats of these values since April 2015 and it can be seen on the chart below. It is clearly seen that buy and sell bitcoin fees were much closer before with a recent growth in bitcoin buy fees from 5.5% to about 7% level. Sell fees however stay at about the same level of 5.5%.
The growing average buy fees can be explained by new operators installations and also increase of the fees by existing ones. E.g. the histogram below shows the distribution of the fees for all machines which have the fees reported. The outliers on the right are bitcoin ATMs run in New York by CoinBTM (Cottonwood Vending) (they have 19 machines in total). The fees charged for smallest purchases at these machines are 25% at the moment from market price. Fair to say, with increased transaction volume users get lower fees at these machines (20% or 15%), however, it is significantly above the average bitcoin ATM buy fee level. High prices could be explained by operating within BitLicense field, where company has huge legal costs initially and this is, of course, going to be included in the price for end customers (thank you, Ben Lawsky).
Distribution diagram shows that majority of bitcoin ATM operators still prefer to set buy and sell fees at about 5% level. So if you get anything below this value – you are lucky.
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