Bitcoin ATM industry grew over 2017 year with accelerating speed. Back in 2014 we did a forecast of how many installations of machines there will be in several years. You can find the table at the end of the post on comparison of traditional bank ATM growth vs. bitcoin ATM growth. The forecast was done based on bank ATM installations back in 1970-s. After 7 years we assumed there will be 2900 ATMs installed worldwide. Today (~4.5 years since first bitcoin ATM installation) there are already more than 3000 ATMs installed worldwide. And the speed if installations is only accelerating over previous years:
In this article we look at one of the most important problems bitcoin ATM operators have — finding bank relationships and opening a bank account.
At the end of the post there is a company mentioned that provides services as intermediary and connects bitcoin ATM operators directly with bitcoin friendly banks also providing additional services on the way.
Disclaimer: We are not affiliated with this company, please do your own due diligence before entering in relations. The material is posted and contacts are provided because in our opinion it brings a value for many operators who potentially need banking relationships, but struggle to find it. Continue reading
With a lot of interest in the industry many entrepreneurs want or plan to start a bitcoin ATM business. We at CoinATMRadar get many support requests for information how to do it, what are the steps etc. Here is a good overview of what are important aspects of operating bitcoin machines.
One of the main topics to research is regulation and what is needed to be done to properly register such a business. This is very important to do in right way from the beginning if you plan to do it professionally long-term and with potential to grow your bitcoin ATM network in the future.
Disclaimer: Information provided in this article is a general overview of current regulation found in public sources. It should not be taken as a legal advice. It is recommended to contact local lawyer in the area where you plan to operate machines. You can find several contacts at the end of this post.
With a trend of growing number of bitcoin machine installations worldwide many business owners start to consider hosting a bitcoin ATM at their premises. This post is supposed to help take a decision about how to house a bitcoin machine.
Generally there are several ways of doing it:
- Organizing all on your own and later on also self operating machine(-s);
- Finding someone who will be ready to finance and install machine at your location;
- Some options in between the above two scenarios.
Operating bitcoin machine on your own
When not to pursue…
The first option is rather a tedious task. Running a bitcoin ATM is a separate business by itself. In order to run a machine one should do all preliminary research work, e.g. finding out what is the legal status of such a business in the area and which licenses are required, then generally obtaining all permissions to do it within legal framework, which is usually time requiring and costly process. Apart from initial investments in legal advice services and obtaining permission, and then investment in machine hardware itself, business owner also will need to organize and maintain running of a bitcoin ATM on ongoing basis. This means to provide liquidity for bitcoin machine operations, and also organize the exchange process and provide all connected services, e.g. customer support.
In this post we look at how operators can organize supply of bitcoin ATMs with liquidity. For simplicity purpose only buy bitcoin transactions (sell bitcoins to customers) are considered.
When running a bitcoin machine every operator needs to provide it with liquidity. Usually this is done via using own capital (fiat and BTC) in order to fund hot wallet (from where bitcoins are sent to customers) or additionally holding some liquidity on bitcoin exchange (fiat currency liquidity), which is converted to BTC when transaction happens to lock exchange rate and laterto replenish hot wallet for future transactions. You can read more details about it in Running bitcoin ATM from own hot wallet or Operating bitcoin ATM via exchange.
Bitcoin ATM industry is growing fast. There are several new bitcoin machine installations worldwide daily. Existing bitcoin ATM operators increase number of machines in their networks, as well as new operators join the market. Even on the production side, there are new manufacturers developing their products and coming to the market with new bitcoin machine models targeting different segments and niches, e.g. recently were added BitTeller, Bitlox, BitConcept on our site.
Running a bitcoin ATM is an interesting business opportunity in the new era of digital currencies, however, sometimes the lack of information keeps people away as they don’t know where to start, or get any practical estimations of how much you can earn with a bitcoin ATM. In order to increase transparency Coin ATM Radar conducted a survey with a number of bitcoin ATM operators to find out what are current metrics of an average bitcoin ATM business.
Before going any deeper we recommend to read:
- “How much can I expect to make owning a bitcoin ATM?” on Quora
- Bitcoin ATM profitability real life examples
- How to start a bitcoin ATM business – check list
- Exchange and counterparty risks when running a bitcoin ATM
Now back to survey. It was sent to 24 operators in total, 11 responded either in full or skipping some questions due to not wanting sharing info, although it was mentioned that none of info will be associated in any form to the company or person responding. Even limited info we received gives a good estimation of level of costs and earnings one should expect.
In the previous article we covered exchange and counterparty risks of operating a bitcoin ATM and two general ways to do it: sell bitcoins from your hot wallet, or do mirror deals via bitcoin exchange.
In this post we look at what system settings are supported by main bitcoin ATM providers, namely: Lamassu, General Bytes and Bitaccess. Other large supplier of bitcoin ATMs — Genesis Coin was reached but didn’t provide details about their setup options.
Lamassu bitcoin ATM has an open source code. This allowed different developers to take the code and build software upon it. E.g. Dash implementation is done by external party, Ethereum was also implemented by external party first and later on Lamassu added their own version of ETH official support.
Based on information provided by Neal Conner (Customer Service Manager) Lamassu bitcoin machines support the following settings currently:
Running a bitcoin ATM brings a lot of opportunities. On the other side such a business brings a lot of risks too.
This post concentrates on two of the main risks which bitcoin ATM operators have to deal with and choose which way to follow:
- Exchange rate risk;
- Counterparty risk.
For simplicity reasons lets look at the case when bitcoin ATM allows buying bitcoins for cash, not selling. Every bitcoin ATM operator chooses how to run a bitcoin machine in this case:
- By using own bitcoin stock;
- Through exchange mirroring deals.
Selling bitcoins from own stock
This scenario is illustrated on the following diagram (click to enlarge):
Why you need to create and promote your bitcoin ATM brand
Almost every day there is a new bitcoin ATM installed somewhere in the world. Most of the locations are in the U.S. and as it was mentioned in previous posts there is a concentration trend continues in bitcoin ATM industry. Concentration happens on both levels: geographical level (bitcoin ATM locations are not evenly distributed with some peak numbers in particular cities) and operator level (there are some big players appeared on the market that have many bitcoin ATM machines installed). Two trends are interrelated as the same operator may want to locate machines in the area where the company or owners are located. However, some bitcoin operators have nationwide or even worldwide networks.
With these trends in place it is very important for bitcoin ATM operators to distinguish their machines from competitors’. There are many reasons for this, but the main ones are:
With bitcoin price rise the speed of bitcoin ATM installations also accelerated as there is a spike in number of bitcoin ATMs appeared in the last two weeks. Bitcoin ATM operators probably had to pre-order machines quite a while ago, so it is more a thorough calculation based on expected transaction volumes and potential growth. But as bitcoin machines are installed in many places and by independent operators – this fact shows that running a bitcoin ATM is a profitable business.