In this part of the Rakeback.com Bitcoin Guide we continue with choosing a Bitcoin Exchange.
In the first part of this guide we explained eWallets, the software application you need to store the bitcoins you own. Your eWallet is also capable of sending and receiving bitcoins, it’s all you need to pay for goods and services like making a deposit at an online poker room such as Americas Cardroom.
To get bitcoins into your wallet, you need to buy them, or be given them in a commercial transaction. This can be done directly with another person who has a bitcoin eWallet, but if you simply want to go and buy bitcoin, the most common way to do so is via a bitcoin exchange.
An exchange brings together buyers and sellers, and the larger exchanges maintain their own stock of Bitcoin so that liquidity is maintained.
There are lots of exchanges, operating in most of the world’s currencies, offering a variety of payment methods such as Visa, Mastercard, PayPal or bank wire transfer.
The process has become much simpler in the last two years as the quality of the software has improved, so bitcoin transactions are fast, secure and reliable.
Factors to Consider in Choosing a Bitcoin Exchange
For poker players who want to use bitcoin as a quick way of making deposits and withdrawals, there are several factors which should be taken into account when choosing an exchange.
Currency Options—in order to avoid currency exchange fees, it is best to buy coins in your local currency.
Fees—Bitcoin exchanges make a profit on each transaction by charging a fee and/or setting a spread between the rates at which they will buy and sell. You should compare prices and spreads across several exchanges before deciding which one is right for you. A graphical list of many exchanges, together with the spreads between their bid and ask prices is provided on the bitcoin.org website. Bitcoin.org is the official site of the people who manage the entire bitcoin blockchain and the mining process which creates the coins.
Liquidity—This is especially important for poker players. Ideally, you will not want to hold your money in bitcoins for any length of time. The price of bitcoin changes rapidly, so the safest option is to deposit your bitcoin as soon as possible onto your poker site, and when you withdraw in Bitcoin get the money back into your bank account quickly. Exchanges with high levels of liquidity give you the minimum wait time between converting your bitcoin to currency or vice versa. Many exchanges publish their “order book” which tells you the volume of transactions at the exchange. This gives you a good guide to how popular the exchange is, and how fast it can process your orders.
Fixed Pricing—Many exchanges give you the choice to buy or sell at a fixed price, or to do so at the market’s best price. Often you can set limits on the price you are prepared to accept so that you are not exposed to sudden market movements.
Security—Using a reputable exchange is important. There have been incidences of bitcoins being stolen online, Rakeback’s advice is to use all the security measures which the exchange offers to protect your transactions from being hacked. Many offer secure logins, and two factor authentication. You should secure your bitcoin exchange account as well as you do your online poker account.
Location—Depending on the location of the exchange, it will follow local laws and regulations relevant to financial service providers and money laundering. You should check that your exchange does not prohibit transactions to or from online poker and gambling sites.
Terms & Conditions—Just like opening a poker account, you should always read the terms and conditions before making a transaction. Don’t just click the “OK I’ve read them button”!
The last word goes to Americas Cardroom CEO Phil Nagy who told us about his enthusiasm for bitcoin when we interviewed him last week.
“Bitcoin is the new Neteller for poker players. It’s hard to set up, it’s really a pain, it’s like opening a bank account, but once you’ve set it up, I can get you your money in three hours, and you can have cash in your bank account in less than 48 hrs. You can’t ask for more than that.”