Have you seen offers from Bitcoin brokers offering low fees for trades? Ever wonder how they do that? It’s probably B.S. Here’s why.
They may be claiming a 1% commission, but what is the actual rate they are selling you the bitcoin for?
For the sake of simplicity, I am going to keep the following in US dollar terms.
Lets say company iXXX is telling you that their rate is 1%. They are saying that Bitcoin is trading at US$650. So you buy US$100 from them. They subtract their 1% fee and then trade the remaining $99 for you at a supposed rate of $650. That will get you 0.15230769 bitcoin (if they don’t then charge you a miner’s fee to send the bitcoin to you).
Was that a good deal? Well, it depends on if the Bitcoin rate they used is accurate. I can tell you right now, that one site is quoting a rate of $663.23, while the Coinbase price is $648.62.
The first thing someone almost always asks me is ‘what’s your commission?’ When the better question is ‘where do you base your rate, and how does this compare to Coinbase or other major exchanges?’
If you are buying in a local currency like the Singapore dollar, and they are buying at an overseas exchange, ask them what rate they are using for their forex conversion? Is it a buy/sell rate, or is it a blended rate? They may be squeezing a few percentage points from this too.
The truth about brokering bitcoin is it’s a fairly complex and capital intensive business. You need to have risk capital and bitcoin sitting at major exchanges (which can go belly up…) waiting for clients to buy and sell. You need to have a good understanding of markets. You need to build a solid reputation as a trustworthy and honest trading house.
Ultimately, it’s up to each of us as responsible buyers to decide which firm to deal with and how to spend our hard earned money.
I prefer to deal with transparent companies and people that I like and trust.
If you have any questions about how we at Coin Republic operate our trading operations, please let us know. You can post your questions in the comments section, or use the contact form above for private communications.
Thank you for your continued support!