Technology

How to invest in cryptocurrencies?

Marmore Team

26 July 2017

How can GCC Individuals invest in Cryptocurrencies?
Though GCC has been a slow starter in the cryptocurrency space, there has been a spurt in the number of bitcoin trading exchanges in the GCC, especially in the United Arab Emirates in the last couple of years. Apart from the regional players, there are popular exchanges that allow investors from anywhere across the world to buy bitcoins through online payments.

List of Popular Cryptocurrency exchanges

 ExchangeCurrenciesCountryRemarksLinksTrade Fees
 CoinbaseBitcoins, Ether and LitecoinUS, UK, Europe, Canada, Australia and others through digital wallet.Can be used to buy, use, store and trade digital currency. One of the most popular platforms in the world.
Only exchange to offer insurance for stored bitcoins
https://www.coinbase.com/1.49%
 KrakenBitcoins, Ethereum, Monero, Ethereum Classic, Augur REP tokens, ICONOMI, Zcash, Litecoin, Dogecoin, Ripple and Stellar/LumensEuro region. Can be traded with many major currenciesLow transaction fee and preferred choice of traders.https://www.kraken.com/Maker fee: 0% – 0.36% depending on volume and currency pair
Taker fee: 0.1% – 0.36%
 CexMoney with major cryptocurrencies and vice versaBest platform for beginners. Known for its user friendly trading platform.https://cex.io/affiliate-programMaker fee: 0%,
Taker fee: 0.1% – 0.2% depending on volume
 ShapeShiftBitcoin, Ethereum, Monero, Zcash, Dash, Dogecoin and many othersIt does not accept any other currency or cards other than cryptocurrency trading.https://shapeshift.io/#/coinsNA
Exchange in GCC
 BitOasisBitocoinMENA, mainly UAEAllows buying bitcoin in AED.  Exchanges are spread across UAE, Kuwait, Saudi Arabia and Bahrain.https://bitoasis.net/en/NA
 CoindeskBitcoin with fiat currenciesUAEHeadquartered in Australia, the company has plans to expand its operations in the Middle East.
Coindesk also plans to operate bitcoin ATMs in Dubai.
http://www.coindesk.com/NA

Source: Company websites
*different types of fees are explained below

How to buy and sell cryptocurrencies (majorly bitcoins)?
There are three methods through which cryptocurrencies can be bought/ stored and sold.

  • Online platforms of various exchanges/ from the exchange offices
  • Bitcoin ATMs
  • Transactions between two parties without the need of an exchange

Online platforms of various exchanges/ from the exchange offices
Buying and selling cryptocurrencies through exchanges is probably the most popular and the less risky method available till now. There are a number of exchanges that allow trading of cryptocurrencies online.

Top 5 Bitcoin exchanges by value traded

  ExchangeHeadquartersDaily Volume traded
  BitfinexHong Kong$ 45,000,000
  PoloniexUSA$ 45,000,000
  CoinbaseUSA$ 40,000,000
  KrakenUSA$ 39,000,000
  BitStampLuxemburg$ 30,000,000

Source: Alexfortin.com, As of 7th May 2017

How to buy?

  •  Choose a cryptocurrency exchange.
  • Trade with your local currency, or USD (if local currency is not accepted by the exchange) in terms of the cryptocurrency.
  • Payments can be made by linking the bank account, credit/debit cards, or other payment tools such as Paypal. Online exchanges have a wide variety of payment options in order to lure customers.
  • Once the transaction is completed, bitcoins are transferred to your account registered with the exchange. There is no settlement cycle followed owing to which cryptocurrencies sometimes take longer time to be credited to your account.
  • Most exchanges charge a fee on fixed/ percentage basis for each transaction.

  • The main types of fees are:

    • Exchange fees – Basic fees for exchange operations. It is calculated depending on currencies and coins exchanged.
    • Trade fees – This is the fee to trade between currencies on the exchange. The Maker fee is the cost to make an offer to sell a currency on the exchange. The Taker fee is the fee to take an offer someone else has made.
    • Deposit / Withdrawal fees – This is the fee to deposit or withdraw funds from the exchange. It’s usually cheaper to deposit currency than to use credit card transactions.
    •  Move your bitcoins into a secure Bitcoin wallet which can be used to store the value in an encrypted manner. Bitcoin wallets contain private keys; secret codes that allow you to spend/sell your bitcoins. These private keys are stored in reality, not the bitcoins. They help in secure transactions.

    How to sell?

    •  Bitcoins available in the wallet can be sold through the exchanges at spot rate.
    • Once the sell transaction is completed, the exchange finalizes the transaction by transferring the amount to the linked bank account.
    • Sell transactions are also honored by the exchanges after charging a commission/fee.

    Bitcoin ATMs
    A bitcoin ATM is an internet machine that allows a person to exchange bitcoins and cash. Some Bitcoin ATMs offer bi-directional functionality (both buying and selling is allowed). In some cases, Bitcoin ATM providers require users to have an existing account in order to transact on the machine. Bitcoin ATMs are the most private way of obtaining them, as the purchaser, in general, does not require to furnish any details. However, some bitcoin ATMs now require users to register themselves with the service providers.

    There are 1,369 bitcoin ATMs installed across 56 countries in the world. In GCC, there is a buy-only bitcoin ATM in Jubail International Market. Most of the ATMs are located in the US, Canada, and Europe. There are online websites and mobile apps that help to find out the bitcoin ATMs across the world (coinatmradar). Each ATM has its own transaction limit and permissible currency that can be used for the transaction.

    •  Bitcoin ATM machines collect cash (usually local currency or USD) and in exchange provide equivalent bitcoins. Bitcoins are dispensed either to the buyer’s own Bitcoin wallet (via scanned QR code on the buyer’s mobile device or paper wallet), or to a paper wallet generated and printed by the ATM at the time of purchase.
    • In some ATMs, bitcoins can be deposited and cash can be collected in return.

    Genesis, BitAccess, and Robocoin are some of the popular bitcoin ATMs. All these ATMs charge a service fee for every transaction.

    Direct buying and selling:
    Though a rare mechanism in use, it is possible to transfer bitcoins to other persons directly for a price. As cryptocurrencies are not regulated, such direct buying and selling without the need for exchanges can happen. It is anticipated that such transactions could be popular among those using cryptocurrencies as these exchanges do not offer any counter-party risk either. The only advantage of using the exchanges in place of direct transactions is the reputation they have earned in the past, due to which exchanges are perceived to be less riskier compared to one-to-one transactions.

    Risks involved:
    Not only are cryptocurrencies risky due to their volatile nature, the nascent stages of their development, the lack of clarity on who’s who as in the case of bitcoins and many other cryptocurrencies are some other major risks that are inherent. Few countries such as the US, Canada, Australia, and the UK have legalized the use of cryptocurrencies. However, they remain outside the purview of regulations for their transactions and exchange operations. The chance of default, dishonor of payments and insolvency is high for the trading parties and exchanges.

    Apart from the above-mentioned risks, there have been allegations of misuse of bitcoins for illegal purposes. As most nations are compliant with treaties such as anti-money laundering and are a part of the financial action task force (FATF), there is a possibility that nations may take the direction against cryptocurrencies provided allegations are proved.

    Cryptocurrencies offer a high-yielding and attractive investment option for investors in GCC and elsewhere, despite the bundle of risks associated.

    We recommend Investors to read the risks section of this blog carefully before investing in cryptocurrencies!

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