Online Exchange vs Bitcoin ATM: Which Is Better?

  • By -
  • October 6, 2023

To buy Bitcoin in Australia, you have two options: an online exchange vs a Bitcoin ATM. But if you’re new to crypto, this binary presents a tricky problem. Do you go for the feature-rich experience with lower fees, or do you prefer the simplicity and privacy of in-person transactions? Most importantly, do you want full control over your assets or do you trust a third party to hold them for you? Each option offers unique benefits and drawbacks to consider, from transaction costs and coin selection to payment methods, identity verification, custody, and more. Let’s unpack the differences between an online exchange vs a Bitcoin ATM and which is better.

Online Exchange Bitcoin ATM
Advanced features Beginner-friendly
Requires a bank account or payment card Cash & card transactions
Accessible anywhere with internet In-person transactions only, typically located in big cities & high-traffic areas
Requires personal information (KYC) & ID verification Less personal information required
Wide variety of cryptocurrencies Primarily Bitcoin, limited coin offerings
Lower fees Higher fees
Custodial and non-custodial options Non-custodial, requires a private digital wallet

What Is An Online Exchange?

An online exchange is a digital marketplace where you can buy, sell, and trade various cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), and countless more. Some of the best Bitcoin exchanges in Australia include Binance, CoinSpot, Kraken, and Coinbase - to name just a few. 

These exchanges are accessible from the comfort of your hammock, or anywhere with an internet connection. But they cater to experienced crypto users with advanced trading features like stop-loss orders, margin trading, limit orders, charting tools, staking, and more. 

If you’re a Bitcoin freshie, trying to buy Bitcoin online can be a stressful and overwhelming experience. The trade-off is convenience.

How Does It Work?

Before you can buy Bitcoin through an online exchange, you first need to create an account. This will include a verification process called 'Know Your Customer' (KYC), which includes collecting quite a bit of personal information and confirming your identity. 

No need to panic - it’s completely normal. Regulated platforms are legally required to collect this information to comply with financial regulations. This step is crucial to ensure the security and legitimacy of your transactions. But it’s off-putting if privacy is important to you. 

Once verified, you can link your bank account or use a supported payment card to deposit fiat currency, like AUD. Once that’s done, you can start trading. The trading process itself is super straightforward. You can choose from a variety of cryptocurrencies to buy, sell, and swap. 

The best online exchanges in Australia offer sophisticated features that include, but are not limited to: charts, analytical tools, limit orders, stop loss/take profit, margin trading, options, and much more. These tools are popular among experienced traders who prefer advanced trading strategies. For crypto noobs, they can be overwhelming and risky if you don’t know what you’re doing.

How Is My Crypto Stored?

Most online exchanges are custodial. This means the exchange has control over your private keys and manages your crypto assets on your behalf. While many give you the option to transfer your assets to a private wallet, most users keep their crypto on the platform. 

A portion of the assets are held in hot wallets, which are connected to the Internet for quick and easy transactions. While the majority of the funds are stored offline in cold wallets to protect against online threats, like hacking. 

Custodial storage is convenient and eliminates the risk of losing your assets due to your own human error. But it also means your crypto is exposed to the risk of hacks and cyberattacks. If the platform experiences downtime, technical issues, or goes out of business, accessing your funds could be difficult or even impossible. 
Regulatory changes or legal issues could affect your ability to access or use your assets, as we saw with the FTX scandal. And of course, there’s the issue of personal privacy. Custodial service typically requires collecting your personal information, which might conflict with your privacy preferences.

Pros & Cons Of An Online Exchange

Pros Cons
A wider range of cryptocurrencies compared to Bitcoin ATMs Can be overwhelming for beginners
Trade from anywhere, anytime Vulnerable to hacks and other cybersecurity attacks
Typically lower transaction fees than Bitcoin ATMs Requires personal information/ID verification
Advanced trading tools & market analytics

What Is a Bitcoin ATM? 

A Bitcoin ATM is a physical machine that looks and functions like the traditional ATMs you’re used to. But they’re designed exclusively for buying and selling Bitcoin and other popular coins with cash. You can find them in high-traffic places like shopping centres, cafes, and airports. The most popular Bitcoin ATMs in Australia include Localcoin, Olliv, Cryptolink, and Bitrocket.

They’re ideal for beginners, offering a simple and intuitive way to buy and sell cryptocurrency. On the downside, Bitcoin ATMs are slightly less convenient because you have to leave the house.

But at least you don’t need a bank account to use one. Cash is king. Plus, you don’t have to provide nearly as much personal information as you do with online exchanges. That’s a win for personal privacy. Localcoin ATMs don’t require you to make an account, and it takes less than a minute to get started.

How Does It Work?

To use a Bitcoin ATM, you first need to find one near you. This can be done through online directories specifically designed to pinpoint their locations. For example, the Localcoin website provides a Bitcoin ATM locator. From the menu at the top of the screen, click on “Bitcoin ATM Locations”, enter your address or postal code, and select if you want to buy or sell. 

Once you've found a Bitcoin ATM, the transaction process is user-friendly with simple on-screen instructions to guide you. If you're looking to buy Bitcoin or another supported coin, insert cash into the machine and follow the prompts. If you're selling, you send your crypto to the ATM’s specified address and then withdraw cash. Localcoin ATMs don’t currently support selling, but that feature is coming soon. Stay tuned!

How Does It Store My Crypto?

It doesn’t! The beauty of a Bitcoin ATM is that it requires self-custody. That means you maintain 100% control of your assets and are solely responsible for storing them in a private digital wallet. And the best part? Self-custody eliminates the risk of losing your digital assets to online threats. And no third-party or regulatory body can restrict your access.

The downside is that you need to already have a digital wallet and know how to use it. Your wallet is required for both receiving Bitcoin when buying and sending Bitcoin when selling. It’s the crypto equivalent of a bank account for your digital assets, ensuring that your transactions are secure and seamless.

Plus, you need to safeguard your private keys – losing them means losing access to your cryptocurrency. You also need to be comfortable using tech software and gadgets. There's always the risk of physical damage or loss due to user error.

The good news is that crypto wallets have come a long way and there are tons of user-friendly options available. Our top two recommendations are Trust Wallet and Bluewallet. 

Pros & Cons Of A Bitcoin ATM

Pros Cons
User-friendly, especially for cash users or those wary of online transactions. Limited coin selection, with some offering only Bitcoin.
Trade from anywhere, anytime Vulnerable to hacks and other cybersecurity attacks
Non-custodial, which keeps you in control of your assets Transaction fees are usually higher than online exchanges.
Instantly receive Bitcoin, other supported coins, or cash. Access is limited by physical location of ATMs.

Which Is Better: Online Exchange vs Bitcoin ATM?

It boils down to comfort level and personal preference. For convenience and variety, online exchanges are unbeatable. They're ideal if you want to engage with diverse cryptocurrencies and appreciate the comfort of trading from anywhere. 

But simplicity and anonymity are where Bitcoin ATMs shine. They're perfect for those not comfortable with creating an account or who prefer transactions in cash. Their straightforward interface makes them a good choice for beginners and infrequent users alike.

Use an online exchange if: Use a Bitcoin ATM if:
You're comfortable with online banking You prefer or need to use cash
You’re an active trader and/or want to trade a variety of cryptocurrencies. Privacy is important to you
You need lower fees & advanced trading features. You're new to cryptocurrency and/or want an easy process.
You can tolerate the security & privacy risks of third-party custody You trade infrequently, so higher transaction fees are not a concern.
You want full control over your assets

Consider a Localcoin ATM

From the convenience and security of Bitcoin ATMs to the versatility of online exchanges, each option has unique benefits and drawbacks to consider. If you value the control and privacy that self-custody offers, Localcoin is an FSPR-registered crypto company that provides over 100 Bitcoin ATMs available in every major Australian city. 

Posted in

    Recent Posts

    Frequently Asked Questions (FAQs)