The Best Way to Buy Bitcoin in Europe? Avoid Bad Rates.

When you buy bitcoin, be sure to compare exchange rates

Last spring, Roberto Tonelli was planning his dream wedding. He and his fiancée, Ivana Castaniere, lived in New York, but their families were from Europe. They’d decided to get married in Vallo di Nera, a picturesque town in central Italy. Roberto needed to pay vendors there, but when he went to his Coinbase account to withdraw, he discovered one of Coinbase’s dirty little secrets.

“The total fee was around 10 percent worse than it should have been,” the 33-year-old says. “I could have made 10 cents more for every euro I withdrew. For a wedding, that would really add up.”

Roberto’s exchange wasn’t unique. Large exchanges and banks routinely mark up the exchange rate — without pointing it out — when people invest with them. They hide a fee in your rate when you buy bitcoin, etherium or a Netflix stock. Whether you buy a little, or a lot. Whether you buy bitcoin once, or every week. You’re likely being overcharged.

The next generation of crypto apps

In 2020, people around the world trade over €100 billion of cryptos per day. But astoundingly, starting and smaller traders made up only 30% of the global market — the other 70% comprised of institutional investors — they paid 90% of the trading fees.

In other words, the multi-billion-dollar business of crypto asset investments has largely been built on a hidden markup. People like Roberto pay that markup every time they buy bitcoin.

But in the past several years, start-up “fintechs” (financial tech companies) have rushed to fill the vacuum created by the large exchanges' and banks’ inflated pricing. Companies like Change have built faster, smarter, leaner ways of buying bitcoin, and they pass their savings on to consumers.

Beware of bitcoin fees in Europe

When you buy bitcoin, there are a few big things to consider, including speed, convenience, and security. But for most people, the top of the list is cost. And on that front, there are two things to watch out for — the fees and the exchange rate.

The fees for buying bitcoin in Europe vary widely

Whether you use a bank, or an alternative like Coinbase, you’ll see an upfront fee. It might be a flat fee, or a percentage of the amount you’d like to send.

Some services even claim that they have no fee at all (“0% commission”).

No matter how low the advertised fee is, have your guard up. Because as Roberto discovered, the devil is often in the exchange rate they offer you.

Not all exchange rates are created equal

In 2016, Kristjan Kangro had a similar experience to Roberto. Kristjan is Estonian, and was working in Singapore in a venture capital company. He had just been paid a Christmas bonus, and he wanted to buy bitcoin.

Kristjan added money to a local Singaporean crypto exchange. But once he made the first trade, there were a lot fewer bitcoins — world's most popular cryptocurrency — than he expected.

“I started digging to find out what happened, and I realized I’d been incredibly stupid,” he says. “I expected Coinbase to give me the exchange rate I saw on Google. Instead, they gave me a rate that was 5% more expensive.”

The rate on Google that Kristjan refers to is the mid-market rate. That’s the midpoint between the price that sellers are willing to sell a cryptocurrency for, and the price buyers are willing to pay for it.

It’s fair to say that the mid-market rate is the real rate. It’s the rate exchanges give themselves when they sell currencies to each other. It’s the rate you see when you google a given exchange rate, or search for it in places like Coinmarketcap.

Before you buy bitcoin or other cryptos, it’s wise to look up the current mid-market rate, so you can get an idea of what’s fair and what’s not.

Cheapest way to buy bitcoin in Europe?

After Kristjan discovered his exchange’s rate markup, he promised himself he’d never get ripped off again. He worked out a deal with a South African Alec Erasmus, who was working in Cape Town as an architect of a payments startup, who was fascinated by trading systems from an early age. Soon they were hot iterating on the product, they looked up the mid-market rate, and tried to work on getting the bitcoin buy price as close to mid-market rate as possible.

In time, the pair added more crypto currencies to their platform. In 2016, Kristjan incorporated it as a business that let people invest in bitcoin: Change. Change is no longer an experiment but with sizeable offices in Amsterdam and Tallinn, but its core principles are the same as ever.