Crypto's brutal recession is finally coming to an end with Bitcoin ATM

Crypto’s brutal recession is finally coming to an end with Bitcoin ATM

Amherst County, Virginia, does not have a hospital. It has a bitcoin ATM.

It’s inside the Dogwood Express Market, a convenience store just down the road from the local used car dealership. The machine allows people to buy, receive and send bitcointhe biggest Cryptocurrency.

Choosing them to do so, however, is another matter. “I’ve never seen anyone use it,” Chrissie Scruggs, a 27-year-old Dogwood Express employee, said in October.

Since the first Bitcoin ATM was installed nearly a decade ago, the number of machines has mushroomed, making them impervious to cryptocurrency’s boom-and-bust cycles. from the streets New York From a city to rural communities like Amherst County, ubiquitous, physical symbols of the growing mainstream appeal of cryptocurrency have popped up.

Then came 2022, and the “crypto winter” that sent bitcoin down 64% and swept away companies from Celsius Network to Sam Bankman-Fried’s FTX. The number of crypto ATMs in the US peaked at more than 34,000 in August and has since fallen slightly, according to Coin. ATM Radar that tracks machines. September was the first month in industry history in which more ATMs were retired than installed, according to coin-op ATM data (October saw a slight rebound).

Even worse, the amount money The average machine handles have dropped sharply, according to the calculations bloomberg News based on available industry data appear.

The total amount of money transferred via cryptocurrency ATMs globally, expressed in dollars, fell to $230 million in October from $349 million in January 2021, according to data from researcher Chainalysis. This drop came even as the number of machines installed worldwide nearly tripled in the period. This means approximately 75% reduction in the value generated by the average unit.

Many ATMs now get little, if any, use. In the small Smoke Shop in midtown Manhattan, a store tucked away among shelves of soda and snacks. Master of science World Health Organization Working in the shop, he said he didn’t pay much attention to the machine. On a recent Friday afternoon, it was estimated that at least one person had used it that day. Every two weeks or so, someone comes to collect cash from the unit.

What is clear, however, is that usage has declined in the past year. “Now, it’s slow,” said Alam, 49.

With demand slumping, executives accustomed to delivering units as quickly as possible and negotiating new leases face tougher choices.

Currency Zipperwhich operates about 5,000 ATMs across we and Brazil, it has engaged advisors to help it rework nearly $125 million in debt to fund an aggressive expansion, Bloomberg News reported in November. People familiar with the matter said the company was seeking additional funding from troubled crypto brokerage Genesis.

Some Coin Cloud kiosks are located in rural areas with little traffic, according to people familiar with its business. Coin Cloud declined to comment on its efforts to secure funding. CEO Chris McCallary said in October that the company didn’t have to reduce the number of its devices.

“You have to be more selective about location than it was a couple of years ago,” said Ben Weiss, CEO of rival CoinFlip. “You want locations with long hours and high foot traffic.” Weiss said in October, without elaborating, that CoinFlip has not had to pull any machines this year and that its revenue has been rising.

Rental negotiation

Running a lot of idle machinery can be expensive. The operators negotiate rent individually with the outlets, though some pay store owners a percentage of the revenue the unit generates, according to Eric Grill, CEO of crypto ATM maker ChainBytes.

Grill also owns four ATM crypto companies that between them operate “a few hundred” machines globally. He said his business usually pays stores about $300 a month to host a machine, but depending on how much money the unit brings in, the fee can be as high as $1,000.

In early November, Grill said that crypto ATMs in the US were generating between $1,000 and $10,000 in revenue per month. He estimated that 3% to 6% of that goes to operating costs such as rent, marketing and paying compliance officers and people who collect money from the machines.

The executives interviewed for this story expressed confidence in their business even if sentiment around digital assets ran sour. They said that transaction volumes are not as vulnerable to market fluctuations as they are on cryptocurrency exchanges, for example.

The machines also provide a fast, convenient – and often anonymous – way into the world of digital assets. Grill Companies do not ask for a phone number or identification for transactions less than $500.

Due in part to these traits, crypto ATMs generate exorbitant fees, ranging from 11% to 25% according to Coinsource operator.

“A lot of people are trying to be conservative,” said Brandon Mintz, founder and CEO of Bitcoin Depot, which Coin ATM Radar ranks as the largest ATM operator in the US. Bitcoin Depot has been slowing down the pace of installing new units and is focusing on moving unused hardware to better performing locations.

Mintz plans to take Bitcoin Depot public by merging it with a special purpose acquisition company, or SPAC. In an August press release announcing the deal, Bitcoin Depot said it operates more than 7,000 “kiosk locations” across the United States and Canada. The company generated $6 million in net income on sales of $623 million in the 12 months through June, according to the statement, which did not provide year-ago comparisons of unaudited figures.

According to the agent’s statement. That compares to a 10% return on index leveraged loans in the US.

The proposed transaction, scheduled to close in the first quarter, values ​​Bitcoin Depot at $885 million. Mintz said in an email dated November 22 that the deal remains on track and that “the company has not been affected by fluctuations in the industry.” He also said that Bitcoin Depot is “comfortable” with its financial position and debt repayment capacity.

Banning ATMs in Singapore

One potential threat comes from regulators. Singapore in January banned cryptocurrency ATMs and ordered them to be closed. in March , United kingdom Authorities said they did not approve any machines and warned operators to remove any units still in use.

In the US, regulators have so far taken a hands-off approach. But in a report originally released in September 2021, the Government Accountability Office said encrypted ATMs could be used to facilitate drug trafficking. He has recommended that the Financial Crimes Enforcement Network of the Department of the Treasury and the Internal Revenue Service review the registration requirements for the devices. The two agencies agreed.

Whatever the outcome of this process, the most pressing challenge for ATM operators may be convincing owners that hosting the machine is still worth it, even with reduced usage.

Luis Pena, manager of the Orion Electronic store in the Bronx, thinks his machine gets something like one visitor per day. He’ll take it—he’s a potential customer, after all—and he has no plans to dump the ATM. But his patience is not infinite.

“When they start not giving me clients,” he said, “it doesn’t make sense to have them.”


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