Doing an ACH transfer from your bank account to buy Bitcoins is easy and convenient. This is an advantage of using Coinbase. However, there is a downside. On July 23, 2014, after several weeks of Bitcoin hovering around $625, I purchase four Bitcoins on Coinbase. With Coinbase’s one percent transaction fee, I paid $628.30 per Bitcoin. However, on July 24, Bitcoin dropped in price to $600. And, on July 28, it dropped to $575. During the price drop my coins were locked in never-never land. According to Coinbase, “Your bitcoin will arrive by the end of day on July 29, 2014.”
Be aware that Coinbase will hold your Bitcoins for about seven days, after you initiate an ACH transfer from you bank account. Even though your bank may say that the funds have been transferred, your Bitcoins will not appear in your account for over four business days. This can be painful in a bear Bitcoin market.
On Bitstamp, one has to do an international wire transfer to fund an account. Once your account is funded, then you can purchase Bitcoin. When I added up the fees for doing an international wire transfer ($30 bank fee, plus $15 Bitstamp fee), I determined that I would better off using Coinbase. So, did I save any money by using Coinbase? No. The fees at Bitstamp would have been $3.11 per Bitcoin (or one half of one percent), plus $45 in total wire transfer fees (vs. $6.22 per Bitcoin at Coinbase). So, I saved $32.56 in fees by using Coinbase, but it was painful to watch the Bitcoin price fall without the ability to cut my losses and sell. In the end, it was more expensive to use Coinbase, since I was forced to hold during a sell off.
Beware that Coinbase will hold your coins for six to seven days, which seems like forever during a sell off. Four business days translates to seven days, minus a few hours. In my case, the price of Bitcoin dropped by $45 before I was free to transfer my Bitcoin to Bitstamp. If you are an active trader, then you are better off paying the International wire transfer fees and using Bitstamp. During a sell off, it is costly to tie up your Bitcoin for a week in never-never land.
When buying Bitcoins, what exchange do you use? Some exchanges offer zero fees. Share your wisdom!