Why do Bitcoins on Bittylicious cost so much?
Before asking this question, you should understand how Bittylicious works.
Bittylicious actually works as a marketplace with many different Bitcoin sellers on the back end. They can each choose their own price and the cheapest one is provided to you, the buyer. This means that the price is the cheapest price that the sellers are willing to sell at. The price is not controlled by Bittylicious itself and there is no fixed price formula.
Often, the price is a bit more than some of the large exchanges out there, and to do a fair comparison you would need to compare it with GBP sites based in the UK.
There are many costs associated with offering Bitcoins and other virtual currencies to you, the user, on Bittylicious. Compared to the bigger exchanges, the benefits of Bittylicious over a large market include:
- Bittylicious is UK based and follows UK law.
- Bittylicious is priced primarily in British pounds.
- You would need to pay foreign exchange costs to put GBP onto a market (e.g. converting to US Dollars).
- On many markets, there are huge restrictions on withdrawing fiat and large Bitcoin amounts.
- You often need to pay fees to put money onto the exchanges in the first place.
And other costs that brokers have to face include:
- There is fraud in the banking world, meaning brokers sometimes lose money altogether.
- Most banks hate cryptocurrencies, meaning there's the risk of losing bank accounts.
- Banks often charge fees for transactions, especially on business bank accounts.
- Bittylicious itself charges brokers a small fee.
Those costs, including time costs, all add up. We believe Bittylicious offers the easiest way for people to buy Bitcoins and sometimes this can come at a little extra cost.
As well as the costs listed above, the Bitcoin network has a concept of transaction fees, which originally was designed to be a small fee for transactions to be sent and included in a Bitcoin block. These have been rising at an incredible amount recently, and each transaction often costs around £20 (or a lot more) to send. This value changes a lot, and has been £30 for each transaction before. For small trades, e.g. a £25 trade, this can be a huge proprtion of the costs before the broker even has to factor in their risk costs, FX costs, bank transfer costs, our commission and their profit. Please expect small trades to have a very large margin on them until a solution to the scaling crisis is found.
Estimates of the current network fees are available can be viewed at BitInfoCharts.