What the First $100 of Bitcoin Actually Costs to Buy

A hundred dollars does not buy a hundred dollars of bitcoin anywhere. The gap is usually between two and six per cent, and most of it is not shown as a fee.

The charge that is labelled

Venues publish a trading or processing fee, commonly between 0.5 and 2.5 per cent for a card purchase and lower for a bank transfer. This is the number in the fee schedule and the number buyers compare.

It is rarely the largest of the three.

The charge that is not labelled

The second charge is the spread: the difference between the price the venue pays and the price it quotes you. On a retail instant-buy screen the spread is frequently wider than the stated fee, and nothing on the confirmation screen separates them.

The test is simple. Open the venue’s own order book in another tab and compare the mid price against the quote you have been given. The difference, minus the stated fee, is the spread.

This is also why an exchange that shows the all-in cost before you confirm is worth more than a headline fee that is a quarter of a per cent lower.

The charge that arrives later

The third is the withdrawal or network fee, paid only if the coins leave the venue. It is flat rather than proportional, which makes it trivial on a large purchase and brutal on a small one.

On a hundred dollar purchase, a flat withdrawal fee of three dollars is three per cent. The same fee on a five thousand dollar purchase is six hundredths of one per cent.

What the arithmetic looks like

On a hundred dollars at a typical retail venue: roughly one to two dollars of stated fee, one to four dollars of spread, and a withdrawal fee of one to five dollars if the coins move. Between three and eleven dollars, with the labelled part accounting for less than a third.

Those are ranges rather than a quote, and they move with the pair and the hour.

Why small purchases are the worst case

Flat costs do not scale down. A first purchase is almost always small, which means a first purchase almost always pays the worst effective rate a buyer will ever pay.

Buying once at a larger size, where that is affordable, costs less in total than four small purchases. The alternative is to leave the balance on a regulated venue for the first purchase until it is worth moving.

What to check before confirming

Whether the quoted rate holds for the full amount, whether the fee is included in or added to the quote, and what the withdrawal costs. Venues where the first purchase does not need a broker will answer all three on the screen in front of you.