Thanks for joining us for article #2 in our 4-part series of my experiences buying bitcoin. Although in our last article I described an ok process of account opening, the process of buying my first coin was less than ok.
Buying was a headache
Just as a reminder, I invested $100 of my kid’s inheritance to learn.
They asked me if I wanted to fund my massive $100 purchase with a debit card, PayPal, or checking account. Great. I use PayPal regularly and thought the process would be seamless.
They asked permission to access my PayPal account and I said yes. After clicking the link to grant access, the little circle thing just spun and spurn. My internet connection maybe?
Don’t think so since I was in Starbucks, the holy grail of internet connections. I tried again, the same thing. Tried again and got to where PayPal asked me to select my personal or business account. I chose personally. Then lockout.
No explanation other than “this transaction can’t be completed” and a number to call. So I called in my pissed-off state. The nice gentlemen took my information, listened to my tale, then told me he would need to escalate my case.
I would be called back in 24-48 hours. Dead End! I have no patience so 24-48 hours is effectively eternity. For the record, they did call me back within the timeframe.
Now I switch back trying to use my bank debit card. I typed in my numbers and double-secret probation code (Free something to anyone who gets the Dean reference). They then told me they had debited my account for 2 amounts under $1, and I had to go to my checking account and retrieve the amounts.
So, I did. I logged into my bank account and saw the debits.
It would have been nice to have been prepared upfront that I would need access to my checking account. At least Ikea tells you on the first page of the instructions that you will get a migraine in setting up your bed.
Wait, Ikea doesn’t do that either. So, I conclude both organizations, despite being widely successful, don’t really prepare the customer for the full experience.
I retrieved the evidence they wanted and typed it into Coinbase. Approved! I purchased my $100 of bitcoin with a fee of 3.8%, a fair number given the novelty of the product. My entry point was $42,000/bitcoin.
I’m now the proud owner of a bouncing baby bitcoin. Let the games begin!
So, who is my custodian and what exchange did I use?
I get it that Coinbase is my broker here since I used their platform to execute my trade.
I decided to learn a little more after my account opening. I expected to find a “Help” section while I was logged into my Coinbase account. Nope. I had to google the question to find my answers. Only later did I finally understand the help menu was buried in my Coinbase “Accounts” menu.
Does that mean I’m behind the times since I should have known that? I’m I just a dinosaur? Maybe.
Exchange: Coinbase was my exchange and would execute my transactions. Interestingly, no NYC Stock exchange or NASDAQ involved since they are “centralized”. So, broker and exchange are the same. That’s pretty neat!
Custodian: Who is in charge of my $100 (or my kid’s) prior to and post-purchase? Coinbase was holding my cash (not really; wait until next week’s article for the real hide the salami) and all subsequent bitcoin purchases in “street name”.
“Street name” means the blockchain doesn’t know me, it knows only Bitcoin. Since there is no FDIC nor other insurance, what this means is that if Coinbase goes under, I become a secured creditor of Coinbase. I only exist within Coinbase records. I hope they are accurate!
With the $625 million hacks of Axie Infinite’s Ronin this week, I’m a little worried I now have exposure to a less than investment-grade credit.
However, my broker is my exchange is my custodian is my app. That’s pretty neat and tidy overall. Coinbase, therefore, played all roles in my transaction. Presumably, this process should cut down my fees in the future since there are fewer parties than a conventional stock purchase.
Although the process was not smooth, I did get there with fewer parties than a stock trade. Read next week’s article for something which really pissed me off!