Rusty Russell's Coding Blog | Stealing From Smart People

Mar/14

19

Bitcoin Trading In Australia

I bought 10 BTC to play with back in 2011, and have been slowly spending them to support bitcoin adoption.  One thing which I couldn’t get reliable information on was how to buy and sell bitcoin within Australia, so over the last few months I decided to sell a few via different methods and report the results here (this also helps my budget, since I’m headed off on paternity leave imminently!).

All options listed here use two-factor authentication, otherwise I wouldn’t trust them with more than cents.  And obviously you shouldn’t leave your bitcoins in an exchange for any longer than necessary, since most exchanges over time have gone bankrupt.

Option 1: MtGox AUD

Yes, I transferred some BTC into MtGox and sold them.  This gave the best price, but after over two months of waiting the bank transfer to get my money hadn’t been completed.  So I gave up, bought back into bitcoins (fewer, since the price had jumped) and thus discovered that MtGox was issuing invalid BTC transactions so I couldn’t even get those out.  Then they halted transactions altogether blaming TX malleability.  Then they went bankrupt.  Then they leaked my personal data just for good measure.  The only way their failure could be more complete is if my MtGox Yubikey catches on fire and burns my home to the ground.

Volume: Great (5M AUD/month)
Price Premium: $25 – $50 / BTC
Charge: 0.65%
Hassle: Infinite
Summary: 0/10

Option 2: localbitcoins.com

According to bitcoincharts.com, localbitcoins is the largest volume method for AUD exchange.  It’s not an exchange, so much as a matching and escrow service, though there are a number of professional traders active on the site.  The bulk of AUD trades are online, though I sold face to face (and I’ll be blogging about the range of people I met doing that).

localbitcoins.com is a great place for online BTC buyers, since they have been around for quite a while and have an excellent reputation with no previous security issues, and they hold bitcoins in escrow as soon as you hit “buy”.  It’s a bit more work than an exchange, since you have to choose the counter-party yourself.

For online sellers, transfers from stolen bank accounts is a real issue.  Electronic Funds Transfer (aka “Pay Anyone”) is reversible, so when the real bank account owner realizes their money is missing, the bank tends to freeze the receiving (ie. BTC seller’s) bank account to make sure they can’t remove the disputed funds.  This process can take weeks or months, and banks’ anti-fraud departments generally treat bitcoin sellers who get defrauded with hostility (ANZ is reported to be the exception here).  A less common scam is fraudsters impersonating the Australian Tax Office and telling the victim to EFT to the localbitcoins seller.

Mitigations for sellers include any combination of:

  1. Only accepting old-fashioned cash deposits via a branch (though I’m aware of one US report where a fraudster convinced the teller to reverse the deposit, I haven’t heard of that in Australia)
  2. Insisting on “localbitcoins.com” in the transfer message (to avoid the ATO fraud problem)
  3. Only dealing with buyers with significant reputation (100+ trades with over 150 BTC is the Gold Standard)
  4. Insisting on real ID checking (eg. Skype chat of buyer with drivers’ license)
  5. Only dealing with buyers whose accounts are older than two weeks (most fraudsters are in and out before then, though their reputation can be very good until they get caught)
  6. Only allowing internal transfers between the same bank (eg. Commonwealth), relying on the bank’s use of two factor authentication to reduce fraud.

Many buyers on localbitcoins.com are newcomers, so anticipate honest mistakes for the most part.  The golden rule always applies: if someone is offering an unrealistic price, it’s because they’re trying to cheat you.

Volume: Good (1M AUD/month)
Price Premium: $5 – $20 / BTC
Charge: 1% (selling), 0% (buying)
Hassle: Medium
Summary: 7/10

Option 3: btcmarkets.net

You’ll need to get your bank account checked to use this fairly low-volume exchange, but it’s reasonably painless.  Their issues are their lack of exposure (I found out about them through bitcoincharts.com) and lack of volume (about a quarter of the localbitcoins.com volume), but they also trade litecoin if you’re into that.  You can leave standing orders, or just manually place one which is going to be matched instantly.

They seem like a small operation, based in Sydney, but my interactions with them have been friendly and fast.

Volume: Low (300k AUD/month)
Price Premium: $0 / BTC
Charge: 1%
Hassle: Low
Summary: 7/10

Option 4: coinjar.io

I heard about this site from a well-circulated blog post on Commonwealth Bank closing their bank account last year.  I didn’t originally consider them since they don’t promote themselves as an exchange, but you can use their filler to sell them bitcoins at a spot rate.  It’s limited to $4000 per day according to their FAQ.

They have an online ID check, using the usual sources which didn’t quite work for me due to out-of-date electoral information, but they cleared that manually within a day.  They deposit 1c into your bank account to verify it, but that hasn’t worked for me, so I’ve no way to withdraw my money and they haven’t responded to my query 5 days ago leaving me feeling nervous.  A search of reddit points to common delays, and founder’s links to the hacked-and-failed Bitcoinica give me a distinct “magical gathering” feel. [Edit: they apparently tried and failed four times to transfer the 1c verification to my ING account; with 1-2 business day support response, this took quite a while.  They never explained why this was failing.  Using my wife’s CBA account worked however, and I got my funds the next day.  Upgraded their score from 4/10 to 5/10.]

Volume: Unknown (self-reports indicate ~250k/month?)
Price Premium: $0 / BTC
Charge: 1.1% (selling) 2% (buying)
Hassle: Medium
Summary: 5/10

If you trade, I’d love to hear corrections, comments etc. or email me on rusty@rustcorp.com.au.

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5 Comments for Bitcoin Trading In Australia

Russell Stuart | March 20, 2014 at 12:49 pm

Your comments on mtgox are a bit harsh. I thought it common knowledge the way you got your bitcoins out was to fix and resend the mtgox transaction. Yes, it is a tad inconvenient, but it reliably worked.

Then, as you say, the next step was to contact mtgox to see ask them to pay you a second time. It appears everyone else in the know was doing that so I presume you, as a man definitely in the know, did it too.

It was a great service to provide, while it lasted. Popular to the point they were evidently overwhelmed with demand. Surely you could cut them a bit of slack?

:D

Russell Stuart | March 28, 2014 at 2:58 pm

No a more serious note, turns out during the period mtgox says they suffered from the tx malleability problem, someone was monitoring the mempools for that very thing. They publish their results here:

http://arxiv.org/abs/1403.6676

Author comment by rusty | March 29, 2014 at 5:47 pm

It was not common knowledge that you had to “fix” MtGox transactions. Certainly their helpdesk didn’t know! skanner.net didn’t mention it either. And you can’t fix double-spend or too-large transactions. And I went around the “pay me again please” loop TWICE.

It was common knowledge that US cash withdrawls were glacial, but did you know that Australian withdrawls were too?

On the contrary, the general bitcoin community was too reluctant to diss MtGox. Hence no information about this on coindesk.com, for example. And MtGox certainly didn’t disclose their issues, so it was very hard to know.

They deserve much in depth criticism than this minor note!

Russell Stuart | March 31, 2014 at 2:12 pm

My first comment was an attempt at satire. If you don’t laugh at levels of incompetence and outright fraud that have accompanied bitcoin’s evolution from rebel crypto currency to (hopefully) mainstream, you would have to cry.

That aside, I should have also thanked you for the survey. I found it useful.

CoinSect | May 19, 2014 at 1:39 pm

Rusty,

Try http://www.coinsect.com.

We’re a new digital currency marketplace based in Sydney that enables our global users to buy and sell coins for cash. I’m 100% confident you will find our site easier, and more efficient than the others listed above.

Regards.

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