Have you ever wondered just how secure is Bitstamp exchange? The following Bitstamp review will strive to show you how this young startup has flourished over its six-year existence. From consistently high trading volumes, to becoming western Europe’s leading platform for trading Bitcoin and a limited selection of major cryptocurrencies – Bitstamp’s fast progress has impressed observers, investors, and users alike.
When two 20-year-old Slovenian college-dropouts wanted to invest in bitcoin in 2011, they decided to launch Bitstamp. Software developer and part-time bitcoin miner Damijan Merlak and computer salesman Nejc Kodrič discovered a gap in availability of exchange services for European bitcoin users.
The only option available at the time was to wire funds to the Mt. Gox exchange in Japan. The process took days and often resulted in financial losses due to bitcoin’s high volatility.
The two childhood friends decided to set up Bitstamp as an alternative to Mt. Gox and as an easy option for Bitcoin users in Slovenia and surrounding countries. When Mt. Gox collapsed in early 2014, Bitstamp started to receive more international clientele. It has since grown to become a major player in the industry.
Strengths of Bitstamp
- Offers a very simple buy/sell user interface, combined with advanced trading pages with detailed graphs, and trading parameters.
- Has significant trading volumes and therefore represents a good exchange for large purchases or sales.
- Supports buying of cryptos using debit and credit cards (recently extended to multiple countries).
- Regulated by the CSSF (Commission de Surveillance du Secteur Financier) in Luxembourg – thus good standards for keeping users’ funds more secure.
- Will support trading of Bitcoin Cash & will allocate all owed BCH tokens to customers.
- Cheaper & more efficient than person-to-person exchanges such as Localbitcoins.
- Despite a significant theft of its reserves, Bitstamp has maintained a strong reputation and has not suffered from prolonged trading shutdowns. A similar reputation & clientele recovery happened with Bitfinex (major Hong Kong exchange).
Weaknesses of Bitstamp
- As with all centralized exchanges, private keys are controlled by the exchange operators.
- Unlike Coinbase’s free 10$ credit for new traders, Bitstamp offers no such freebees to attract market share.
- Account verification takes more than three days. Similar wait times can be expected on Coinbase, CEX, and Kraken.
- Users are required to share an invasive amount of personal information when transactions reach a threshold (~10k usd)
- Although extra locations have been added, service is not available in all countries. Bitstamp competitor Coinmama offer similar credit card purchases to users anywhere in the world.
- Only supports only four cryptocurrencies & slow to add new major altcoins such as Bitcoin Cash & Ethereum. Compared to competitors such as Kraken, Bitstamp has been slow to add popular coins.
- A long list of unusual fees are applied to user accounts. However fees remain significantly cheaper than exchanges like CEX or Coinmama.
Move to Bitcoin-friendly location
Bitstamp has moved its headquarters twice. It first moved from Slovenia to London in April 2013 in search of better financial and legal opportunities for their business. At that time, almost all governments around the world fumbled with how to handle Bitcoin and the businesses that sprung up around it. However, Slovenia proved to be a difficult place for Damijan and Nejc to run a bitcoin exchange.
While regulators in the UK had yet to develop the regulatory framework to issue a cryptocurrency-related business license, they gave the exchange the go-ahead. Bitstamp managed to self-regulate to a level on par with traditional licensed financial institutions. It began asking its customers to provide documents to prove their identity was compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.
In April 2016, the company moved its headquarters again. This time they went to Luxembourg after the government there granted them a license to operate as a payment institution. The regulatory recognition made Bitstamp the first fully regulated virtual currency exchange in the EU. With the new license, it could do business in all 28 EU member states.
Short interview of Nejc Kodrič, Bitstamp CEO
Bitstamp maintains offices in London, Slovenia and in Berkeley, California. Outside of Europe, Bitstamp supports services in close to 50 countries. The list includes the US, China, South Korea, South Africa, Brazil and Australia.
The exchange is one of only a few that accept debit and credit cards. You can purchase bitcoin, Ripple, Litecoin or ether using a Visa or MasterCard. You have to apply to the company for your credit card to be approved for use. Be aware that your country of residence must be on the list of countries supported by Bitstamp.
You can also deposit fiat through Single Euro Payments Area (SEPA) bank transfer. SEPA transfers to Bitstamp are efficient, cheap, and fast (usually two days).
Funding and supported cryptocurrencies
Bitstamp has completed two rounds of investments. In December 2013, Pantera Capital invested $10 million in the company as the only participant in a Series A round. In January 2017, Bitstamp ran a crowdsale on the investment website BnkToTheFuture and raised a further $4 million.
Until January 2017, Bitstamp was exclusively a bitcoin exchange. It has since added other cryptocurrencies to its pairing options. The list of supported cryptocurrencies in addition to bitcoin includes Litecoin and Ripple. The exchange also added ether on August 17, 2017.
With only four supported cryptocurrencies, Bitstamp accepts fewer than other global exchanges. In comparison, Coinbase supports 5 cryptocurrencies, Bitfinex 14, Kraken 14 and Poloniex 27.
Bitstamp’s minimum dollar value for trading in any pairing on the platform is $5.
Main Security Features
Like most first-generation centralized exchanges, Bitstamp holds user’s private keys on its platform. Users must trust the company to secure and safeguard their digital coins. This means users also must trust those in charge of their private keys to remain honest.
Meanwhile, users access funds through accounts using passwords and two-factor authentication (2FA). The history of cryptocurrencies has shown that you should avoid entrusting third parties with your private keys. It is therefore a good idea, immediately following a purchase, to move your crypto assets to wallets that are 100% under your control. Experts always recommend bringing your holdings onto exchange platforms only when you are ready to sell.
Bitstamp presents their security features from the moment you register an account. After you fill out the registration form, an email is sent containing a customer ID and password to your inbox. You use the ID as your username, and you should change your password immediately the first time you sign in.
Before you will be allowed to trade on the platform, you must also verify the account by providing your full name, postal address and date of birth. To authenticate this information, Bitstamp requires you to upload a government-issued ID and a no more than three-months-old utility bill to prove place of residence.
The document scans should be of high quality (colour images, 300 dpi resolution or higher), visible in their entirety and current (not expired). After you submit proof of ID, it takes three days for Bitstamp support to approve your application.
Bitstamp has experienced one minor & one major security incident since its inception. In February 2014, it was the target of a compromising distributed denial of service attack. The exchange suspended withdrawals for some users for two days to prevent hackers from accessing private keys and cashing out.
The attackers blackmailed Bitstamp and demanded 75 bitcoins in ransom. The company refused to pay and cited a policy of non-negotiation with criminals.
A year later, in January 2015, an attacker breached the exchange’s security and stole about 19,000 bitcoins. The thieves used Skype and email communications with employees to introduce malware into Bitstamp’s system.
The malware retrieved the private keys of the company’s hot wallets. The news only surfaced six months later when someone leaked an internal report about the hack. Bitstamp declined to acknowledge its authenticity. Instead, they successfully requested the document be taken down from the platform on which it was published.
Bitstamp User Experience
Web & Mobile Interface
Bitstamp operates through website and mobile applications. The bulk of its traffic comes through the web. Most user reviews of Bitstamp give the website a very good score. Credit is usually attributed to large simplified buttons for buying / selling, and depositing / withdrawing. I’m not surprised that beginners love the easy-to-use buy/sell features. ust look how straightforward this is compared to competitors like Kraken:
Users also have the option to develop their own software to access and manage their accounts. Bitstamp has made third party apps possible by offering a custom API.
A rating on downdetector.com indicates that the most reported issues with Bitstamp’s website are downtimes (66%) and transfer outs (33%). Users have also pointed to problems with logging in, especially with not receiving verification codes.
The exchange offers a mobile app for both Android and Apple. Mobile users can place orders, make deposits and withdraw funds. However these mobile applications have received more negative feedback than positive.
Major issues raised by users-reviews include slow customer support, difficulty in executing orders —especially those involving Ripple —and poor trading chart experience.
Invasive customer “vetting”
Personally I have stopped using Bitstamp after support made a very invasive request for personal information. It’s true that most exchanges will ask for a passport & utility bill to verify real names and locations – as required by law. However, Bitstamp seem to take advantage by requesting customers give out information on competitor usage. Also, further requests are made that could very well compromise customers’ banking security & privacy.
Take a look for yourself:
I’ve read many users complaining on forums after receiving similar invasive requests from Bitstamp. I always give credit to exchanges that strive to make the vetting process as smooth as possible for their clients (Kraken does this much better than Bitstamp). Unfortunately, this is a big negative.
Please note that most users do not receive this request. Indeed, there appears to be a transaction/withdraw threshold (~10k usd) after which accounts get flagged for some extra “KYC” à la Bitstamp.
Bitstamp charges three types of fees—on deposits and withdrawals, for trading, and for various services. Depositing and withdrawing is free for all cryptocurrencies. However, withdrawing using BitGo Instant will cost you 0.1%. Also transferring Ripple IOUs between accounts costs 0.20% of the value involved.
It is free to deposit using SEPA, but you will be charged 0.90 EUR to withdraw using the same channel. International wire transfers cost 0.05% to deposit, with the minimum fee set at $7.5. Withdrawals cost 0.09%, with the minimum set at $15.
Charges for using credit cards to make purchases vary depending on the amount involved. It costs 8% for amounts less than $500, 7% for amounts between $500 and $1,000, and 6% for purchases above $1,000 but less than $5,000. It costs 5% for purchases above $5,000.
Withdrawing funds from your Bitstamp account using a credit card costs a flat fee of $10 for amounts not exceeding $1,000. For transfers exceeding $1,000, you are charged a fee of 2%.
Trading pairs cost a percentage ranging from 0.10% to 0.25%, depending on the volumes involved. The higher the amount traded, the lower the percentage cost you incur.
Bitstamp charges for a long list of service and operational fees. The list includes declined cash withdrawals ($0.55), a monthly account fee ($1.95) and a dormancy fee ($5).
Bitstamp Market position
According to Bitcoinity.org, Bitstamp sits as the sixth largest exchange in terms of trade volume and controls about 8.9% of the global market. In the first six months of 2017, the exchange processed transactions carrying a combined value of close to $12 billion.
The Bitstamp website receives more than 15 million visitors monthly, with about 28% coming through mobile devices, according to Similarweb.com. Bitstamp’s traffic is lower than Coinbase’s (95.8 M), Kraken’s (38.7 M) and Poloniex’s (95.8 M). It is higher than Bitfinex’s (12.5M).
Should you like to try something different to Bitstamp, the following are the most popular alternatives:
- Coinbase – beginner friendly website with millions of users as per my Coinbase review. Credit card and bank transfer deposits. (USA)
- Coinmama – less users & no selling, but great for buying with a card from anywhere in the world. (Israel)
- CEX – just as easy to use as Bitstamp. Card & bank deposits/withdraws. (UK)
- Blockchain.info – world’s most popular online wallet, recently introduced card purchases for EU customers. (UK)