How Spacs Became Wall Street Tree

If you want to see the future of so many of the special purpose acquisition companies currently flooding the market, look to the recent past. Nearly five years ago, Landry’s Seafood billionaire Tillman Fertitta took Landcadia Holdings public to the tune of $345 million. No matter that, true to the SPAC “blank check” model, there was not yet any operating business—dozens of hedge funds piled into its $10-per-unit IPO. 

In May 2018, Landcadia finally located its target: a budding online restaurant delivery service called Waitr that would merge with the SPAC in exchange for $252 million in cash. Fertitta touted the fact that the Louisiana startup, with $65 million in revenue, would now have access to 4 million loyalty members of his restaurant and casino businesses, and a new partnership with his Houston Rockets NBA franchise. Two years later, though, you very likely have never heard of Waitr. As such, its stock recently traded at $2.62, down more than 70% from its IPO price (the S&P 500 has climbed 76% over the same period).

Waitr was a disaster for pretty much anyone who bought the stock early. But the hedge funds that purchased Landcadia’s IPO units did just fine. Virtually all recouped their initial investment, with interest, and many profited by exercising warrants in the aftermarket. “SPACs are a phenomenal yield alternative,” says David Sultan, chief investment officer at Fir Tree Partners, a $3 billion hedge fund that bought into Fertitta’s Landcadia SPAC IPO—and pretty much any other it could get its hands on. 

The SPAC boom of 2020 is probably the biggest Wall Street story of the year, but almost no one has noticed the quiet force driving this speculative bubble: a couple dozen obscure hedge funds like Polar Asset Management and Davidson Kempner, known by insiders as the “SPAC Mafia.” It’s an offer they can’t refuse. Some 97 percent of these hedge funds redeem or sell their IPO stock before target mergers are consummated, according to a recent study of 47 SPACs by New York University Law School professor Michael Ohlrogge and Stanford Law professor Michael Klausner.

Though they’re loath to talk specifics, SPAC Mafia hedge funds say returns currently run around 20%. “The optionality to the upside is unlimited,” gushes Patrick Galley, a portfolio manager at Chicago-based RiverNorth, who manages a $200 million portfolio of SPAC investments. Adds Roy Behren of Westchester Capital Management, a fund with a $470 million portfolio of at least 40 SPACs, in clearer English: “We love the risk/reward of it.” 

What’s not to love when “risk” is all but risk-free? There’s only one loser in this equation. As always, it’s the retail investor, the Robinhood novice, the good-intentions fund company like Fidelity. They all bring their pickaxes to the SPAC gold rush, failing to understand that the opportunities were mined long before they got there—by the sponsors who see an easy score, the entrepreneurs who get fat exits when their companies are acquired and the SPAC Mafia hedge funds that lubricate it all. 

It’s about to get far worse for the little guy. Giant quant firms—Izzy Englander’s Millennium Management, Louis Bacon’s Moore Capital, Michael Platt’s BlueCrest Capital—have recently jumped in. Sure, they all raised billions based on algorithmic trading strategies, not by buying speculative IPOs in companies that don’t even have a product yet. But you don’t need AI to tell you the benefits of a sure thing. And that means torrents of easy cash for ever more specious acquisitions. Says NYU’s Ohlrogge: “It’s going to be a disaster for investors that hold through the merger.” 

In the first 10 months or so of 2020, 178 SPACs went public, to the tune of $65 billion, according to SPAC­Insider—more than the last ten years’ worth of such deals combined. That’s just one indication that the current wave of blank-check companies is different from previous generations. 

In the 1980s, SPACs were known as “blind pools” and were the domain of bucket-shop brokerage firms infamous for fleecing gullible investors under banners such as First Jersey Securities and The Wolf of Wall Street’s Stratton Oakmont. Blind pools circumvented regulatory scrutiny and tended to focus on seemingly promising operating companies—those whose prospects sounded amazing during a cold-calling broker’s telephone pitch. The stockbrokers, who typically owned big blocks of the shares and warrants, would “pump” prices up, trading shares among clients, and then “dump” their holdings at a profit before the stocks inevitably collapsed. Shares traded in the shadows of Wall Street for pennies, and the deal amounts were tiny, typically less than $10 million. 

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Former stockbroker and convicted felon Jordan Belfort was immortalized in The Wolf Of Wall Street. In the late 1980s and early 1990s, blank check companies, similar to today’s SPACs but known as blind pools, were his stock and trade. Getty Editorial

In 1992, a Long Island lawyer named David Nussbaum, CEO of brokerage GKN Securities, structured a new type of blank-check company, with greater investor protections including segregating IPO cash in an escrow account. He even came up with the gussied-up “special purpose acquisition company” moniker. 

The basics of the new SPACs were as follows: A sponsor would pay for the underwriting and legal costs of an initial public offering in a new shell company and have two years to use the proceeds to buy an acquisition target. To entice IPO investors to park their money in these new SPACs as the sponsors hunted for a deal, the units of the IPO, which are usually priced at $10 each, included one share of common stock plus warrants to buy more shares at $11.50. Sometimes unit holders would also receive free stock in the form of “rights” convertible into common stock. If a deal wasn’t identified within two years, or the IPO investor voted no, holders could redeem their initial investment—but often only 85% of it. 

GKN underwrote 13 blank-check deals in the 1990s, but ran into regulatory trouble with the National Association of Securities Dealers, which fined the brokerage $725,000 and forced it to return $1.4 million for overcharging 1,300 investors. GKN closed in 2001, but Nussbaum reemerged in 2003 running EarlyBirdCapital, which remains a big SPAC underwriter today. 

SPACs fell out of favor during the dot-com bubble years, when traditional IPO issuance was booming. In the early 2000s, interest in SPACs returned with the bull market, and the deals started getting bigger. Leading up to the 2008 crisis, dealmakers Nelson Peltz and Martin Franklin both turned to SPACs for financing, raising hundreds of millions of dollars each.

Around 2015, SPACs began to offer IPO investors 100% money-­back guarantees, with interest; the holder would also be entitled to keep any warrants or special rights, even if they voted against the merger and tendered their shares. Even more significantly, they could vote yes to the merger and still redeem their shares. In effect, this gave sponsors a green light on any merger partner they chose. It also made SPAC IPOs a no-lose proposition, effectively giving buyers a free call option on rising equity prices. As the Fed’s low-rate, easy-money policy propelled the stock market higher for over a decade, it was just a matter of time before SPACs came back into vogue. And so they have, with unprecedented force. 

Hedge funders may be the enablers of the SPAC boom, but they certainly aren’t the only ones getting rich. In September, a billionaire-sponsored SPAC called Gores Holdings IV said it would give Pontiac, Michigan–based entrepreneur Mat Ishbia, owner of mortgage lender United Wholesale Mortgage, a $925 million capital infusion, which would value his company at $16 billion. If the deal is completed, Ishbia’s net worth will rise to $11 billion, making him one of the 50 richest people in America. “I never knew what a SPAC was,” Ishbia admits. “I felt like it was a more efficient process.”

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SPAC MVP: United Wholesale Mortgage’s Mat Ishbia won a national basketball championship with Michigan State twenty years ago but missed his only shot in the finals. His first attempt at the SPAC game could be a slam dunk. Jacob Lewkow for Forbes

There are also the sponsors, underwriters and lawyers who create SPACs, each taking their pound of flesh from the deals. Sponsors, who pay underwriting and legal fees to set up and merge SPACs, normally wind up with a generous shareholder gift known as the “promote”—roughly 20% of the SPAC’s common equity after the IPO. 

Alec Gores, the private equity billionaire who helped take United Wholesale Mortgage public, has listed five SPACs and raised over $2 billion. In the United Wholesale Mortgage deal, Gores and his partners are entitled to purchase $106 million worth of “founder shares” for $25,000, or $0.002 a share. Gores’ private equity firm hasn’t raised a new fund since 2012. With easy scores like this, why would he? 

Among SPAC sponsors, few can match Chamath Palihapitiya’s frenetic pace. Palihapitiya, 44, is a former Facebook executive who founded Silicon Valley venture capital firm Social Capital in 2011. With his venture business slowing down, Palihapitiya has recently turned to the public markets. In the span of 37 months, he has raised $4.3 billion in six New York Stock Exchange–listed SPACs that go by the tickers IPOA, IPOB, IPOC, IPOD, IPOE and IPOF. The founder’s stock he has received for his “promote” will amount to no less than $1 billion, by Forbes estimates. In late 2019, Palihapitiya used one of his SPACs to take Virgin Galactic public. Two other deals have already been announced: mergers with home­buying platform Opendoor at a $5 billion valuation and with medical-insurance company Clover Health at $3.7 billion. Palihapitiya and Gores point out that they intend to invest hundreds of millions via private placements in their deals.  https://c4087b1b1645d1a0dc9c9c6154fc97c6.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

Of the $65 billion raised in SPAC IPOs so far in 2020, Forbes estimates that all told, sponsors like Gores and Palihapitiya should net more than $10 billion in free equity. Great for them, but terrible for the rest of the shareholders. In fact, by the time the average SPAC enters into a merger agreement, warrants afforded to hedge funds, underwriting fees and the generous sponsor’s promote eat up more than 30% of IPO proceeds. According to the study of recent SPACs by Ohlrogge and Klausner, a typical SPAC holds just $6.67 a share in cash of its original $10 IPO price by the time it enters into a merger agreement with its target company. 

“The problem with the typical founder-shares arrangement is not just the outsized nature of the compensation or the inherent misalignment of incentives, but also the fact that the massively dilutive nature of founder stock makes it difficult to complete a deal on attractive terms,” says billionaire Bill Ackman. 

A handful of billionaires like Ackman are structuring fairer deals with their SPACs. In July, Ackman raised a record $4 billion SPAC called Pershing Square Tontine Holdings. He’s shopping for deals, but his shareholders will face much less dilution because his SPAC has no promote. 


“A handful of billionaires are structuring fairer deals with their SPACs. but most SPAC deals don’t come with benevolent billionaires attached.”


Billionaire hedge fund mogul Daniel Och, backer of unicorn startups Coinbase, Github and Stripe via his family office, recently raised $750 million in a SPAC IPO called Ajax I but reduced its promote to 10%. His investing partner in Ajax, Glenn Fuhrman, made billions in profits running Michael Dell’s family office; the SPAC’s board includes an all-star lineup of innovators: Kevin Systrom of Instagram, Anne Wojcicki of 23andMe, Jim McKelvey of Square and Steve Ells of Chipotle. The group has pledged their personal capital into Ajax’s future deal. 

“We’re lowering the sponsor economics to make clear that this is not about promoting someone’s capital,” Och says. “It’s about investing our own capital, and then finding a great company that we can hold for a long period of time.” 

Most SPAC deals don’t come with benevolent billionaires attached. In fact, if history is any guide, the average post-merger SPAC investor is in for a fleecing not unlike the ones dealt out in the shoddy blind-pool deals peddled by those bucket shops of the 1980s and ’90s. 



According to NYU’s Ohlrogge, six months after a deal is announced, median returns for SPACs amount to a loss of 12.3%. A year after the announcement, most SPACs are down 35%. The returns are likely to get worse as the hundreds of SPACs currently searching for viable merger partners become more desperate. 

Problems are already surfacing in the great SPAC gold rush of 2020. 

Health-care company MultiPlan, one of the most prominent recent deals, may already be in trouble. Acquired by a SPAC called Churchill Capital Corp. III in a $1.3 billion deal, its shares plunged 25% in November after a short seller published a report questioning whether its business was deteriorating more than it let on. 

The Churchill SPAC is one of five brought to market by former Citigroup banker Michael Klein, which have raised nearly $5 billion. Klein and his partners now sit on stock holdings worth hundreds of millions, thanks largely to the lucrative promotes. Klein’s investment bank, M. Klein & Co., has made tens of millions of dollars in fees advising his own SPACs on their deals. In the case of MultiPlan, Klein’s bank earned $30 million in fees to advise Churchill to inject SPAC capital into MultiPlan. IPO proceeds, however, are now worth only 70 cents on the dollar.  https://c4087b1b1645d1a0dc9c9c6154fc97c6.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

“Coming out of the financial crisis there was all this talk about the expected outcomes when you have all these traders who have heads-they-win-tails-they-don’t-lose incentives, because it’s somebody else’s money,” says Carson Block, the short seller who called out MultiPlan. “Those incentive structures are alive and well on Wall Street in the form of SPACs.” 

Nikola Motor, the SPAC that broke the dam on electric-vehicle speculations, now faces probes from the Department of Justice over whether it misled investors when raising money. Its founder, Trevor Milton, is gone, and a much-hyped partnership with General Motors is in doubt. Shares have traded down 36% from where they stood when the SPAC merger was completed. 

Electric vehicles aren’t the only overhyped SPAC sector. So far 11 cannabis SPACs have either announced a deal or are searching for one. And in online gaming, there are no fewer than 10 SPACs in the works. 


Blank Checks For Billionaires 

SPACs were once shunned by savvy investors. Today they’re beloved by THE WEALTHIEST. 


It wasn’t long ago that fracking was all the rage on Wall Street, too, and SPAC IPOs provided quick and easy capital infusions. Energy private equity firm Riverstone Holdings issued three large SPACs—one in March 2016, for $450 million; then two more IPO’d in 2017, raising $1.7 billion—all intent on profiting from shale oil-and-gas investments. 

Riverstone’s Silver Run II SPAC acquired Alta Mesa Resources in 2018, but the company quickly went bankrupt, incinerating $3.8 billion of market capitalization on oil fields in Oklahoma. Its other two SPACs completed mergers, and now both are trading below $3 per share. 

Despite its dismal track record, Riverstone had no trouble raising $200 million in October for its fourth SPAC IPO, “Decarbonization Plus Acquisition.” Shale fracking is yesterday’s game, so Riverstone has moved on to clean tech. 

Hope springs eternal—especially when you can count on hedge fund money to back you up.

Antoine Gara

Antoine Gara

I’m a staff writer and associate editor at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, mergers, and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a member of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to agara@forbes.com. Follow me on Twitter at @antoinegara

Eliza Haverstock

Eliza Haverstock

I’m an assistant editor at Forbes covering money and markets. I graduated from the University of Virginia with degrees in history and economics. More importantly, I covered breaking news for its student paper The Cavalier Daily, while also writing for the school’s underground satire magazine. Since then, I’ve worked at Bloomberg and Pitchbook News, writing about everything from plastic straws to pizza robots.

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Bloomberg Markets and Finance

SPACs (special purpose acquisition companies, or “blank check” companies) have become all the rage on Wall Street in 2020. Sonali Basak explains how they work and why they have grown so popular.

What is a special purpose acquisition company (SPAC)? What is a blank check company? Should you invest in SPACs, and how do they work? Both a SPAC and blank check company are publicly-traded shell companies that raise collective investment funds through an initial public offering (IPO) in the form of a blind pool. The funds are placed into a trust until an acquisition is made or a predetermined period of time elapses and the fund is liquidated.

SPACs are increasingly being viewed as an alternative to the IPO process in particular for silicon valley companies since the failed WeWork IPO. Some recent SPAC mergers have been controversial such as Nikola Motors (NKLA) and Luckin Coffee (LKN). Many argue that these companies would not have made it through the traditional IPO process. We will also learn about Direct Listings, like the Spotify listing which is another alternative to the IPO process. Patricks’ Books: Statistics for Traders: https://amzn.to/3eerLA0 Financial Derivatives: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Visit our website: http://www.onfinance.org Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle Patreon Page: https://www.patreon.com/PatrickBoyleO…

Are Hedge Funds Too Big To Beat The S&P?

When I started my hedge fund career in 1998, the industry controlled about $200 billion in assets in 3,000 funds. Today, according to BarclayHedge numbers, there are between 10,000 and 15,000 funds investing over $3 trillion. But we seem to have lost a little something along the glorious speedway of growth. Performance, to be precise. As I looked back at the coming of age of hedge funds in the last twenty-something years, I couldn’t help but wonder: when it comes to performance, does size matter?

Not to be fastidiously historical, but from 1998 to 2008, hedge funds beat the S&P in seven out of eleven years, according to the Callan Institute periodic return tables. After 2008, they beat the index…once: in 2018, by 1.1%. Yes, for ten out of the last eleven years, the S&P has outperformed hedge funds, not by a little, but by a whopping 9.4%. I suspect that the poor showing of the hedge fund index is even understated, because it likely has a survival bias − meaning that the worst performing hedge funds go out of business and are not counted in ensuing years.

Why the consistently lackluster returns? My experience as a twenty-year investor in the high yield and distressed markets is that it is hard enough to have ten great ideas to invest $1 billion. When you invest $10 billion and you need a hundred great investments – unique and executable − it’s mission impossible. Call me a fatalist, but invariably the top ten are great, the next ten conceivably good, and so on…until the bottom of the barrel is simply lame. Why not invest more money in the top ten ideas? Because of size limitations: ten distressed situations large enough to invest $1 billion do not systematically exist, at least not without considerably moving the price.

Admittedly, distressed investing, a sub segment of the alternative investment landscape, is a niche market that simply may not accommodate the current size of hedge fund assets. And mine may only be an anecdotal experience. But the same opinion has been publicly voiced by several legendary investors in different markets.

In 2016, speaking at the Milken Investment conference, Steve Cohen of Point72 declared that there were “too many players out there trying to do similar strategies”. Dan Loeb wrote in his investment letter the same year that we were “in the first innings of a washout in hedge funds and certain strategies.” Since then, the industry has added almost $1 billion in assets. A superior intuition tells me, however, that both investors referred to the demise and shortcomings of others – their own fund would continue to grow and thrive. Recommended For You

But what if you could extrapolate the question to the entire hedge fund industry, as one asset class, in an analytical rather than subjective manner?

I came upon a fascinating study by Marco Avellaneda, director of the Division of Financial Mathematics at the Courant Institute of New York University, who presciently asked, back in 2005: “Hedge funds: how big is big?” The first concept he introduces is that of capacity: the total amount of money that can be put to work with a given manager or strategy without negatively affecting performance. He corroborates my experience that some strategies (currency trading for example) have greater capacity than others (distressed investing in my example), and consequently that investors, all things equal, should prefer deep capacity rather than niche strategies.

The problem then becomes, can hedge funds deliver outsized risk-adjusted returns in markets that are highly liquid and efficient? His answer is that they can, to the extent that they offer superior investment skills. And since above-average skills are, by definition, in limited supply, as money (i.e. demand for skills) pours into the hedge fund industry, it begins funding managers whose skills “are not superior to those that are needed for index investing”. Here, academia poetically meets practitioners. Mr. Cohen succinctly remarked in the same panel that “talent is very thin” and eloquently added that he was “blown away by the lack of talent.”

And so, comes the point at which hedge funds are too large to beat the market: they are the market. Professor Avellaneda uses a linear regression to study the marginal return of a dollar invested at any given hedge fund size. As expected, the line is well-fitted and downward sloping, meaning that returns diminish as assets increase. He insightfully extrapolates that the hedge fund industry will no longer outperform the S&P 500 past $2 trillion in size.

The industry first reached $2.3 trillion in 2008 (dipping for two years after the Global Financial Crisis before ramping back up to today’s $3 trillion): precisely the year that started the streak of a ten out of eleven-year underperformance. Naturally, one can wish to invest in hedge funds for diversification. But it will take innovations and changes for a trend reversal in outperformance. Follow me on LinkedIn. Check out my website.

Dominique Mielle

 Dominique Mielle

I spent twenty years as a partner and senior portfolio manager at Canyon Capital, a $25 billion hedge fund. In 2017, I was named one of the “Top 50 Women in Hedge Funds” by Ernst & Young. 

One of the only senior women in the hedge fund business, I played key roles in complicated bankruptcies, serving as a leading creditors’ committee member for Puerto Rico, and as a restructuring committee member for U.S. airlines in the wake of the September 11 attacks. 

I was a director and the audit committee chair for PG&E during its fifteen-month bankruptcy process and emergence, and now sit on the board of Digicel, Anworth (ANH), Studio City (MSC) and Tiptree (TPTR). 

Since retiring in 2018, I have been working on a book about being a female investor in the golden age of hedge funds. For more information visit http://www.dominiquemielle.com

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Warren Buffett made a $1 million bet in 2007: that hedge funds would not outperform index funds over the next 10 years. WSJ’s Nicole Friedman checks the numbers and handicaps Buffett’s chances of winning the bet on Lunch Break with Tanya Rivero. Photo: Bloomberg Subscribe to the WSJ channel here: http://bit.ly/14Q81Xy More from the Wall Street Journal: Visit WSJ.com: http://www.wsj.com Follow WSJ on Facebook: http://www.facebook.com/wsjvideo Follow WSJ on Google+: https://plus.google.com/+wsj/posts Follow WSJ on Twitter: https://twitter.com/WSJvideo Follow WSJ on Instagram: http://instagram.com/wsj Follow WSJ on Pinterest: http://www.pinterest.com/wsj/ Don’t miss a WSJ video, subscribe here: http://bit.ly/14Q81Xy More from the Wall Street Journal: Visit WSJ.com: http://www.wsj.com Visit the WSJ Video Center: https://wsj.com/video On Facebook: https://www.facebook.com/pg/wsj/videos/ On Twitter: https://twitter.com/WSJ On Snapchat: https://on.wsj.com/2ratjSM

Changelly How To Exchange Currency At The Best Rates

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Changelly is a fast and relatively anonymous cryptocurrency exchange service that allows you to trade almost any cryptocurrency out there. In this post I’ll review the company and its services. Changelly Review Summary Changelly does what it says on the tin: Users can quickly and simply trade between cryptocurrencies to suit their needs.

A 0.5% cryptocurrency trade fee is not extortionate – it’s actually quite cheap for such a convenient product. However the company can be a bit more transparent about their business. The main thing to remember is to not use Changelly for fiat trades because the exchange rates are ridiculously high. That’s Changelly in a nutshell. If you want a more detailed review of Changelly keep on reading, here’s what I’ll cover:

1.Company Overview

Changelly allows you to trade cryptocurrency instantly and without registering at any exchange or verifying your identity. In operation since 2015 and headquartered in Malta, Changelly was originally associated with the Minergate team, which I reviewed as well. However, today these are two different companies (according to a source inside Changelly). Changelly uses an automatic trading robot that integrates with some of the largest trading platforms, including Poloniex, Binance and Bittrex.It operates by making bids and asks on respective exchanges to suggest the best available rates on trading pairs. This is similar to the service offered by Shapeshift.

2. Changelly Services

Changelly offers an instant, simple and relatively anonymous crypto to crypto exchange service. The service can be accessed via the company’s website, its mobile app (Android only) or through various 3rd party wallets. The most popular wallets that integrate Changelly are  TREZOR, Ledger, Exodus, Jaxx, Coinomi and Edge.

Changellyalso offers its API and a customizable payment widget for websites. Using the widget, users can exchange crypto from within the site without needing to go to Changelly’s website. The company’s website also allows you to buy Bitcoin with a credit card via an integration with Simplex. While Changelly boasts about its simple and relatively anonymous buying process, it states that it may require a full verification process if a certain trade or user seems suspicious.

How to Use Changelly?

Decide what coins you want to change (e.g., Bitcoin to Ethereum, Litecoin to Dash, etc.). Verify the transaction fees. Enter your receiving address. Confirm and pay in your chosen currency.

3. Currencies and Payment Methods

Changelly offers access to over 140 different cryptocurrencies. The wide range of cryptocurrency creates an opportunity to exchange any two currencies directly with minimal fuss. Traditional cryptocurrency trading platforms generally have a limited selection of trading pairs, meaning that sometimes users have to make multiple transactions to receive their desired cryptocurrency. With Changelly, you can make up your own trading pairs with any of the cryptocurrency available on the platform, in one transaction.

You only need to select the trading pair and the software will take care of the trades. For example, you can easily trade Doge for Steem in one transaction.  Click here to see all of the supported currencies. Recently, Changelly has added fiat currency support, with the inclusion of credit and debit card purchases. While this is a welcome addition for new users, it’s important to pay attention to the fees with this feature.

4. Changelly Fees

Changelly boasts about its static-rate fees as a major benefit of its service. With Changelly, all trades guarantee a 0.5% fee, which is fairly competitive, when all is said and done. However, cheaper rates can be found when working directly on trading platforms like Bitstamp or Kraken.

Still, If you’re making multiple trades to move altcoins, then Changelly may actually become a cheaper option, particularly with smaller amounts. When it comes to trades using fiat currency, there’s a massive caveat to mention here. Trades from fiat currency (i.e., dollars, euros, etc.) claim to hold the 0.5% static fee, but in reality, this doesn’t appear to be true. The rates vary with this method and you’re more likely to be trading at higher rate due to the unfair exchange rate. In their defence, Changelly does warn you about the high fees and the team claim this is out of their control. The reason for that is that to process these transactions, Changelly needs a third-party payment service (currently Indacoin and Simplex), which massively varies the rate.

Direct Buying Fees

When you’re looking to buy cryptocurrencies with a credit card on Changelly, you’ll notice fees are considerably higher. It’s important to understand why. All bank card transactions on Changelly are provided by Simplex and Indacoin. For BTC, BCH, LTC, XRP and ETH Changelly supports direct payments, which are provided by Simplex, so you can buy these cryptos without double conversion. However, when buying an other coin listed on Changelly, the transaction will be operated by Indacoin. In this case, the fiat amount will be converted twice: from fiat to BTC and from BTC to your requested cryptocurrency.

5. Buying Limits

When trading crypto to crypto there is no limit on the transaction amount. However fiat transaction have buying limits:

  • USA, Canada and Australia – $50 limit for the first transaction. The next purchase could be made in 4 days (100$ limit) and $500 after 7 days of the first buy. No more than 3 payments within the first week. No limits in one month at all.
  • CIS region (Russia/Ukraine/Belarus/Kazakhstan/Armenia/Georgia) – $200 limit for the first transaction. The next limit increase could be done in 24 hours. The total limit for the first week is $2000 and for the first month is $10000.
  • EU and other countries – $100 limit for the first transaction, the next purchase could be made in 4 days with 200$ limit and $500 after 7 days of the first buy. No more than 6 payments within the first week. No limits in one month at all.

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If you’re looking to buy Bitcoin with a credit card via Changelly you’ll have the following limits:

  • First transaction: from $50 to $10,000
  • Daily limit: up to $20,000
  • Monthly limit: up to $50,000

6.Supported Countries

According to Changelly’s Terms of Service you will not be able to use the exchange if you live in any of the following countries: Cuba, Iran, North Korea, Crimea, Sudan, Syria, United States of America (including all USA territories like Puerto Rico, American Samoa, Guam, Northern Mariana Island, and the US Virgin Islands (St. Croix, St. John and St. Thomas), Bangladesh and Bolivia, as well as any other country subject to United Nations Security Council Sanctions List and its equivalent.

7. Customer Support and Customer Reviews

There is no doubt that the whole industry is struggling to provide reliable customer service. For the most part, Changelly seems to be doing a respectable job with a relatively high satisfaction score on TrustPilot. Team members often reply to queries within hours, and there are many reports of problems being fixed in under 24 hours. The website is particularly clean and easy to understand, so users have a minimal learning curve to start trading.

An in-depth FAQ also helps you educate yourself about the site and service. Support is provided through a chatbox on the website. However, aside from the  respected amount of positive reviews, there are many one-star reviews about expensive trades and missing funds. As mentioned above, Changelly claims to have 0.5% fees, but in reality, it can get a lot more expensive for USD and Euro transactions. Changelly seems to be responding to each and every review with a request for a follow up. You can also read the comment section in this post for additional reviews of the platform.

8. Changelly vs. Shapeshift

Changelly’s ultimate competition is Shapeshift, a similar service headed by Erik Vorohees in 2014 that has gained a lot of respect from the Bitcoin community. From a user perspective, there isn’t a lot of difference between the two services, with Changelly being the cheaper one. From a reputation perspective, Shapeshift is much more open about its business and the people who run the company. I’ve compared both companies in the past, if you’re looking for a more detailed perspective.

9. Frequently Asked Questions

Does Changelly Accept Debit Cards?

Yes, Changelly accepts debit cards for cryptocurrency purchases. You may pay with a 3D-secure card from any country and in any currency. Debit cards are much more recommended to use than credit cards, since the latter can get declined by the issuing bank.

How Long Does Changelly Take to Exchange Between Cryptocurrencies?

Changelly transactions usually take between 5-30 minutes. Transactions over 1 BTC have a longer processing time, and can take longer depending on their size.

Source: http:/www.changelly.com

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Why Choosing an Exchange Might Be The Most Important Crypto Choice You Make – Crypto Silbert

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Why Choosing An Exchange Might Be The Most Important Crypto Choice You make. Getting involved in crypto comes with a lot of choices and decisions. This activity can be stressful at times, with challenges like choosing the right coins to invest in, deciding when to buy and sell, knowing what news to listen to, and many more. One of the single most important choices you’ll make is picking an exchange. There are hundreds out there, so there’s plenty of choice, but that also means there’s a lot that can go wrong here………..

Read more: https://smartereum.com/39515/why-choosing-an-exchange-might-be-the-most-important-crypto-choice-you-make/

 

 

 

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