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2021 was the year Coinbase went mainstream.
Founded in San Francisco almost ten years ago, one of the world’s largest cryptocurrency exchanges went public in April and is now valued at around $ 50 billion, which Hyundai is worth.
Coinbase hit these dizzying heights as demand for cryptocurrency skyrocketed, fueled by thousands of dollars in stimulus and endless hours of home quarantine. Bitcoin, the most popular digital currency, was worth less than $ 5,000 when Covid-19 hit America, up from nearly $ 50,000 just over a year later.
Traders flocked to Coinbase because it made it easy to buy and sell cryptocurrency with easy-to-navigate tools and a sleek design. (Except Hawaii; residents of the state of Aloha cannot register.) Despite its popularity, Coinbase’s fees can be extremely high, which can drastically reduce any earnings you might see.
Here’s how to determine if Coinbase is right for you.
- Wide choice of crypto-currencies to trade
- Low account minimum
- Convenient user experience
Cons of Coinbase
- Expensive and difficult to understand pricing structure
- Getting lower fees requires using a completely different Coinbase platform
Cryptocurrencies on Coinbase
Currently, you can buy the following cryptocurrencies on Coinbase:
- Bitcoin (BTC)
- Ethereum (ETH)
- Cardano (ADA)
- Tie (USDT)
- Internet Computer (ICP)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- Uniswap (UNI)
- Chain link (LINK)
- Stellar lumens (XLM)
- USD coin (USDC)
- Polygon (MATIC)
- Ethereum Classic (ETC)
- EOS (EOS)
- Aave (AAVE)
- Wrapped Bitcoin (WBTC)
- Filecoin (FIL)
- Tezos (XTZ)
- Dai (DAI)
- Manufacturer (MKR)
- Cosmos (ATOM)
- Alogrand (ALGO)
- Compound (COMP)
- Dash (TITLE)
- Zcash (ZEC)
- Synthetix Network Token (SNX)
- Yearn.finance (YFI)
- SushiSwap (SUSHI)
- Decentralized (MANA)
- Basic Attention Token (BAT)
- Enjin Coin (ENJ)
- The graph (GRT)
- UMA (UMA)
- Celo (CGLD)
- 0x (ZRX)
- Bancor Network Token (BNT)
- OMG Network (OMG)
- Curve DAO Token (CRV)
- Ankr (ANKR)
- 1 inch (1 INCH)
- Ren (REN)
- Loop (LRC)
- iExec RLC (RLC)
- Kyber Network (KNC)
- SKALE (SKL)
- Storj (STORJ)
- Cartesi (CTSI)
- Augur (REP)
- Original token (OGN)
- Balancer (BAL)
- Currency (RMN)
- NKN (NKN)
- Civic (CVC)
- Band Protocol (BAND)
- NuCypher (NU)
- Orchid (OXT)
- Mirror Protocol (MIR)
- Ampleforth Governance Token (FORTH)
- District0x (DNT)
- Tellor (TRB)
One of the reasons Coinbase has generated nearly $ 3 billion in revenue in the past 12 months, for example The morning star, is that it charges a bunch of fees. That’s not necessarily bad – almost all crypto exchanges charge a fee, whether they’re openly labeled as such or not. The problem is that the most user-friendly offering from Coinbase, its namesake platform Coinbase, charges higher fees for its convenience and simplicity than what you might get elsewhere, even on its more complicated crypto trading platform. , Coinbase Pro.
First, there are the “spread fees,” which Coinbase says typically makes up 0.50% of your transaction.
What it is about?
When you want to buy a cryptocurrency, such as Bitcoin, you log into your Coinbase account and choose an amount you want to buy, say $ 100. To determine what it’s worth in Bitcoin, Coinbase uses the exchange rate on Coinbase Pro. Coinbase then adds the spread fee which it calls the “consumer exchange rate”. It’s basically the difference between the price Coinbase pays to get a crypto and the price it sells it back to you. There may be padding on each end to help Coinbase make a profit.
Then there is the aptly named “Coinbase Fee,” which depends on the size of your purchase, the fiat currency you use to make it, and how you pay. These fees are the greater of a lump sum or varying percentage, which can be a bit confusing to figure out.
Here’s how the flat fee applies to U.S. buyers:
- Transactions less than or equal to $ 10, the fee is $ 0.99
- Transactions greater than $ 10 but less than or equal to $ 25, the fee is $ 1.49
- Transactions greater than $ 25 but less than or equal to $ 50, the fee is $ 1.99
- Transactions greater than $ 50 but less than or equal to $ 200, the fee is $ 2.99
After going over $ 200, the fee structure changes to be based on a percentage, determined by how you pay for the crypto:
- 1.49% for US bank accounts and Coinbase USD wallets
- 3.99% for debit card or PayPal
Fees for purchases over $ 200 can be up to 1.5% of any transaction for a minimum amount of $ 0.55.
In practice, this means that your $ 100 only earns you $ 97 worth of Bitcoin. While these fees may seem low at the moment, over time they can have a serious impact on your returns. (In the traditional world of equity investing, this dynamic has led to low-cost passively invested index funds that charge significantly less than actively managed funds with comparable, if not better, performance.)
Let’s say you put $ 100 into your Coinbase account every month to buy Bitcoin for 20 years. Assuming Bitcoin returns an annual average of, say, 10%, you would end up with almost $ 66,700 after fees. At no cost, however, you would have had around $ 68,700.
By simply executing your transactions, Coinbase would have saved over $ 2,000 on your returns in fees, or roughly 4.6% of your total return.
Hopefully, as consumers have more options for making crypto transactions, Coinbase’s fees will go down. After Robinhood offered free commissions on stock trades, for example, Charles Schwab and E-Trade, among others, followed suit. It is no coincidence that Robinhood now allows its clients to trade cryptos.
“The race to the bottom that took place in late 2019 with stock trading fees is likely to head into the crypto trading space,” said David Trainer, CEO of New Constructs, an investment research firm. . “We expect Coinbase’s competitors to reduce their trading fees to zero in an effort to increase their market share.”
Features of Coinbase
With its higher fees, why has Coinbase become one of the most popular destinations to buy cryptocurrency in the United States? Some reasons:
Ease of use
On the one hand, it is incredibly easy to use. Registration is quick and you can earn a small amount of Bitcoin (worth $ 5) by uploading state or federal issued ID. (You’ll need to do this if you want to sign up for Coinbase Pro.)
You can then link your bank account to your account through the Plaid data transfer network, the recommended method to minimize trading costs.
The interface is bright and easy to navigate. A search bar helps you sift through the myriad of crypto offerings available, from Bitcoin to Tellor, and you can set up purchases to recur on a continuous basis.
For those who are a little more in the weeds, Coinbase allows you to trade selected cryptos for other cryptos, meaning you can convert your Litecoins to Augur, for example.
Coinbase has built its reputation as a secure place to buy and sell cryptos. This was a particularly important statement after the Mount. The Gox debacle, when around 850,000 Bitcoins were stolen in 2014. (This total is currently worth over $ 37 billion.)
Coinbase has never experienced such a calamity, although there has of course been customer complaints about the budding exchange.
He claims that 98% of consumer funds are stored offline in various locations around the world, which helps provide even greater security for digital assets. Coinbase keeps your crypto in its free wallet service, although you can choose to keep your crypto in a third-party wallet. You will need to perform two-factor authentication to log into your account. There are also biometric fingerprints and AES-256 encryption on private keys.
Additionally, Coinbase pools your account liquidity with its other U.S. customers and places it in one of three places: custodial accounts at U.S. banks, U.S. money market funds, or U.S. treasury bills. short term.
You don’t know where your funds are held, but since they’re in US banks, you get FDIC pass-through insurance up to $ 250,000. But remember: like most investments, the crypto you hold in your account does not have this government protection. You risk losing all the money you invest in cryptocurrencies.
What about Coinbase Pro?
While Coinbase is designed for newcomers, more advanced traders might be interested in Coinbase Pro. (You don’t need a separate account for Coinbase proper and Coinbase Pro; the same credentials will suffice.)
While the Pro version comes with more sophisticated charting and trading options, the biggest difference is in the fees, which is that they are lower and simpler.
Your trading volume is determined by the amount you traded in the last 30 days and is calculated in dollars.
The “taker” fees are applicable when you make a transaction and are immediately executed.
The “maker” fees come into play when you place an order, but they are not fulfilled immediately. While waiting for another customer to match your order (that is, someone who wants to buy as much as you want to sell), you pay the lower “manufacturer” fees.
It is possible that part of your order will be considered a taker and the rest as a manufacturer, depending on how much of your order Coinbase is able to move at one time.
Either way, the 0.50% fee on traders under $ 10,000 is much lower than the 1.49% (plus the spread) you would pay on Coinbase itself.
With its seamless signup process, ease of use, and positive security reputation, Coinbase has become a popular gateway for cryptocurrency investors who want to get started. The fees, however, can be a major downside, and you should consider upgrading to the Pro version as soon as you’re comfortable.
* The amount of fees varies depending on the amount of purchase and the method of purchase. 1.99% (0.5% spread fee + 1.49% Coinbase fee) applies to orders of $ 200 or more placed by wire transfer in the US or Coinbase USD Wallet.