Coinbase is an American cryptocurrency exchange and it is one of the biggest cryptocurrency exchanges in the world, being number two in rankings after the Binance exchange and having 13.3 million active users. In this article, you’ll learn more about Coinbase.
Coinbase was founded in 2012 in San Francisco, CA. As it is an American company, it is controlled by the Financial Crimes Enforcement Network (FinCEN) in the USA, which assures safety and comfort to the users. Moreover, if you are a resident of the USA, you won’t need to file IRS Form FBAR (Report of Foreign Bank and Financial Accounts) for foreign accounts with over $10000.
A Beginners Guide Trading Cryptocurrency
In order to get started trading cryptocurrencies like Bitcoin or Ethereum, you need to choose two things: a cryptocurrency wallet and an exchange.
As for a cryptocurrency wallet, it can be MetaMask, Atomic Wallet, Trezor, or even wallets that are available on exchanges. The next thing is a cryptocurrency exchange. For instance, you can trade on Coinbase, Bittrex, or Binance. Coinbase is perfect for beginners as there are both wallet and an exchange offered.
Then, you should decide if you want to trade dollars to crypto (USD to Bitcoin, or Ethereum to USD), or crypto to crypto (Bitcoin to Ethereum, or Ethereum to Litecoin).
How to Get Started Trading Cryptocurrency with Coinbase.com
Coinbase is the best and the easiest trading platform that offers trading different alt-coins, such as Bitcoin, Ethereum, Litecoin, Bitcoin Cash. Now you’ll learn how to get started trading on Coinbase.
Opening a Coinbase account
First of all, sign up for Coinbase.com and set up a digital currency wallet, where your digital assets can be stored. Then, link your bank account with your Coinbase account, also your debit and/or credit card is needed in order to exchange crypto currency.
Now you are able to purchase Bitcoin, Ethereum, Litecoin, Bitcoin Cash, etc (in order to trade USD to digital currency) or you can sell BTC, ETH, LTC, BCH, etc (in order to trade digital currency to USD). You can also trade crypto to crypto, using Coinbase Pro account or pressing the convert button.
What you should know before you start trading on Coinbase
Here are some tips for crypto traders who begin trading on Coinbase:
- Use a strong password, two-factor authentication, and check all security settings. Coinbase provides insurance in case of hacking, but it is applied if there was a breach on their side, not if your account was hacked.
- Enter every form of payment in order to increase limits of buying or selling. You can also increase your limits by uploading a photo ID. The limits are also increasing each time you trade.
- In fact, use your bank account to purchase digital currency via Coinbase over other payment methods if possible. This will lower the fees.
- You should wait up to 5 days until your bank approves the pairing, so keep that in mind.
- Check if the wallets are set up in the settings before trading coins.
- With the mobile app, you’ll be able to trade from your mobile phone. There is always a possibility of the market crash, so you’ll need to buy or sell as soon as possible when it’s time to do that.
- A USD wallet on Coinbase can benefit you – put assets in it and then, once the deposit clears, use it in order to buy coins immediately moving forward.
- Buy fractions of a coin, not the whole one. Whole Bitcoin is too expensive, so make sure to buy fractions of it at the beginning.
- Set alerts, as they can help you in deciding the time when to buy or sell.
- There is a possibility to send your digital assets to other traders on Coinbase via the email address.
Coinbase Trading Fees
Coinbase has a complex fee structure, as it is a combination of elements that depend on two factors:
- Coinbase charges a fee of about 0.5% for crypto sales and purchases. However, this rate depends on market fluctuations and it may be higher or lower.
- It also charges a fee that depends on the amount purchased and the payment type.
For example, if you buy 100 USD of BTC through your U.S. bank account, you will be charged a fee of $2.99. With that fee, your full total will end up being $100, but you will only get $97.01 worth of BTC.
And as for selling, for example, if you sell $100 in the amount you’re selling, the fee will be 1.49%. So, the total amount you’re selling the cryptocurrency for will be $98.51.
Coinbase Withdrawal fees
Coinbase doesn’t have a direct withdrawal fee, but it has a standard “network fee” at the time of withdrawing. It also depends on two factors: the time of withdrawing and the selected coin.
Coinbase tax forms
The IRS uses different tactics in order to detect cryptocurrency investments and unreported income. The most predominant system is the 1099 reporting system. Coinbase reports certain customer activity to the IRS using the 1099-MISC (Miscellaneous Income) form for rewards and/or fees through the exchange. However, Coinbase doesn’t issue 1099-Ks and 1099-Bs for trades on the exchange. As for Non-US users, they won’t get any forms from Coinbase and must utilize their transaction history to fulfil their local tax obligations.
Coinbase pros and cons
As Coinbase is one of the top cryptocurrency exchanges in the world, it has its advantages and disadvantages. Let’s look at its pros first:
Cryptocurrencies Available on Coinbase
Coinbase offers more than 40 cryptocurrencies for investment, trading and staking. Some of these cryptocurrencies are BTC, ETH, BCH, BCC, and others.
Variety of fiat deposit and withdrawal options
The trading platform has a big variety of options to deposit and withdraw fiat currencies, such as via debit card or bank account.
Coinbase has a referral program, which awards its users 10 USD if they invite someone who trades 100 USD and more.
The Coinbase exchange ranks among other highly liquid cryptocurrency exchanges. Thus, crypto traders are protected from serious price slippage in a volatile market.
Extremely simple for beginners
Trading on Coinbase is extremely simple for someone who starts crypto trading. Opening a Coinbase account is easy. Moreover, the user interface is clear, friendly and convenient. In addition, there is also an educational program – Coinbase Earn, which explains how to buy and sell digital currency. Moreover, Coinbase Earn rewards its users with small crypto deposits when they learn more about the trading platform’s offerings.
There is also a Coinbase’s mobile app available for iOS and Android. It is very easy to use and it mirrors the desktop version’s functionality.
Coinbase uses a variety of safety measures in order to prevent unauthorized manipulation of digital assets, such as 2FA and multi-signature security options. Moreover, Coinbase has insurance if it is hacked (however, this insurance doesn’t apply if your account is hacked due to the lack of security measures). 98% of users’ assets are also secure in offline cold storage. In addition, as digital currency isn’t considered legal tender, Coinbase provides insurance by pooling Coinbase balances and holding them in USD custodial accounts, USD denominated money market funds or liquid U.S. Treasuries.
As it was already mentioned, Coinbase fees are too high in comparison with other cryptocurrency exchanges. However, Coinbase Pro has lower fees and more features, which you’ll learn about later on.
Lack of anonymity
As you have to fill in your full personal information and all transactions are tracked, there is no anonymity on the Coinbase exchange.
Lack of control over assets
When a user buys digital currency on Coinbase, it is stored in a wallet that Coinbase has control over. Thus, the user doesn’t have full control over their digital assets. However, it can be bypassed if the user withdraws their currency to their own personal wallet.
Trading On Coinbase Pro
As Coinbase is quite simple for new crypto traders, Coinbase Pro is more for advanced traders. With an account on Coinbase Pro, users have access to more choice of tools. Moreover, users can place market, limit and stop orders with lower fees on Coinbase Pro. It also offers the option of margin trading and more charting options. In addition, Coinbase Pro has over 100 trading pairs available worldwide – nearly 40 tradings with USD, and more than 40 crypto to crypto trading pairs in 42 regions.
Coinbase Pro Fees
Moving on to the Coinbase Pro fees, they are far more less than on Coinbase. Coinbase Pro fees range from 0% to 0.50% for taker trades, which is very pleasing in comparison with trading on Coinbase. However, Coinbase Pro fees are still quite high compared to the fees that most competing cryptocurrency exchanges have.
While Coinbase is a great trading platform for people who only start trading cryptocurrency, trading on Coinbase Pro is better for those who want to actively trade with lower fees and more advanced features.
Binance vs Coinbase
Coinbase is mainly number two in rankings after the Binance exchange. Binance is a cryptocurrency exchange created in 2017 and it is a leader among crypto exchanges. Let’s compare two of the biggest crypto exchanges on the market.
Security is a crucial factor when deciding on the cryptocurrency exchange. Both Coinbase and Binance take security seriously. However, Coinbase is more open about user’s transactions, and it is regulated by the FinCEN in the USA, which adds a layer of safety to the trader.
Depositing or Withdrawing Fiat Money
Coinbase offers to buy more than 40 cryptocurrencies using the fiat currencies of any of the 32 countries where it functions – both in Europe and North America, except for Australia and Singapore. Crypto traders can also sell their digital assets in all 32 countries, except for Australia and Canada. In contrast, Binance offers trading with cryptocurrencies only, but it has a wide range of them – more than 300 different alt-coins.
As it was already mentioned, Coinbase fees are high – 1.49% for each time you buy or sell crypto can be a problem, while on Binance there are no charges for deposits or withdrawals, and it has a fee of 0.1% for all trades. Moreover, there is a 50% discount for trades via Binance Coin (BNB).
A user’s level and the amount of the fiat currency they trade with impact on the trading limits on Coinbase. For example, Level 2 users can have up to $25000 worth of trades, and level 3 users are able to make unlimited trades. In contrast, Binance trading limits vary with the level of verification of a user. Level 1 users can make up to 2 BTC worth of cryptocurrency per day, while level 2 traders can make trades up to 100 BTC worth per day.
Crypto trading is sometimes confusing, so good user support is very important when some problems appear. Both Coinbase and Binance communicate with users via email or support bot, but users claim them to be slow. Coinbase also has a telephone helpline, but for the USA only, while Binance support is available in 4 languages – English, Chinese, Japanese, and Korean.
As for the user experience, Coinbase has the most user-friendly interface in the market, being extremely simple and convenient for beginners. While Binance has basic and advanced settings, basic settings may be too complicated for someone who has only started trading.
Crypto trading might be frightening and confusing, so it’s crucial to choose the right exchange. Both Binance and Coinbase have their benefits and drawbacks, so you can try both of them and choose which one is more satisfying for you.