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Coinbase Review 2021 - Cryptocurrency Exchange Platform | NextAdvisor with TIME
If you’ve heard of any cryptocurrency exchange, it’s probably Coinbase. Bitcoin early adopters have been buying and trading coins on Coinbase since 2012, but the platform gained mainstream attention in 2021 when it became the first crypto exchange to go public on the Nasdaq.
Today, more than 56 million users are trading over $300 billion worth of cryptocurrency on Coinbase each quarter. It has the third-highest trade volume of all exchanges, according to crypto data firm CoinMarketCap.
Here’s what you need to know about buying, selling, and holding cryptocurrency on Coinbase:
No matter where you buy it, cryptocurrency is a highly volatile , speculative investment. Only invest in crypto what you’re prepared to lose , and make sure you have other financial priorities in place first: save money in an emergency fund , contribute to retirement savings , and pay off any high-interest debt balances.
Simple interface for beginners
More than 50 cryptocurrencies to choose from
Strong security measures
High fees compared to some other exchanges
No control of your own private keys when you keep coins on your account
Coinbase supports more than 50 different cryptocurrencies. You’ll find each of the most common cryptos listed on Coinbase, including the following:
Different coins have different trading restrictions and minimum/maximum withdrawal amounts. Some can only be traded for certain fiat currencies like the U.S. dollar or converted to/from other cryptocurrencies. You may also be restricted from trading some coins based on the country or state you’re located in. Coinbase’s website offers an overview of these restrictions for each of its supported cryptocurrencies.
One of Coinbase’s biggest drawbacks compared to other exchanges is its pricey fee schedule.
When you make a cryptocurrency transaction on Coinbase — like buying Bitcoin, or exchanging your Ethereum back into U.S. dollars — you’ll be charged both a spread and a Coinbase fee.
The spread is the difference (or margin) between the market price and the price you actually pay for a purchase or receive for a sale. You can compare it to the commission or trading fee you might pay when you invest using a brokerage account.
Coinbase’s spread is equal to about 0.50% of your crypto sales and purchases, though it can fluctuate based on the market. For cryptocurrency conversions — trading Bitcoin for Ethereum, for example — you may be charged a spread of up to 2.00%, based on market fluctuations. However, there’s no Coinbase Fee for converting your crypto coins to other cryptocurrencies.
The Coinbase Fee can also vary, depending on your payment method, location and other factors. It may be either a flat fee or a percentage of your transaction, but will always be the greater between the two.
Here’s a comparison of the flat vs. percentage Coinbase fee for U.S. users:
So if you buy $50 worth of Bitcoin on Coinbase through a bank transfer, you’ll be charged a spread of about $0.25, as well as the $1.99 flat fee (since that’s greater than the 1.49% alternative fee). That means you’ll actually end up with about $47.76 worth of Bitcoin. That may not seem like much, but it adds up the more you buy.
You can also choose to deposit cash into your Coinbase USD wallet, and buy crypto from that wallet later on (for the 1.49% fee described above). Because crypto prices move so quickly, keeping USD in your Coinbase wallet can help you avoid potentially lengthy bank transfers — like if you want to act on a sudden price drop, for example. Here are the fees associated with depositing USD into Coinbase:
Unlike cash in the bank, cryptocurrency is not protected under any federal regulations.
Coinbase says it stores 98% of customers’ crypto offline, in cold storage (the remaining 2% is used to facilitate trading volume). The exchange also has an insurance policy to protect crypto holdings. Experts say robust measures such as this are why a mainstream exchange like Coinbase might be worth the extra fees.
Still, there’s no guarantee that your coins will be restored to your wallet if your crypto is stolen in a massive security breach. In that case, “we will endeavor to make you whole,” Coinbase says on its website. “However, total losses may exceed insurance recoveries so your funds may still be lost.”
The insurance policy also does not cover losses that result from unauthorized access to your personal account. In other words, if your identity is stolen or someone figures out your Coinbase account password and steals from your wallet, you may not be able to recover it.
Though it can be helpful for faster trades, most people don’t need to store cash on Coinbase (just as you wouldn’t keep uninvested cash in a conventional investment account). But any cash holdings you do keep on the exchange are pooled with other users in one of three ways: held in U.S. bank accounts, or invested in U.S. Treasuries or money market funds. You have no say in which method your cash is kept, but Coinbase says the money kept in bank accounts as cash is FDIC-insured up to the current maximum of $250,000.
Other security measures include 2-step authentication, biometric logins (like fingerprint and Face ID), and data encryption. Always protect your own personal security by using strong passwords, not repeating passwords across accounts, enabling 2-factor authentication, and monitoring your accounts regularly for any unauthorized activity.
In general, experts say it’s smart to stick to cryptocurrency exchanges that are popular and already have a large customer base. Coinbase is arguably the most well-known of traditional cryptocurrency exchanges, and has been around for a long time compared to many others. Its recent appearance on the Nasdaq also means users can get a better glimpse into the health of Coinbase as a platform, since its financials are now public.
Education is a big part of investing in crypto, especially for beginners. Coinbase offers a Coinbase Learn hub with beginner’s guides to different coins and uses of cryptocurrency, regular updates about what’s going on in the market, and recommendations for more resources.
It also incentivizes users to actively learn through Coinbase Earn. You can watch short videos and take quizzes about specific altcoins, and Coinbase will deposit a small amount of that crypto into your wallet as a reward.
Coinbase offers different options when it comes to crypto storage.
First, you can store your crypto on Coinbase. This is the simplest option — just log into your account, buy your crypto, and leave it within your account. You won’t have access to your private keys by doing this; instead, your coins’ security will rely on Coinbase’s security measures (and your own account protections).
You can also choose to move your holdings onto Coinbase’s separate hot wallet software, Coinbase Wallet. This is a separate app that you would download, and unlike keeping your coins on Coinbase, does give you control over your private keys. That control means you can do more with your crypto, like move coins between wallets and participate in other decentralized finance activities that require crypto transfers and payments outside the exchange. But if you’re just looking to buy and hold Bitcoin or another crypto for its value as an asset, it’s not necessary.
Coinbase offers another free exchange platform called Coinbase Pro, which charges lower fees and additional features for people interested in actively trading crypto.
If you’re just starting out and learning about cryptocurrency — or you’re interested in crypto as a long-term store of value — Coinbase Pro’s advanced features are probably not necessary. But if you’re looking to buy and sell coins more actively, Coinbase Pro offers additional tools and reports, as well as cheaper trades, that you might benefit from.
Coinbase’s easy-to-use interface, educational tools, and strong security measures make it a great choice for anyone looking to begin investing in cryptocurrency.
If you’re just looking to put some extra cash into Bitcoin as a long-term investment, Coinbase simplifies the process. You can simply buy your coins, leave them on Coinbase, and track their value over time.
But it’s also a good option to grow with you as you learn more about crypto. It’s not lacking in any major services you would find elsewhere, between numerous different currency offerings and the Coinbase Wallet option. If you do eventually choose to invest beyond Bitcoin or hold your own private keys, Coinbase is still a great starting point.
The biggest downside to Coinbase is its fees, which can be higher than some other exchanges. However, for most general investors, they’re a small price to pay for the convenience, range of features, and security you’ll get in return.
Investing in cryptocurrency is inherently risky, and your crypto is a speculative asset at best. But if you’re OK with the risk (and have your other financial priorities covered), Coinbase is a secure and legitimate exchange to use.
You can’t protect your holdings from market fluctuations, but Coinbase has a relatively longstanding reputation and secure safety measures in place to protect the money you put into it.
You can withdraw your money from Coinbase back to your bank. You’ll just need to sell your cryptocurrency on the exchange. The money from the sale will enter your USD Wallet on Coinbase, and then you can withdraw the funds to your bank.
You can also send crypto from your Coinbase account to your own wallet as long as you have your wallet address, though you may incur a fee.
by:Kendall Little on twitter