If you are planning to get into cryptocurrency trading, chances are that you will start that journey through a centralized exchange and if this is the case, Coinbase should be on the list of exchanges to choose from. This is because it is one of the most popular crypto exchanges based on trading volume. Like all exchanges, Coinbase has its perks and disadvantages. This review will help you understand everything you need to know about Coinbase so that you can make an informed decision when determining whether it is the right exchange for you.
Coinbase History and Operations
Coinbase has been around since 2012, making it one of the oldest cryptocurrency exchanges. It has, so far, managed to survive major obstacles and overcome challenges that have caused the demise of some of its rivals. This is an advantage especially for those looking for an exchange that has years of experience and a healthy reputation. Coinbase was founded by Fred Ehrsam and Brian Armstrong. They launched the exchange through a U.S-based tech startup accelerator called Ycombinator.
The exchange was initially founded as a marketplace for Bitcoin trading but has since then expanded to include thousands of other cryptocurrencies. Coinbase currently has over 2,700 employees across the world, supporting its presence in more than 100 countries. Its ecosystem also supports roughly 9,000 institutions in the finance segment.
Coinbase, as a company, operates three main products: Coinbase exchange which provides an easy way for the average crypto enthusiast to get exposure to the market, Coinbase Pro which is more complex and provides additional tools for pro traders and the Coinbase wallet, a storage solution for storing cryptocurrencies.
Coinbase’s Expanded Services
Let us take a more detailed look at some of the services that the Coinbase crypto exchange offers:
Coinbase not only acts as a crypto marketplace but also as a service provider in the budding crypto finance industry, through various solutions designed to provide value. For example, it provides merchant solutions to businesses through dedicated plugins that allow them to receive payments through cryptocurrencies. The plugins are supported by some of the biggest content management systems (CMS) in the industry such as WooCommerce, Shopify, and Magento.
Coinbase Staking Platform
Users on the Coinbase ecosystem gain access to its staking platform through which they can earn passive income through some proof-of-stake digital coins trading on its exchange. This service simplifies the process for users, which would have otherwise required them to go through complicated processes to access the staking opportunities. Coinbase also has a lending pool service through which coin holders can lend their cryptocurrencies and earn interest. Note that this service is limited to a few cryptocurrencies.
Coinbase also offers custodial services for institutional investors, which operates similar to how banks offer custody over deposits from their customers. However, this approach means the customers do not have control over their funds, thus handing over control to the banks. We would recommend users to lean towards self-custody over their finances, and this is possible on Coinbase through the Coinbase wallet which gives users control over their private keys. The company provides an extra service called Paradex which makes it possible for users to trade cryptocurrencies directly from their wallets. It provides the convenience of not having to move funds out of the wallet to buy a different cryptocurrency which they will then need to move into the wallet.
For more advanced traders, Coinbase offers a crypto trading platform called Coinbase Pro. This is different from the exchange’s traditional brokerage service where the trading process has been simplified. The Coinbase Pro platform is designed for more experienced users, and it enables traders to trade a wide choice of digital currencies such as BCH, LTC, BTC, ETH, and ZRX. Compared to a brokerage, the fees on this platform are considerably lower and the Coinbase Pro platform also offers a wide choice of trading options.
Coinbase has developed a stablecoin called USDC as one of its additional services to provide more flexibility to traders when buying and selling cryptocurrencies. The company also provides funding to companies participating in the building of the decentralized finance system through Coinbase Ventures.
Coinbase Regulation and Security Measures
The above services highlight Coinbase’s deep commitment to supporting the decentralized movement. It has also become an incredibly huge player in the segment, and this does not come without regulatory concerns when it comes to Coinbase. Many users, especially those in the U.S prefer to invest only in exchanges that are regulated as part of their risk mitigation strategies.
Interestingly, Coinbase was not only one of the pioneers in the crypto space, but it was also among the first cryptocurrency exchanges to secure regulatory approval in the U.S. This makes it one of the best exchanges especially for customers in the U.S where there are strict guidelines regarding trading. It also means the exchange is required to implement proper security measures, such as KYC (know your customer) and anti-money laundering (ALM) measures, which all users must adhere to.
Coinbase implements other security measures, such as storing 98% of the assets traded on its platform. The exchange has its cold storage facilities distributed across the world in a highly secure network with banking-level encryption. These measures are essential in preventing loss as a result of the exchange being hacked. Numerous crypto exchanges have been hacked in the last few years, leading to the loss of cryptocurrencies worth billions.
It is clearly evident that Coinbase applies a high level of security measures to avoid falling victim to malicious hacks. Despite this, Coinbase has unfortunately gone through such attacks in the past, leading to losses for some of its users. However, those losses are often linked to accounts that have not activated 2FA. This is why the company insists that users should consider setting up 2FA on their accounts as an added layer of security.
Coinbase implements KYC mainly as a means of curbing money laundering, although the information provided is heavily used in 2FA. Coinbase enforces KYC by setting some user limitations. For example, you might only be allowed to buy cryptocurrencies in limited amounts until you verify your ID, phone number, and personal information.
Coinbase Deposits and Withdrawals
If you decide to use Coinbase, you will need to deposit funds into your account so that you can start trading. Here are some of the payment methods that you can use on the exchange:
- Cryptocurrency deposits and withdrawals from crypto wallets and other exchanges. This is ideal for individuals that already have funds in a wallet address outside of the Coinbase ecosystem. Coinbase supports a wide variety of digital currencies such as Bitcoin, Ripple, Ethereum, Bitcoin Cash, Litecoin, Stellar, Zcash, Dai, and many many more.
- Debit card deposits and withdrawals.
- Credit cards deposits.
- Wire transfers, although this option is limited to banks that support the exchange. Note that you will not be able to use this method if your bank does not allow Coinbase transfers. Some of the banks that offer this option include SEPA in Europe and U.S-based ACH (Automated Clearing House).
- PayPal withdrawals. Note that Coinbase does not yet support deposits via PayPal, but you can withdraw to your PayPal account.
The Fee Structure On The Coinbase Exchange
Coinbase has a complex fee structure across its platforms. Transaction costs on the Coinbase exchange are different from those on Coinbase Pro. Here is a look at how the fees are calculated on the exchange:
- A flat transaction fee applies to every transaction under $200 and the standard transaction fee is 1.49% of the transaction value.
- Coinbase Pro applies a 0.5% fee on the market price.
- Buying cryptocurrencies via credit card applies a transaction fee of 3.99% on the value of the transaction.
- Also, when you deposit money, there is no charge via an ACH transfer, but all other deposits will cost $10.
- There is no charge for transactions between Coinbase accounts
- Before any outside transactions show up in your Coinbase account, they will require 3 confirmations.
The transaction fees vary depending on factors as seen above yet they also have some of the lowest fee structures around when compared to other brokerage services like CEX.io and Coinmama (click here to read more about CEX.io). We recommend you take the time to access the Coinbase site to get more information on the fees before you get started.
Interestingly, recently, some existing users of the Coinbase exchange complained about declined attempts to purchase cryptocurrencies, although there is a good explanation for this. Crypto prices can be extremely volatile, which means the price of an asset can experience a significant change in a short amount of time. This makes it difficult to execute orders at prevailing market prices and in many cases, Coinbase will decline your purchase in these cases of extreme price shifts. The easier solution is to take advantage of limit orders which will execute a buy or sell order automatically when the asset reaches the indicated price level.
Does Coinbase Offer Any Customer Support?
Customer support is an essential part of providing a good experience to customers and this is especially important in financial services. Reliable and professional customer service can go as far as encouraging users to continue using a product or service. While Coinbase provides customer support through email and you can expect to receive a response in 48 to 72 hours, interestingly, Coinbase’s user support does not have a favorable reputation for its customer services.
Some of the most common issues that force users to seek Coinbase customer service include transaction cancellation especially when conducting bank transfers, and account closure. The latter particularly happens when the exchange determines that a user’s account might be involved in money laundering. The exchange closely monitors transaction activities related to:
- Transfer of cryptocurrencies across other exchanges especially those that do not have KYC and AML.
- Dark web transactions which are used to acquire illegal products and services.
- Crypto gaming.
- Paying for adult services.
Having your account suspended can be a huge inconvenience especially if you are a regular trader that likes to take advantage of opportunities in the market. This provides an incentive for users to avoid activities that may risk their accounts being frozen.
Coinbase is a favorite for many customers due to the simplicity through which it makes it possible for people to access the crypto market. However, as we have stated, some Coinbase users have complained about issues such as frozen accounts, stolen funds, and poor customer service. Despite this, the exchange does have many satisfied users.
Is Coinbase Centralized?
Decentralization is one of the most important aspects of cryptocurrencies. The whole point of decentralization is to create a new financial system that is free of control by central authorities who have a history of making highly inefficient systems. Governments cannot regulate cryptocurrencies, but they can reinforce strict measures against crypto trading through centralized exchanges. Coinbase is a centralized exchange, and this makes it an easier target for regulators.
Coinbase’s strict regulatory measures reflect its regulatory compliance and the mandated style of operations required by regulatory authorities, such as the SEC (US Securities and Exchange Commission) in the U.S. The exchange attempts to maintain a balance between regulatory requirements by the authorities while providing a good user experience. This approach has some advantages, such as heavy user protection, but on the other hand, the exchange is a conduit through which governments can enforce measures against the crypto market.
Opening A Coinbase Account
Now that you understand how Coinbase operates, as well as some of its advantages and disadvantages, you are in a better position to determine if it is a good choice for your crypto needs. If it is, the next step should be opening an account and you can do that by simply clicking here.
Creating a Coinbase account is just as easy as opening a bank account and fortunately the process is fast and easy, meaning you can start building your crypto portfolio on the exchange as soon as possible. Verifying your account is the best way to make sure you can conduct your crypto trades safely and with fewer limitations. You will be required to provide some personal details, such as your social security or ID number and personal contact details, to verify your account.
Coinbase will also require you to prove your information and you can achieve this by submitting a photo of your government-issued ID. Once the account information is verified, you will be able to buy and sell crypto as much as you want, as long as you have enough funds.
Coinbase also offers a lot of flexibility in terms of account management. Users can access and manage their crypto portfolio through the Coinbase website or its mobile app. The latter makes it possible to access the market no matter where you are, as long as the host device is connected to the internet.
The need to make a profit is the biggest driver for investment in the cryptocurrency market. Getting into the market and exiting at the right times is essential and is often determined through trading tools that aid in technical and fundamental analysis. Coinbase offers such tools on its Coinbase Pro trading platform, but this option is best suited for pro traders. You can, however, try out other strategies, such as HODLling and dollar-cost averaging if you are new to the crypto space.
HODLling is the acquisition of cryptocurrencies and holding on to them for lengthy periods, allowing for healthy gains before cashing out. Dollar-cost averaging is where traders buy more cryptocurrencies every time the market experiences a dip.
Coinbase vs. Other Exchanges
Let us take a look at how Coinbase stacks up against another crypto exchange, such as Binance. Binance also offers a wide choice of cryptocurrencies plus they accept credit cards for crypto purchases. On the downside, these purchases have a very high fee of over 5%. When we, however, look only at crypto to crypto exchanges, Binance definitely wins with an extremely low fee of 0.1%. To read our comprehensive review about Binance, click here.
How Can You Withdraw your Funds from Coinbase?
You can withdraw money from your Coinbase account to your bank account, crypto wallet (in the case of cryptos), or PayPal account. Currently, there is no option to withdraw fiat currencies to your debit card or credit card.
How Long Is the Withdrawal Process?
In most cases, withdrawals with Coinbase are instant. It may, however, take up to 3 days for your bank to process the transfer so take the time to check this with your financial institution. Crypto withdrawals usually reflect within an hour. It is important to remember that the Coinbase exchange will delay any transactions to or from your account if they suspect that you did not authorize the transaction.
Can I Store my Bitcoins on Coinbase?
Sure, you can. We, however, recommend keeping your Bitcoin in a non-custodial wallet. With this wallet type, you will hold the private keys. You can compare keeping your Bitcoins on the Coinbase exchange to keeping your money in a bank. While it is safe and secure, ultimately the bank has control over your funds.
Final Words – Should Coinbase Be Your First Crypto Exchange Choice?
Coinbase might not be the perfect crypto exchange and it has had its fair share of challenges and negative criticism. However, the majority of its users have a good experience, and its regulatory measures make it one of the safest cryptocurrency exchanges available today. It is also one of the oldest and most reputable cryptocurrency exchanges and has so far contributed positively to the advancements in the crypto space. To join the Coinbase crypto exchange, click here to get started.