Coinbase is the second largest cryptocurrency exchange (behind Binance) as measured by volume.
They're an American exchange that has been in business since 2012 which makes Coinbase arguably the most established and trusted cryptocurrency exchange in the world.
Coinbase's CEO is Brian Armstrong who has been an outspoken proponent of cryptocurrencies for the length of his tenure. Armstrong co-founded Coinbase in San Francisco with Fred Ehrsam and the exchange's success has made both men extremely wealthy.
In this review we'll cover everything that you need to know about Coinbase from buying Bitcoin to keeping your account secure.
Coinbase really is a full service exchange with lots of different features but as with any cryptocurrency exchange, best practices are important in order to keep your coins safe. To begin with we'll look at the process for buying Bitcoin on Coinbase.
Is Coinbase a Good Place to Buy Bitcoin?
Coinbase is widely regarded as the best fiat to crypto on ramp in the entire crypto ecosystem. When a crypto investor needs to buy Bitcoin the first exchange that they're likely to think of is Coinbase.
To a large extent that's because Coinbase has an extremely intuitive layout that's easy to navigate even for investors just starting to get involved with crypto.
Having a good UI is important because it makes it easy to use Coinbase and to buy Bitcoin without making any mistakes like typing in the wrong price for an order.
Using a Coinbase account to buy Bitcoin is also a really great option because Coinbase is available in 49 states. The only state which can't currently use Coinbase is Hawaii
Such a high level of support is unusual among cryptocurrency exchanges. For instance, Kraken, Poloniex and Binance US are all unavailable in New York state because of the difficulty in securing a BitLicense.
The Coinbase exchange is also a really good choice for buying Bitcoin because of the different payment methods that they accept. For instance, it's possible to use a wire transfer, bank deposit or debit card as a payment method on Coinbase.
How Much does Coinbase Charge to Buy Bitcoin?
The charge to buy Bitcoin on Coinbase depends mostly on what payment method you want to use. The most expensive option is to use a debit card. With a debit card the fee is usually around 4% so that with a $100 purchase there is a $4 fee.
Unfortunately it's no longer possible to buy Bitcoin with a credit card on Coinbase. At one point it was possible, however, in 2018 Coinbase stopped allowing for credit card purchase.
Buying with a bank account is cheaper and a $100 Bitcoin purchase would usually incur a fee of about $3. To understand how the fee schedule works, and how fees vary depending on which country you live in, it's necessary to check the Coinbase website.
At this point in our Coinbase review it's important to point out one key difference between buying Bitcoin with a bank transfer versus buying with a debit card. When you use a debit card to buy Bitcoin on Coinbase the BTC is instantly available in your account. That means that you can keep it on Coinbase or withdraw it whenever you like.
A bank account purchase is different. When you use your bank account the Bitcoin is not available to withdraw for up to five days. The purchase price is locked in so that you get the Bitcoin at the price you see as soon as you hit the buy button, however, that BTC is locked up in Coinbase for up to a week. This is very important to keep in mind and if you need to withdraw the Bitcoin immediately it's important to buy with a debit card even though the fee is higher.
How Can I Buy Bitcoin on Coinbase?
To buy Bitcoin or any other digital currency on Coinbase the first step is to create a Coinbase account. As mentioned, Coinbase is available to almost everyone in the United States. Outside of the USA Coinbase is available in more than 100 other countries including Coinbase UK. A full list of countries where Coinbase operates is available here.
After creating an account and passing the Coinbase ID verification process, the next step is to add a payment method. Thankfully Coinbase makes it easy to set up a bank account using your online banking login information. Thanks to this login system a bank transfer can be set up in just a few minutes. Adding a debit card is also easy and takes less than 2 minutes.
Once you've added your payment method you can begin to buy and sell Bitcoin and any other digital currency on Coinbase. As you can see, figuring out how to buy on Coinbase is very easy and straightforward.
How Can I Sell Bitcoin on Coinbase?
Selling Bitcoin on Coinbase is just as easy as buying a digital currency on the platform. Simply transfer the Bitcoin to Coinbase using the public address that the exchange provides. Once the transaction clears, which usually takes about an hour for Bitcoin, you can then sell the crypto.
The Coinbase fees for selling Bitcoin are similar to the fees for buying Bitcoin. Again, more information is available on the Coinbase website.
How do I Get My Money Out of Coinbase?
There are several payment methods that can be used to withdraw funds from Coinbase.
If you've already linked your bank account to Coinbase this is the easiest method for withdrawal. Within the United States funds withdrawn from Coinbase via a bank transfer typically take two business days to show up in your account.
Bank transfers are also a good option as they're free. That's as opposed to a wire transfer. Each wire transfer withdrawal from the Coinbase wallet costs $25.
In late 2018 Coinbase also made it possible for United States customers to withdraw funds from your account via PayPal. This is a good option as money withdrawn will show up in your PayPal account instantly, no waiting. Also, like a bank transfer there are no fees for withdrawing fiat currency to PayPal.
How to Increase Coinbase Limit?
As the name implies the Coinbase limit is a limit on how much cryptocurrency you can buy and sell each day. A few years ago the Coinbase limit was quite small, as low as a $500 purchase limit per week. However, now with a verified account users can buy up to $25,000 worth of Bitcoin each day making Coinbase a great option for all but the most serious traders.
To get the highest purchase limit possible you'll need to verify your Coinbase account with information like your address, phone number and you'll also need to submit a copy of your ID whether that's a driver's license or passport. Once you've done that you'll be able to withdraw more from your Coinbase wallet each day.
ENS Crypto Names
ENS names are an interesting new development which attempt to solve one of the greatest problems in the crypto ecosystem: complicated crypto addresses. The average crypto address is several dozen digits of nonsensical numbers and letters, they're all but impossible to remember or make any sense of. An ENS name solves that problem.
A crypto ENS name is like a domain name. It's easy to read and it allows cryptocurrency users to send crypto to an easily remembered name instead of a complex crypto address. On the way to mass adoption ENS names could be an important step which makes crypto altogether more accessible to new users.
The reason why we're mentioning these names is that Coinbase recently announced that their Coinbase wallet would start supporting ENS names. The names work with most of the currencies on the Coinbase platform, not just Ethereum and ERC20 tokens. Users will be able to pick unique names, like @cryptofan99 and then other people will be able to send them crypto using that name instead of a crypto address.
This represents an exciting development for the cryptocurrency ecosystem as a whole and it should help Coinbase to gain even more widespread adoption, especially with people who are new to blockchain currencies.
Coinbase Tax Reporting
Crypto taxes, especially taxes in the United States, have become a hot topic.
Even though tax regulations in a lot of countries remain unclear it's nonetheless becoming increasingly clear that cryptocurrency traders and investors are going to be responsible for paying taxes. In fact, the American IRS recently sent out letters to thousands of crypto holders, informing them that they would need to report their crypto holdings.
What does that have to do with Coinbase? In fact it was Coinbase which turned over account information for thousands of people to the IRS.
For those planning to pay their taxes this wasn't an especially big deal, however, for those who hoped to report to the IRS on their own terms it was a big blow. This cooperation with the IRS suggests that Coinbase may not be the best exchange for traders and investors who don't want their account information involuntarily turned over to the IRS.
If you'd like to know more about crypto taxes in the United States Coinbase has a lot of information which should answer your questions.
One piece of information worth covering now is that crypto investments held for more than one year are taxed at a lower rate than those sold sooner. Under this setup crypto hodlers are rewarded more than traders.
How does Coinbase Work?
People who want to know what is Coinbase may be surprised to learn that the exchange actually has two distinct services.
Firstly there is Coinbase, the platform that we've been discussing so far in this review. This is a platform primarily catering to first time crypto users. With a Coinbase account it's easy to buy and sell Bitcoin and other cryptocurrencies.
The second service that Coinbase offers is something called Coinbase Pro (formerly known as the GDAX exchange). Coinbase Pro is an actual cryptocurrency exchange in the sense that here it's possible to exchange one currency for another. For example, trade Bitcoin for Ethereum or switch Bitcoin Cash or Bitcoin. There are limit orders, market orders and many of the other tools that you'd expect to find on any other cryptocurrency exchange.
Transferring crypto between Coinbase and Coinbase Pro is fast and free. That means that it's easy to open a Coinbase account, purchase Bitcoin and then send it to Coinbase Pro to trade for other currencies.
Coinbase Pro Trading Pairs
Coinbase Pro has added quite a few new trading pairs since the bullrun in 2017. For instance, it's now possible to trade cryptocurrencies like XRP, XLM, REP, BAT and even DAI on the Coinbase Pro platform. A lot of Coinbase reviews have pointed out how much better the platform is to use now that they offer more coins.
Earlier when Coinbase only offered coins like Bitcoin and Ethereum for trading, when a new coin was added to the Coinbase platform the price would often rise because so many people could now buy and trade it.
This was dubbed the Coinbase effect. Since that time however things have changed. Now with all sorts of new exchange platforms traders have more access to cryptocurrencies and when Coinbase adds a new coin it's no longer considered a big deal.
Unfortunately not all coins are available in all areas. In order to determine which cryptocurrencies you'll be able to trade on Coinbase Pro, based on your location, you can check the Coinbase website. If a coin is not yet available to trade in your area it may be available in the future as Coinbase is always working to expand their service.
As a tightly regulated US exchange, you also cannot invest in tokenized stocks (like you can on other popular exchanges). Coinbase users who want to trade crypto into stocks have to convert their crypto to fiat, move fiat into a traditional online brokerage and buy stocks like Amazon, Tesla, Facebook, Google, Netflix etc. the traditional way, instead of swapping them directly for tokenized stocks.
Can You Trade with Leverage on Coinbase Pro?
A lot of cryptocurrency exchanges are notorious for how much leverage they allow their traders to use. For instance, some platforms like Bitmex allow for leveraged trades as high as 100x.
Until early in 2020 it was only possible to buy and sell or trade cryptocurrency on Coinbase, there was no option for leveraged trading. That's changed though and recently Coinbase began giving their customers the option to trade with leverage. Unfortunately, this option is far from widely available.
As of publication leverage on Coinbase Pro is only available to residents of 23 states within America. To be eligible for margin trading the trader must use Coinbase regularly and keep an active balance in their account. More information about leverage trading is available on Coinbase's blog. In general Coinbase is not really the best platform for margin trading, an exchange like FTX is much better for this.
How Can I Use the Coinbase App?
When you review Coinbase and all of the features that it has, the Coinbase app is designed to offer the same functionality as the desktop based platform. For instance, you can initiate bank transfers, change your payment method and transfer funds in and out of your Coinbase wallet. The Coinbase withdrawal fee is the same whether you use the app or the exchange.
Of course the app also allows traders to buy and sell cryptocurrency. This is particularly helpful given the volatile nature of the cryptocurrency ecosystem. Sometimes prices rise or fall extremely quickly and you might want to buy or sell while you're away from the computer. The app makes it easy to do so. Like the desktop platform you still can't use a credit card to buy crypto but you can use other payment methods like bank transfers or a debit card.
The mobile app has all of the same trading pairs as Coinbase, including BTC, BCH, ETH, ETC, LTC, BAT and USDC among others. It also features a price alert which can be helpful to find out about sudden changes in price. Finally, the app has a feature which allows it to be instantly disabled in the event that your phone is stolen.
Were someone to gain access to your phone they would not be able to steal any funds or make any purchases with the Coinbase application.
How does Coinbase Make Money?
Coinbase earns most of its profit in two unique ways. The first is fees that they charge for the purchase and sale of cryptocurrencies. As Coinbase offers perhaps the best way to buy cryptocurrency, and millions of people use the platform for this purpose, it makes sense that Coinbase makes a good profit from offering this service.
Coinbase fees charged for trading are the second way that Coinbase earns a profit. Recently Coinbase Pro increased their maker and taker fee to 0.5% which is quite high for a cryptocurrency exchange.
Despite these high fees, Coinbase remains the second most popular cryptocurrency exchange by volume so they continue to make a good profit from customers trading on the platform.
There is a third way that Coinbase makes a profit, however, it represents only a small portion of their profits. Staking happens when a cryptocurrency investor locks up some of their coins in order to help secure the network. Normally this is done on an individual basis, however, it's also now possible to stake through Coinbase.
As of now the most popular staking option on Coinbase is Tezos although once Ethereum switches to Proof of Stake this will probably become the most staked cryptocurrency. Coinbase charges a commission to investors who stake with them and this is the third way that Coinbase earns a profit.
Is Coinbase Secure?
When people ask is Coinbase safe the answer is definitely yes.
If there is one point worth making in this Coinbase review it's that the platform is legit and doesn't cut corners when it comes to safety. In fact, Coinbase is even known for detecting sophisticated hacking attempts and dealing with them before they can become a problem.
All of that being said, it's still important to follow basic security procedures when using the Coinbase exchange, like using secure two factor authentication.
Two Factor Authentication with Google Authenticator
While there have certainly been bigger hacks that have taken place, one that really grabbed everyone's attention happened in 2019 when a hacker stole $100,000 from a crypto engineer's Coinbase account. The hacker was able to do this because instead of the engineer using Google authenticator for 2FA (Two Factor Authentication), he was using a text message. Because of that the hacker was able to do a SIM swap, access his account and drain all of his funds.
This shows why it's so important to set up 2FA with Google Authenticator instead of a SMS text message. It's possible for hackers or anyone else to call up a phone company and convince them to transfer a phone number to a new SIM card that the hacker controls.
Once they have that, along with a hacked exchange password, a hacker can take out all of the crypto from an account and maybe even the fiat currency. While Coinbase was never technically hacked with this attack, they do have a good customer support department to help out anyone who encounters problems as they use the exchange.
In the event that you run into a problem while trading on Coinbase, or you want to know how to use Coinbase better, there is a good customer support center. Coinbase offers several ways to reach customer support, either via email or with a phone call. More information on that, including a customer support email address, is available here.
When people ask is Coinbase legit one of the easiest ways to prove the legitimacy of the platform is by looking at their physical offices. Unlike some other shady exchanges where it can be hard to even figure out what country they're based out of, with Coinbase you know that they have offices in three different locations in the United States. A Coinbase scam as a company is not real at at all, with their good reputation, customer support and California offices Coinbase is the real deal.
Largest Crypto Transfer Ever
It's very interesting in a Coinbase review to talk about Coinbase sending what might still be to this day the largest cryptocurrency transaction in history. Toward the end of 2018, as part of an upgrade to their cold storage system, Coinbase moved approximately five percent of all BTC, eight percent of all ETH and twenty-five percent of all LTC. That amounted to roughly $5 billion worth of crypto at the time, however, as of spring of 2020 it's worth considerably more.
These were all balances held in the internal Coinbase wallet which is interesting as it shows that beyond just clearing other trader's transactions, Coinbase actually holds a significant amount of cryptocurrency itself. It also shows that Coinbase is definitely a secure platform as this crypto stash mush represent one of the greatest honeypots of all time. If there were any vulnerabilities the crypto would inevitably be hacked.
What Other Exchanges are Like Coinbase?
If you'd like a service similar to what Coinbase offers, but when you review Coinbase you've decided it's not the right exchange for you, then you might want to consider one of these other American based exchanges. All of these exchanges are fully compliant with United States regulations and are considered secure platforms to trade on.
The one restriction worth noting, however, is that traders from New York state cannot use any of these platforms.
Founded in 2011, Kraken is one of the oldest cryptocurrency exchanges that's still around. Like Coinbase, Kraken is headquartered in San Francisco. Unfortunately, for those who want to buy cryptocurrency Kraken bank transfers are the only valid payment methods for the platform. They do not accept debit cards or a credit card.
The advantage of Kraken over Coinbase is that they have significantly more trading pairs, including coins like NANO, WAVES, Dogecoin and Cosmos. Kraken has never been hacked and their trade volume is, on average, anywhere from one quarter to one half of Coinbase's.
Founded in 2014, Poloniex is the only exchange on this list that's been successfully hacked. That being said, they learned a lot from their mistakes and are a much more secure platform today. Poloniex is headquartered in San Francisco and their daily trading volume is about half of Kraken's.
Unlike Kraken, one of Poloniex's payment methods is a debit card. However, the transaction isn't run directly through the Poloniex platform, it is cleared by Simplex which is a third party provider. The advantage of this setup, however, is that it's possible to use a credit card on Poloniex to buy crypto. That makes them a great exchange for anyone who wants to buy crypto on credit.
Launched only in the fall of 2019, the United States subsidiary of Binance is the newest exchange on our list. As of yet the exchange has not generated much interest among cryptocurrency enthusiasts and their daily trading volume sometimes does not even exceed $10,000,000. That's compared to the original Binance platform which often has a daily trading volume of several hundred million dollars.
One of the advantages of Binance US is that they offer a lot of trading pairs, including ICX and NEO. While Binance US does not allow its traders to buy crypto with a credit card they do support debit card purchases. Before deciding on a crypto exchange, you should definitely consider the differences between Binance and Coinbase.
Start Trading on Coinbase
It's a good idea to review Coinbase as they are one of the most prominent cryptocurrency exchanges in the entire blockchain ecosystem. According to their website Coinbase has 25 million users originating from 32 different countries worldwide. Those users help to account for Coinbase's popularity and their unusually high trading volume as compared to other exchanges like Kraken and Poloniex.
Even with the recent explosion of new exchanges Coinbase remains one of the best and easiest ways to purchase cryptocurrency. They accept several different payment methods and their KYC verification process is fast and simple so that it's easy to get registered quickly. Although Coinbase doesn't allow for credit card purchases and their fees are slightly higher than average, many people feel that it's worth paying more because of Coinbase's high security standards.
Furthermore, as Coinbase is based in the USA they are accountable to strict American regulations which go a long way toward protecting investors on the platform.
Between Coinbase and Coinbase Pro most cryptocurrency traders and investors should find a platform that handles a majority of their needs. The Coinbase transfer fees between these two linked exchanges are free so it's always easy to move funds around as necessary. If you still have questions there is always more information available on Coinbase's website and they also have an extensive FAQ support page that covers a wide variety of topics.