Here are some questions to ask before signing up with Coinbase.
Coinbase is a popular cryptocurrency exchange that’s ideal for new investors. If you’re planning to buy Bitcoin (BTC) using U.S. Dollars and you live in any U.S. state except for Hawaii, you can do so in a couple of ways through Coinbase.
There are many great cryptocurrency apps and exchanges on the market right now, but there’s no one-size-fits-all solution — different people simply want different things. Here are some questions to ask yourself when evaluating a crypto platform, whether it’s Coinbase or one of its competitors.
1. How easy is it to deposit and withdraw money?
Crypto exchanges charge fees in different ways and with varying degrees of transparency. Some make it cheap to deposit and trade but then hit you with heavy fees when you want to make a withdrawal. Others simply don’t have many ways that you can pay using fiat (traditional) currencies like U.S. Dollars.
Coinbase allows you to buy Bitcoin via debit card, PayPal, and Apple Pay. You can also buy directly from your bank account and make electronic deposits. You’ll pay 3.99% to buy via PayPal or debit card and 1.49% to buy from your bank account. Withdrawal fees are calculated at the time of withdrawal.
It is easy to deposit money with Coinbase and it’s great to have several options. But it isn’t cheap — and several exchanges offer much better rates.
2. Is it easy to use?
This is where Coinbase shines. Its interface is intuitive and straightforward, as is its mobile app. Advanced users can switch to Coinbase Pro, an advanced platform with more features and reduced fees.
If you’re new to crypto and buying Bitcoin for the first time, you’ll find a wealth of helpful information and videos. You can even earn as you learn — some cryptos pay tokens to people who learn about their project.
Be aware that Coinbase has come under fire recently for its customer support, particularly the lack of in-person telephone assistance. It says it is working to offer more channels and improved support.
3. What are the trading fees?
As with the deposits and withdrawals, Coinbase charges above-average fees. It’s also not very transparent about how much it charges. Fees are displayed when you make the transaction, and it is difficult to know how they are calculated and whether you’re getting the best rate.
For example, at time of writing, CoinMarketCap said 0.01 BTC was worth around $435. On Coinbase, that 0.01 BTC would have cost around $455 — a 3.99% card fee plus an additional undefined spread.
If you want to reduce costs, don’t be afraid to set up accounts with more than one exchange and preview the prices to make sure you get the best deal. You don’t have to deposit money to open an account, and if an exchange isn’t open about its costs, going this route can be the only way to compare apples with apples.
4. How secure is it?
There have been various high-profile crypto exchange hacks over the years, beginning with Mt. Gox in 2014. Centralized exchanges are common targets for criminals, and once digital assets have been stolen, they are very difficult to recover.
That’s why I look for exchanges that demonstrate they will be proactive in protecting my funds. Coinbase ticks a lot of boxes here:
- It keeps 98% of assets in cold storage. This means the funds are stored offline, making them difficult to hack.
- It has third-party crime insurance. If your bank account is hacked or you fall victim to fraud, you’ll often be able to get the money back. This is not the case with most crypto accounts. But if an exchange has external insurance — as Coinbase does — you may be able to make a claim.
- U.S. Dollar balances are FDIC-insured. FDIC insurance means that if Coinbase goes bankrupt, U.S. accounts are covered for up to $250,000 per person. This does not apply to crypto assets.
5. What coins does it support?
Coinbase has been working to increase its coin selection in recent months and now offers around 90 coins for U.S. customers. This is not the biggest selection on the market, but it is a decent range of coins, and traders can buy most of the top coins by market cap.
If you’re only interested in buying Bitcoin, this won’t be a big factor in your decision. But if you might want to branch out into other types of cryptocurrency, Coinbase has you covered.
6. Can I earn interest?
Coinbase recently had to shelve plans for a lending/earning product. Several exchanges lend out money through decentralized loans and use the proceeds to pay high interest rates on customer deposits. However, the SEC told Coinbase it could not go ahead with the launch.
As a result, Bitcoin holders cannot earn interest on their holdings. However, Coinbase does allow investors to stake a handful of coins. Staking involves tying up assets to help keep particular networks secure and can be a good way to earn rewards.
Should you use Coinbase to buy Bitcoin?
Coinbase is a solid crypto exchange, and the fact that the company is listed in the U.S. and tries to stay on the right side of regulation is reassuring. SEC Chair Gary Gensler recently labeled crypto the “Wild West,” and with good reason. There are a lot of bad actors out there — from dodgy exchanges to out-and-out scams.
Coinbase’s fees could certainly be lower, but if you’re buying Bitcoin for the first time, it is a safe and dependable choice. Read our top cryptocurrency picks and essential guide if you’re looking for more options or more information about cryptocurrency investing.