Chances are that if you have invested in cryptocurrency, you have heard of Coinbase. Coinbase is a cryptocurrency investing app created all the way back in 2012. When the company was first created, Bitcoin was trading around $6.
Since Coinbase is a more established cryptocurrency platform, it was well prepared for the recent cryptocurrency boom. In fact, the cryptocurrency boom allowed Coinbase to make major improvements as a company.
In April of 2021, Coinbase became the first cryptocurrency startup to go public on a major U.S. stock market. Today, you can purchase your own shares of Coinbase on the Nasdaq stock exchange.
Since Coinbase is not a commission free trading platform, there are other ways that it has attracted users. As a publicly traded company, the cryptocurrency exchange discloses a lot more financial information to investors than other crypto platforms.
Many investors appreciate this additional information and trust the platform to protect their investments and private information. Additionally, the trading platform is relatively simple and has a solid base membership.
Unfortunately, one piece of Coinbase that lags behind competitors is its lack of fee transparency. The company does state that it will always clearly lay out the fees charged for any transaction before the transaction is completed. Prior to transaction summary though, these fees are difficult to understand.
The purpose of this article is to help you understand the fees long before a trade is entered into. The goal is that this information can be used when determining what platform is best for your trading desires.
To learn more about all of the advantages of Coinbase, head to our complete Coinbase summary article. While this article will cover some of the advantages of using Coinbase, the main purpose is to cover the main fees associated with the Coinbase platform.
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As introduced above, Coinbase is not a commission-free trading platform. There are methods and fees that Coinbase has in place to generate revenue on top of those traditional trade commissions. As the consumer of the product, it is important you understand every charge that you may incur prior to using the product.
There are two main buckets of fees associated with Coinbase accounts. It is important to recognize there are more fees that fall outside the realm of these two main buckets. However, rest assured that those additional fees are less common among traditional cryptocurrency investors.
The two high-level buckets are listed below.
The first bucket of trading fees apply only to traditional Coinbase accounts. Creating an account and browsing the platform is completely free. Unfortunately, there are a plethora of other confusing fees charged to the platform investors.
These fees are not as straight-forward as other platform fees. To understand Coinbase fees, it is vital to understand the factors that determine the magnitude of the fee. The two main factors that go into traditional Coinbase fees are listed below.
A spread is not uncommon among cryptocurrency trading platforms. In fact, this fee is commonly known as a crypto asset trade spread. Coinbase has previously stated that the spread can vary based on market conditions but is usually around 0.5%.
This spread is evident in all crypto transactions regardless of the crypto asset traded. Additionally, the trade spreads apply to all buy and sell sales.
This spread is used to cover the costs of facilitating crypto transactions, storing crypto, and generating revenue for the trading platform. A simple transaction demonstrating the trade spread is shown below.
Assume the current market price for cryptocurrency ABC is $100. You decide to purchase $100 worth of ABC. Applying a 0.5% spread, BlockFi executes your order for ABC at a price of $100.50. You will then own marginally less than 1 full ABC given the spread.
To expand on that same example, if you were to spend $100.50 on cryptocurrency ABC you would end up with 1 full ABC. The price breakdown would be $100 for the cryptocurrency and $0.50 for the BlockFi spread.
This sub-bucket of fees for traditional Coinbase is a “catch all” bucket. Unfortunately, there is no easier way to summarize the fees since they are so sporadic and conditional on cryptocurrency orders.
When a cryptocurrency trading platform executes trades, it can do so using external blockchain networks. There are expenses that the trading platform incurs in order to successfully complete these cryptocurrency transactions.
Coinbase passes along all fees incurred by executing transactions on external blockchain networks to its customers. Of course Coinbase only applies this fee for cryptocurrencies that are supported on the Coinbase platform.
In addition, Coinbase has provided the below explanation for how the remainder of fees are determined on the platform.
“Fees are calculated at the time you place your order and may be determined by a combination of factors, including the selected payment method, the size of the order, and market conditions such as volatility and liquidity.”
Coinbase also states that all fees will be listed on the trade preview screen before you submit the transaction. Make sure you pay attention to that page before completing the transaction because Coinbase cannot reverse a transaction after it is completed.
This second complete bucket of trading fees apply to Coinbase Pro users only. Like traditional Coinbase accounts, Coinbase Pro is free to all users. However, the Coinbase Pro interface and platform is geared towards more advanced traders than traditional Coinbase.
One benefit with Coinbase Pro is that the fee schedule is a lot more straightforward. The application uses a maker-taker fee model to determine all trade fees.
According to Coinbase Pro, the two types of transactions on the platform are maker or taker transactions. Maker transactions are those that provide liquidity to the market and taker transactions are those that take liquidity.
When you execute a market trade at the current market price, you are considered a taker. This is because your transaction will be executed immediately. Takers can expect to pay a fee between 0.05% and 0.60% on the price of the transaction.
Makers, on the other hand, place orders that are not immediately executed. Because of this, the order is placed on the order book. Makers can expect to pay a lower fee than takers at around 0.00% and 0.40% fees.
These fees are variable and depend on the market price at purchase. To see the complete breakdown of these Coinbase Pro fees head to the official Coinbase website. Below are a couple of examples of how the fees are distributed.
1: Transaction Price: $0 - $10K; Taker Fee: 0.60%; Maker Fee: 0.40%
2: Transaction Price: $10 - $50K; Taker Fee: 0.40%; Maker Fee: 0.25%
3: Transaction Price: $50 - $100K; Taker Fee: 0.25%; Maker Fee: 0.15%
Coinbase has found a lot of success throughout the recent cryptocurrency booms, and for good reason. The platform has consistently added to its customer offering since 2012 (long before many other competitors).
Coinbase fees can be quite complicated though and are oftentimes more complicated than recent competitors. However, it is important to recognize that a lot of these fees are commonplace in the world of cryptocurrency. In other words, they are common fees among a lot of other investing platforms.
As a quick recap, the two buckets of fees are shown below.
It is also important to understand that this article does not include a complete list of all Coinbase fees. The above fees are the common fees that apply to the majority of transactions. There are additional fees that cover anything from credit card fees to withdrawal fees.
To get the complete list of fees, as well as an update on all fee costs, feel free to remain updated on Coinbase’s official webpage.
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