What is Coinbase and how does it work?
In a short time, cryptocurrency has grown from a small alternative investment to an investment with a collective value of hundreds of billions of dollars. Whether you’re looking to invest in crypto or use it as a form of payment, you’ve probably heard of Coinbase. After all, with tens of millions of users, it is one of the most popular cryptocurrency exchanges online. It’s also one of the easiest ways to buy cryptocurrency, which has helped fuel its explosion in popularity.
In a nutshell, Coinbase is a cryptocurrency exchange where you can buy popular coins like Bitcoin, Ethereum, and Solana. Not all coins are supported on Coinbase, but there are over 120 different types of cryptocurrencies on the platform. Meanwhile, there are thousands of different cryptocurrencies available around the world. Still, Coinbase lets you trade the most popular types of crypto, so it works well in most cases.
All of this makes Coinbase a great place for new crypto investors to buy and sell their favorite coins. But is Coinbase safe to use? What about fees? We’ll address these questions and more below.
How to Use Coinbase: A Beginner’s Guide
If you’re new to Coinbase and maybe even cryptocurrency in general, this can all seem overwhelming. Don’t worry, it’s actually quite simple, and we’ll walk you through how to get started.
How to Open a Coinbase Account
Opening a Coinbase account is easy. Here’s what Coinbase says you’ll need to create an account:
- Be at least 18 years old
- A government-issued photo ID, such as a driver’s license or ID
- A computer or smartphone with internet access
- A phone number for SMS verification
- The latest version of your internet browser
If none of this is a problem for you, you are ready to create an account. To do this, enter your first and last name, email, state of residence and create a password. You will also need to check the box confirming that you are at least 18 years old. The only thing left to do after that is to set a password. Be sure to set a strong and unique password to protect your account.
You will also want to add a payment method so that you can transfer money to your Coinbase account. US customers can use a variety of methods, including bank account, debit card, PayPal, Apple Pay, or wire transfer. Note that PayPal is only available to US customers and you can only use it to buy cryptocurrency or withdraw cash.
Once you have created your account and added a payment method, you are ready to start trading cryptocurrency.
What cryptocurrencies does Coinbase support?
Although Coinbase does not support all cryptocurrencies, it does support most popular coins. So most people buying and selling on Coinbase will have no problems. However, more advanced traders might need to create an account elsewhere.
There are over 120 coins available on Coinbase. We won’t list them all, but here are some of the most popular Coinbase provides access to:
You can find a full list on the Coinbase website.
How much does the trade cost?
Fees on Coinbase can be a bit complicated, but they depend on your account type, transaction size, and funding source. Several factors can affect the fees you ultimately pay, including your country/region, payment method, and product.
For small trades, you will pay a margin plus 0.5% of your trade value plus a flat fee based on your trade size, as follows:
|$10 or less||$0.99|
|Over $10 and up to $25||$1.49|
|Over $25 and up to $50||$1.99|
|Over $50 and up to $200||$2.99|
Although a Bitcoin costs well above these dollar amounts, Coinbase allows you to buy fractional coins, so you can still buy small amounts. The cost of the markup is already included in your buy or sell price.
For amounts over $200, you will pay a 0.5% surcharge of your total transaction value, and Coinbase’s variable fees on transactions over $200 are charged as follows, depending on how you pay the crypto:
|US bank account||1.49 percent|
|Coinbase USD Wallet||1.49 percent|
|Debit card||3.99 percent|
|Instant card withdrawal||Up to 1.5% of any transaction; $0.55 minimum fee|
As you may also have noticed, the fees consume a significant portion of your purchase for these small quantities.
If you are a more advanced trader, Coinbase Pro may be worth considering. With Pro you will find additional trading options and enhanced charting features. Coinbase Pro also offers a simpler (and lower) fee structure.
The easiest way to familiarize yourself with Coinbase fees is to preview an order, which you can do by following the steps below.
How to buy and sell cryptocurrencies on Coinbase
If you’ve ever linked a payment method to Coinbase, buying and selling couldn’t be easier. Once logged into your Coinbase account, here are the steps to buy cryptocurrency:
- Click the Buy/Sell button in the upper right corner.
- Specify if this is a one-time or daily/weekly/monthly purchase.
- Enter the amount of your purchase.
- Select the cryptocurrency to buy.
- Select your payment method.
Keep in mind that when purchasing using a bank account, the transaction typically takes 3-5 business days, according to Coinbase.
Selling on Coinbase is even easier. All you have to do is enter the amount you want to sell (or select “sell all”). Then indicate which coin you want to sell and how you want to be paid. Note that the same fees apply to buying and selling.
Is Coinbase safe?
It is natural to wonder if Coinbase is safe, especially if you invest a lot. Plus, it’s still a relatively new platform. Although Coinbase is generally a secure platform and has security measures such as two-factor authentication, it is not immune to attacks. A quick search online reveals reports of Coinbase users whose accounts are depleted overnight. Experts point to swapping SIM cards as one of the causes of these incidents.
While that may sound scary, that doesn’t mean you should avoid Coinbase. There are steps you can take to make things even more difficult for potential hackers, such as using what’s called a noncustodial wallet. Another option is a hardware wallet.
The idea behind these different types of wallets is that you are not relying on Coinbase to store your money. They allow you to store your own crypto using an app, software, or hardware. So even if someone accesses your Coinbase account, it will not give them access to the wallet, where your cryptocurrency is actually stored.
The downside to this approach is that it requires you to remember your own password, also known as a private key. If you’ve heard of people losing millions because they got locked out of their cryptocurrency wallet, they probably have a noncustodial wallet. Although this method is more secure, it is your responsibility to ensure that you can access your wallet.
At the end of the line
Coinbase is an easy way for those new to cryptocurrency to get started. Its easy to use interface allows people to buy and sell crypto with just a few clicks. Although not all types of cryptocurrency are supported, you will find many of the most popular coins here.
One thing to keep in mind about Coinbase is that fees can add up, especially when buying small amounts of crypto. For example, you’ll pay a variable fee of $0.99 when you buy up to $10 worth of cryptocurrency, which means your fee could be almost 10% (and that’s on top of the spread markup already included in the price).
These are some of the main reasons why while Coinbase is useful for beginners, it’s not for everyone. If you want to avoid Coinbase’s high fees and long processing times, there are plenty of other ways to buy cryptocurrencies like Bitcoin.
And if you choose to invest in cryptocurrency, make sure it’s part of a diversified investment strategy. This means investing in proven assets such as stocks and bonds, and real estate if you wish. Also, don’t forget to keep some cash on hand, ideally in a money market account or high-yield savings account. Taking these steps should help you weather the volatility that often accompanies cryptocurrency investing.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are cautioned that past performance of investment products does not guarantee future price appreciation.