Coinbase is a leading cryptocurrency exchange that enables users to buy, sell, and store various cryptocurrencies, including Bitcoin, Ethereum, and Solana. Since its inception, Coinbase has been a reliable on-ramp for investors and traders interested in cryptocurrencies and the decentralized finance (DeFi) movement. We’ll provide an in-depth analysis of Coinbase, including its background, security measures, services, and more, so you can get a better picture of the exchange before you begin investing.
- Over the last decade, Coinbase has become one of the most reputable, compliant, and largest crypto exchanges globally.
- Coinbase is known for its easy-to-use interface, wide variety of crypto assets, and strong security. But, it falls short on privacy, customer support, and fees.
Coinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam. They were early adopters of Bitcoin and saw the potential for a user-friendly cryptocurrency investing platform.
Initially, Coinbase focused on providing services for users to purchase Bitcoin with linked bank accounts. Later, the company expanded its offerings to include merchant tools that allow businesses to accept Bitcoin as payment. In 2016, Coinbase announced it would start supporting Ethereum, signaling a shift toward the broader blockchain industry.
Since then, Coinbase has added support for 200+ altcoins and expanded to 100+ countries. The company has also obtained regulatory licenses and has a strong record of compliance. Despite facing challenges, Coinbase has remained committed to improving its platform and providing a safe and secure way for users to purchase cryptocurrency.
Over the years, Coinbase has played a significant role in popularizing cryptocurrency and blockchain technology and is now a household name in the crypto industry. Its easy-to-use platform has made it accessible to people who may not have been familiar with the industry before. In fact, it’s many people’s first crypto exchange.
Coinbase has also made efforts to educate its users, such as offering resources and tutorials on cryptocurrency basics, as well as providing regular updates on the state of the market.
Is Coinbase Safe? | Coinbase Review
Compared to other exchanges, Coinbase has had a better safety track record for keeping its crypto holdings safe. The last publicly known incident was between March to May 2021, where hackers drained the accounts of 6,000 users via a phishing attack exploiting a vulnerability in the platform’s two-factor authentication. Since then, Coinbase’s SMS Account Recovery process has received significant fixes, including stronger login requirements that prevent such hacks.
Additionally, Coinbase carries crime insurance that protects a portion of your digital assets held across its storage systems against losses from theft. That includes cybersecurity breaches on an organizational level, but not losses resulting from someone hacking your account.
However, Coinbase is not an FDIC-insured bank. FDIC stands for Federal Deposit Insurance Corporation, and it is a type of insurance designed to protect U.S. depositors. If a bank fails or goes bankrupt, the FDIC will reimburse depositors up to $250,000 per depositor, per insured bank, for each account ownership category.
In terms of security, Coinbase has a stellar track record of protecting customer funds. However, like all U.S. crypto exchanges, Coinbase does not keep all its user data private. Coinbase reports data about your holdings to the federal government to comply with tax and anti-money laundering laws.
In a move that stirred controversy, Coinbase also acquired Neutrino, a blockchain intelligence team focused on analyzing data on public blockchains for security reasons, in 2019. Moreover, in June 2020, public documents released by the government showed that Coinbase had been bidding to sell its blockchain analytics data to the International Revenue Service (IRS) and the U.S. Drug Enforcement Administration (DEA). A month later, Coinbase was found to be providing its blockchain analytics data to the Secret Service.
Brokerage and Exchange Services
Coinbase is not a traditional brokerage like those that deal in stocks, bonds, and other traditional financial instruments. It is a cryptocurrency exchange where users trade cryptocurrencies with others through its desktop platform and mobile app.
On Coinbase Advanced Trade, you can do market orders, limit orders, and stop orders. You can also use advanced charting tools, margin trade, and look at in-depth data on prices, volume, and orders. Note that Coinbase Pro has been deprecated in favor of Coinbase Advanced Trade.
In addition to being an exchange, Coinbase offers a range of other services, such as a wallet to store cryptocurrencies, a merchant tool to allow businesses to accept cryptocurrency payments, and a platform for institutional investors to trade cryptocurrencies.
Coinbase offers staking services for several cryptocurrencies, including Ethereum, Cardano, Solana, Cosmos, USD Coin, and Tezos. Staking is the process of holding and validating cryptocurrency transactions on a proof-of-stake (PoS) blockchain network. By staking your assets, you earn rewards for contributing to a coin network’s security and maintenance.
The staking services are offered through the Coinbase Wallet or Coinbase Custody platform. Coinbase Wallet is a mobile wallet that allows users to store and manage their cryptocurrencies. Coinbase Custody is a more advanced platform designed for institutional investors and high-net-worth individuals.
Users who stake their cryptocurrencies with Coinbase can earn up to 6.12% annual percentage yield (APY) as of April 2022, depending on the cryptocurrency and network conditions. Rewards are paid out regularly, and users can withdraw their staked cryptocurrencies at any time, though there may be a delay in accessing the funds due to network status.
Staking with Coinbase is a relatively easy process. Coinbase handles all the infrastructure, maintenance, and security, and users don’t need to worry about setting up their staking nodes or managing technical issues.
While Coinbase’s staking services provide an easy way for users to earn passive income on their cryptocurrencies, keep in mind that staking involves risk. There is always a chance of losing some or all of the staked funds. So carefully consider the risks and rewards of staking before participating.
Coinbase offers Over-the-Counter (OTC) trading services as an on-ramp for institutional customers, providing a more confidential and secure way to buy and sell cryptocurrencies. OTC trading is a common practice in the crypto industry, especially for institutional investors and high-net-worth individuals who want to avoid the market impact of their trades.
With OTC trading, transactions do not get executed on a public exchange but through a dealer network instead. This process allows investors to execute large trades without significantly affecting the market prices of the assets being traded. Coinbase’s OTC desk sells cryptocurrencies directly from cold storage, ensuring maximum security for institutional investors.
Coinbase’s OTC trading service is currently available exclusively to Coinbase Prime accounts. To access this service, institutional customers must undergo a strict KYC/AML process to ensure compliance with regulatory requirements.
Where Coinbase Shines
Selection of Supported Coins
Coinbase has one of the largest selections of supported coins among cryptocurrency exchanges, offering access to 200+ cryptocurrencies for U.S. customers to trade and market data on thousands more. Notable cryptocurrencies include Ethereum (ETH), Solana (SOL), Polygon (MATIC), Cardano (ADA), Dogecoin (DOGE), XRP, Polkadot (DOT), Litecoin (LTC), and more.
However, not all of these coins have the same level of support or availability across all Coinbase platforms, while others have limited features. For example, Bitcoin SV (BSV) is not tradeable in the U.S., while Zcash (ZEC) is not available for trading to UK Coinbase users and is only accessible on Coinbase Advanced Trade. Additionally, Coinbase offers 80+ crypto-to-crypto trading pairs on Coinbase Prime and Coinbase Exchange.
Digital Wallet Options and Security
When it comes to digital wallet options and security, Coinbase and Kraken have a better track record compared to Binance, which has experienced massive data and coin losses due to faulty security and exploits. Coinbase claims to hold less than 2% of customer funds online, with the rest stored in offline cold storage, away from possible online breaches.
While Coinbase has a good record as a custodian, cryptocurrency exchanges are not protected by the FDIC or SIPC. If you’ve been in the crypto space long enough, you’ve probably heard people tout “not your keys, not your crypto.” This phrase may seem overly paranoid, but as we’ve seen with the fall of crypto giants like FTX, Voyager, BlockFi, and Celsius, there is merit behind the saying. If you do not hold your private keys, you could lose custody of all your crypto for reasons beyond your control.
Coinbase offers several cryptocurrency trading platforms, each designed to cater to a specific type of user. The standard Coinbase platform is ideal for beginners who just want to buy and hold crypto.
Coinbase Advanced Trade, on the other hand, is aimed at more experienced traders who use advanced charting and trading tools. The platform is also designed for high-volume trading, with lower fees for frequent traders. Coinbase Prime is designed for institutional clients and offers additional features like custody services, advanced APIs, and prime services.
Through partnerships with different blockchain projects, Coinbase Earn allows users to earn crypto rewards while learning about various blockchain projects. The platform offers short educational videos and quizzes that reward users with free crypto assets upon completion. Users have an opportunity to earn free crypto like Bitcoin, Ethereum, Compound, and more.
User Interface (UI)
Coinbase has taken great care to design an intuitive and simple user experience. The mobile app and desktop platform both feature large icons, clear “buy” and “sell” buttons, and an interface that is easy to navigate.
One standout feature is the ability to send and receive cryptocurrencies using a user ID rather than a complicated blockchain address. Features like this make it much easier for newbies to get started with crypto investing.
For the more advanced traders, Coinbase Advanced Trade provides all sorts of technical analysis charting tools, providing a ton of visual information for real-time trades. However, more advanced users may find the lack of coin control or UTXO management a drawback, as it makes it easier for others to track their transaction history.
Coinbase Card is a Visa debit card that gives you crypto rewards on your everyday spending. There is no annual fee and you can use the card anywhere Visa is accepted. Cardholders can select from various cryptocurrencies, such as USDC, Dai, Ethereum, and Bitcoin, to earn a specific percentage back from swiping. Since the card is a debit card and not a credit card, there is no interest or balance transfer fees.
The rewards operate on a rotating system, so each month you’ll have the chance to choose new rewards to earn. When you want to redeem your awards, you can transfer them to your crypto wallet, trade them for other cryptocurrencies, or stake your rewards.
Where Coinbase Falls Short
Coinbase comes with major transaction and withdrawal fees compared to other crypto exchanges. The exchange also has a confusing fee structure that depends on various factors, including location and financial institution.
Coinbase uses a maker-taker fee model to determine its trading fees. The exchange charges a spread of 0.05% to 0.60% for buying and selling cryptocurrencies at the market price, and this can be higher or lower depending on market fluctuations. Additionally, Coinbase charges a fee, which can be a flat fee or a variable fee based on the amount purchased and the payment type. The general Coinbase platform also has higher fees than Coinbase Advanced Trade, which has a more straightforward pricing model.
If you want to withdraw your crypto from Coinbase, you will have to pay high fees as well. The wallet does not allow you to set custom fees with time preference, so you may end up paying more than you’d like if a specific crypto’s network has high demand.
In other words, if you want to save money, Coinbase may not be the right exchange for you.
Coinbase’s customer support has received negative feedback due to difficulty in reaching them and resolving issues. Customers can request support via email, Twitter, phone, or the Coinbase website, with phone support only available for those with compromised accounts. However, Coinbase encourages customers to seek solutions through their help page first.
The process for submitting an email ticket involves selecting a category and sub-category for the issue and filling out a form with relevant information. The waiting time for a reply varies depending on availability and the difficulty of the request. Phone support is available for compromised accounts and can be reached through different numbers depending on the region.
Coinbase is known for tracking users’ transactions, making it difficult to escape their financial surveillance. This is a serious issue that goes against the original purpose of Bitcoin and permissionless transactions in general but is a key aspect in the emerging worldwide regulation of cryptocurrency.
Previously, Coinbase employed people from the Hacking Team, an organization known for supporting oppressive authoritarian regimes that commit human rights abuses by suppressing open dialog. Transactions on Coinbase may compromise the privacy of the individual transacting and those who transact with them.
The exchange performs rigorous blockchain analysis on every satoshi entering its exchange, which means that coins are still tracked for a few steps, compromising privacy and individual autonomy. Coinbase is also KYC/AML compliant, so users must undergo identity verification to deal with fiat currency. Even the most basic unverified signup requires personal information such as your full name, email address, and phone number.
Limits and Liquidity
Coinbase has account limits on deposits, purchases, and withdrawals depending on factors such as your account verification, purchase history, payment method, and region. For example, U.S. customers have a $25,000-a-day limit for ACH transfers. Users must send a wire transfer from a personal bank account if they would like to transfer more money or request a higher limit.
Users who are not verified will have lower limits and will not have access to instant deposits. Additionally, while Coinbase does not limit how much crypto you can sell to your cash balance, withdrawing from your Coinbase wallet to your bank account or personal wallet has limits due to AML laws.
Coinbase offers support in 100+ countries, including the U.S., Canada, Brazil, France, Germany, Sweden, Australia, Kuwait, and more. However, you may have trade restrictions depending on your country and region of residence. In most of them, users can only do crypto-to-crypto trades but not fiat purchases and exchanges.
Why Choose Coinbase
Coinbase offers a variety of services for both new and experienced traders. Many users like Coinbase because of its straightforward interface, which looks and feels very similar to that of other brokerage services like Robinhood or eToro. The platform is also secure and reliable, providing a safe way to invest in digital assets.
Another common reason is the variety of cryptocurrencies available for trading. Additionally, you can stake some of your cryptos and earn free crypto via interest rewards on your holdings.
Coinbase also provides educational resources to help users learn more about cryptocurrency and blockchain technology. This includes a comprehensive knowledge base, live webinars, and a community forum where users can ask questions and share information.
The Bottom Line
Coinbase is a leading player in the crypto space with various perks, including a friendly interface, crypto rewards for learning, and a wide range of supported cryptocurrencies and trading pairs. Additionally, it offers top-notch security measures and insurance to protect its users’ assets. Moreover, its commitment to regulatory compliance and user verification ensures that the platform is safe and trustworthy for everyone.
However, while the exchange is a great crypto on-ramp, the company’s privacy measures and customer support are lacking. The exchange also charges higher fees than its competitors and has been criticized for its excessive surveillance of users. As of May 2023, it is in a legal battle with American financial regulators (mainly the SEC), which is casting some uncertainty about its future and that of cryptocurrency in the U.S.
Before choosing an exchange, weigh the pros and cons to determine which platform is right for you. And keep in mind that crypto is inherently more volatile and risky than traditional asset classes like stocks and bonds. So, make sure to understand your risk tolerance and goals before you dive into cryptocurrency investing.