Why You Should Buy Bitcoin on Coinbase Pro and not Coinbase
When people think of buying their first Bitcoin
The exchange became so popular that it completed its NASDAQ direct listing on April 14, 2021. Coinbase shares, trading under the symbol COIN, began trading at a price of $381, reached a high of $429.54, before eventually closing its first day of trading at $328.28.
On May 13, 2021, after the close of market trading, Coinbase reported its first-quarter earnings results. While the numbers were good, they weren't as strong as some analysts on Wall Street had hoped.
Before Coinbase went public, there were some articles that expressed concern over the cyclical nature of crypto, as well as the fact that Coinbase relies almost entirely on high transaction fees for the bulk of its revenue. During the earnings call, Coinbase actually offered up three different levels of guidance accounting for how the crypto market might perform over the coming months.
Coinbase offers a simple consumer platform and a professional trading platform. While the latter used to be called GDAX, in 2018 it was rebranded as Coinbase Pro. This has led to some confusion, as many people now refer to both the consumer platform and the professional trading platform as simply "Coinbase". So let's take a quick look at each and find out the difference between Coinbase and Coinbase Pro.
Coinbase vs. Coinbase Pro: Basic Overview
Below are the homepages for each platform. The main difference is that Coinbase appears to be very simple, while Coinbase Pro can appear fairly intimidating. But all trades take place on the Coinbase Pro engine, with Coinbase offering significantly higher fees for that simplistic interface.
- Available at coinbase.com or through the Coinbase app.
- Available at pro.coinbase.com or through the Coinbase Pro app.
Coinbase vs. Coinbase Pro: Order Entry
Once you go to actually place a trade, you'll find that the mechanics behind the two platforms are basically the same. Clicking "buy" or "trade" on Coinbase will bring up the following interface. You need to make the following selections:
- Buy or Sell
- Asset, e.g. Bitcoin
- Amount, in USD
On Coinbase Pro, it's basically the same. As with Coinbase, you need to select an Asset (e.g. Bitcoin), Buy or Sell, and an Amount. However, the one difference is that you can specify an order type, which defaults to Market. Leaving the default of Market will make your order behave the same as with Coinbase; it will just fill you at the best available market price. However, as we'll see later, you'll pay a lot less. If you want to consider order types beyond Market, you can read about them here.
Coinbase vs. Coinbase Pro: Fee Overview
Coinbase will charge you a Spread of 0.5%, though this can be higher in volatile markets. They also charge a Coinbase Fee, which is the higher of a Flat Fee, which depends on trade amount, and a Variable Fee, which depends on where you live and how you pay. For example, if you buy $100 of bitcoin in the US, you will pay a flat fee of $2.99, or 2.99%, plus the 0.5% spread, for a total of 3.49%.
If you pay with a credit card or use a debit card, your fee will be even higher.
More information can be found on Coinbase's Pricing and Fees page, though most traders are probably not reading the fine print. This is one reason why Coinbase is making billions of dollars, all on the back of uninformed retail traders.
Coinbase Pro trading fees are designed in an industry standard tiered structure and dependent on maker/taker status. These fees start at 0.50% and taper downward for higher volume traders based on monthly trading volume. Most retail traders will end up paying 0.5%.
$10 - 50K
$50 - 100K
$100K - 1M
$50 - 100M
$100 - 300M
$300 - 500M
$500M - 1B
Coinbase vs. Coinbase Pro: Case Study on Impact of Fees
Say I want to buy $100 of bitcoin right now. The displayed price is $57,973.53/BTC. However, I can easily see the true price of BTC is $57,685.10. The price has been marked up by 0.50%. This is the Spread, much higher than the true bid-ask spread in the market. Then they charge the Coinbase Fee, which is the greater of a fixed fee (from a schedule) or a variable fee based on region and payment method. In the case of a $100 order from a US bank account, it is $2.99, or 2.99%. Your total fee is 3.49%, leaving you with $96.50 in bitcoin.
Now let's imagine that Bitcoin goes up 10% and you sell. You pay another 3.49% and are left with just $102.43. Coinbase has taken $7.20 of your $10 gain! Not optimal for the trader taking all the risk.
This is just as easy as using Coinbase, just with more data and charts that you can just ignore if you want. In the previous example, you would pay $57,685.11. (instead of $57,973.53) and the spread between bids and asks is $0.01. The fee is just 0.50%, or $0.50 on a $100 order, leaving you with $99.50. Now if bitcoin goes up 10% and you sell, you are left with $108.90. Coinbase has taken $1.10, but left you with a gain of $8.90. Much better!
Coinbase vs. Coinbase Pro: Supported Coins
As of April 2021, Coinbase Pro lists 50 coins and 152 pairs for trading. Popular pairs include Bitcoin (BTC/USD, BTC/EUR, BTC/GBP, BTC/USDC), Ethereum (ETH/USD, ETH/BTC, ETH/EUR, ETH/USDC), and other coins like Filecoin (FIL), Stellar (XLM), Litecoin (LTC), and more. The latest info can be found on sites like CoinGecko. The offerings on Coinbase and Coinbase are nearly identical, especially for the most actively traded coin pairs. And offerings can differ based on your region. Coinbase has a great overview on their website.
Notable difference on supported coins in the US:
- 1INCH: Coinbase Pro, but not Coinbase
- BSV: Coinbase, but not Coinbase Pro
- ENJ: Coinbase Pro, but not Coinbase
- GNT: Coinbase Pro, but not Coinbase
- LOOM: Coinbase Pro, but not Coinbase
- NKN: Coinbase Pro, but not Coinbase
Coinbase vs. Coinbase Pro: Exchange Availability
Both platforms are generally available 24/7 with periodic maintenance windows where certain services may be temporarily unavailable. In terms of trading, Coinbase has had issues dealing with increased exchange demand as the popularity of cryptocurrencies has peaked and has had temporary outages or delayed withdrawals. You can dive more into the complete incident report here. Customers can avoid these outages by using a third-party front-end like Cove Markets that sends orders via API directly to the exchange, bypassing the problematic Coinbase and Coinbase Pro websites and apps.
Coinbase vs. Coinbase Pro: Security
Coinbase is known as one of the most secure cryptocurrency exchanges around, and this applies to both Coinbase and Coinbase Pro. With 98% of crypto stored in offline, encrypted wallets, theft is greatly mitigated. Other, more standard features are also used by Coinbase, such as two-step verification, SSL encrypted web traffic, and AES-256 encrypted crypto wallets and private keys. Another way Coinbase tries to stay ahead of hackers is with its bug bounty program. The exchange offers rewards of anywhere from $200 to $50,000 for developers who disclose software security vulnerabilities. To date, 484 reports have been resolved, with a total of $441,281 paid out to developers for their work on better securing the platform. Coinbase also regularly updates their users about attempted phishing attacks, which run rampant in the industry. From a security standpoint, there is no difference between Coinbase and Coinbase Pro.
Coinbase vs. Coinbase Pro: Wallet Services and Custody
Coinbase and Coinbase Pro both offer their own digital wallets for storing bitcoin and other cryptocurrencies. While each wallet is separate, the same technology and security is behind each wallet. 98% of crypto assets are stored offline (i.e. not connected to the internet) in cold storage, which removes the ability for the funds to be hacked into remotely. Its custody solution is so good that it is offered to institutional clients for storage of millions of dollars in cryptocurrency.
Coinbase Custody is a crypto asset custody solution for institutions and is a fiduciary under New York State Banking Law. The cost for the service ranges from $0-$10,000 for implementation dependent on the use case, with a 50 bps (0.50%) annualized custody fee. Additionally, there is a $1 million minimum balance for Coinbase Custody users.
Coinbase Custody features include:
- Segregated cold storage
- The industry's leading insurance policy with a $255 million limit
- Seamless integration with Coinbase Pro
- Closing in on 100 digital assets available for storage
- Regular external financial and security audits
Switching from Coinbase to Coinbase Pro
While Coinbase and Coinbase Pro are linked, each has its own wallet. While you might have a funded Coinbase account, you might not have a funded Coinbase Pro account. Luckily, the process for transferring between the two is free and easy. For more information on how to complete this transfer, please reference this help article on Coinbase's website, though the basic steps are outlined below:
- Go to the Coinbase Pro trading page
- Select Deposit under Wallet Balance (a pop up window will appear)
- Select the currency type (i.e. BTC, ETC) that you’d like to deposit to Pro from Coinbase
- Select Coinbase Account
- Enter the amount you would like to deposit to Pro from Coinbase. Please note that you will only be able to deposit funds that are “Available to Deposit”
- Select Deposit at the bottom of the window
Consideration of Multiple Exchanges
Coinbase Pro is a great platform, but it's only one source of liquidity. Sometimes different exchanges can have better prices. And most other exchanges have fees lower than 0.50%. Exchanges sometimes advertise a low fee, but you'll note in the fine print that the fee is much higher for small traders, so be careful.
There are many alternatives to Coinbase available. One of the largest exchanges in the world is Binance, however they are not available to US residents and have started cracking down on this. Many continue to access the exchange via VPN. However, US residents are encouraged to use Binance US, a separate entity and exchange, but with the same talented team, technology, and strategy underpinning it. Launched in 2019, it continues to grow. Kraken is one of the largest exchanges in the US and a great alternative to Coinbase. Liquidity is very high and similar to Coinbase, while the exchange also has a huge presence in Europe. Fees are also about half those of Coinbase Pro. Other exchanges like Bitstamp and Gemini are also large and very trustworthy.
Many users will opt to access the market through mobile apps like Robinhood and Voyager, which while not exchanges themselves, are able to offer trading services to their users. For those who want to get really wild, they can explore decentralized exchanges like Uniswap. Though be warned that fees are quite high for small traders and there are some additional risks involved.
A comparison of exchange fees can be found here. See below for a quick overview:
Coinbase vs. Coinbase Pro: Key Takeaways
Pro Tip #1: Beware the Easy Option
Sometimes companies offer an "easy" option, which sounds nice. However, it's just a way to identify the suckers, provide limited transparency, then gouge them on price. Many exchanges and vendors offer a basic version for "everyone" and a pro platform for "advanced traders". The differentiator is usually just price. And never use a credit card if you can avoid it.
Pro Tip #2: Watch out for Hidden Price Markups
Be careful about the quoted price. It might be the best price from an exchange order book or it might reflect a, sometimes massive, price markup. These markups are usually not disclosed in an obvious or transparent way.
Pro Tip #3: Look at Multiple Exchanges
In order to get the best price in the market, it's a good idea to consider opening multiple exchange accounts and/or using a price aggregation tool like CoveTrader that has the ability to route to the best price net of fees.
The main difference between Coinbase and Coinbase Pro is price. All trades are executed in the same place and your Bitcoin is stored with the same reputable custodian. While the order entry interfaces might look different, the main inputs are the same. The biggest difference comes down to fees, with Coinbase Pro being significantly cheaper than Coinbase. It's really easy to get a better deal with just a little research and effort. Most traders, even novices, will be much better off trading on Coinbase Pro and avoiding high fees. As traders become more comfortable, they should consider opening up multiple exchange accounts so that they can source the best liquidity at any point.