What is Coinbase?
Coinbase is one of the more popular and user friendly choices for investors who want to buy/sell Bitcoin, Litecoin, and Ethereum.
More specifically, Coinbase is a digital asset exchange company headquartered in San Francisco, California that provides a cryptocurrency wallet-exchange-broker hybrid service (making Coinbase/GDAX essentially a one-stop-shop for cryptocurrency).
Coinbase the company has two main products, 1. Coinbase where people can buy/sell Bitcoin, Litecoin, and Ethereum in a simple way, and 2. GDAX an exchange aimed at experts where people can trade Bitcoin, Litecoin, and Ethereum.
In other words, coinbase acts like a broker, providing a way to buy, sell, send, and receive the three major coins using USD, and GDAX acts like a traditional exchange where customers can trade the major three coins.
We often suggest coinbase for those investing in cryptocurrency for the first time due to ease of use (for example on our basics of cryptocurrency investing page). With that in mind, once you get Coinbase down, we also strongly suggest doing most of your trading on GDAX. Both programs are by Coinbase and both use the same login. Thus, we strongly suggest signing up for both Coinbase and GDAX!
TIP: We notably advertise coinbase on our site. This is because we ourselves use coinbase and find it to be a good first step for new cryptocurrency investors. In other words, we suggest them and thus put the ad up, not the other way around where we put the ad up so we suggest them. If you sign up for coinbase by clicking coinbase links on our site that take you to coinbase’s sign up screen (like this one for example), we both get $10 in Bitcoins when you spend $100… So consider doing that if you are going to sign up anyway. Once you sign up you too can offer people this sweet referral program. 🙂
NOTE: We didn’t create the video below, we are just featuring it in case you want a visual guide to buying cryptocurrency via Coinbase. See our guide below.
How To Buy Bitcoin on Coinbase.
TIP: Consider wiring money to Coinbase via the bank wire option once you feel confident in using it. Its the only way to get money into your account without long wait times or buying coins and paying the related fees. On that note, see our guide to not paying fees when you use Coinbase (it is a thing and it is worth figuring out).
TIP: You need Coinbase to use GDAX. With that said, once you get your feet wet with Coinbase… you’l likely want to use GDAX for almost everything a novice would use Coinbase for. GDAX is more intimidating, but the ability to set limit orders and avoid Coinbase’s fees makes GDAX a no brainer for many investors. Buy/Sell fees on Coinbase are at least 1.43%, on GDAX they can be as low as 0% (for maker fees). So get on Coinbase, fund your USD wallet, and buy a few coins… but consider using GDAX for the bulk of your trades. In short, if you can stomach GDAX (a coinbase product), then save yourself boatloads of fees by using it (although, since you need coinbase to do that, and since you’ll still find yourself using key coinbase features like their APP when on to go, why not click this link and get your free $10 when you sign up and fund your account!).
TIP: It can take over a week to fund your Coinbase/GDAX and they share limits. A benefit of Coinbase is you can buy cryptocurrency at the market price plus a fee before your account is funded. To use GDAX you have to wire or bank transfer money to your account first. So Coinbase has one thing over GDAX, immediacy for new users. I personally use Coinbase when I see a good price and don’t have access to my desktop (on which GDAX runs) or when I don’t have funds in GDAX (because they are tied up in trades) but want to make a buy immediately.
How to Get Started Trading Cryptocurrency With Coinbase.com
The process for getting started trading cryptocurrencies is simple, but there are a few notes that are vital to understand (just like above, but this time applied to using coinbase).
First, to sign up for coinbase.com.
- Sign up for coinbase.com to create a digital currency wallet where you can securely store digital currency.
- Connect your bank account, debit card, or credit card so that you can exchange digital currency into and out of your local currency (you’ll probably also want to add optional info and upload your ID to expand your purchasing limit).
- Buy Bitcoin, Ethereum, and/or Litecoin (trading USD, aka US dollars, for cryptocurrency).
- Sell Bitcoin, Ethereum, and/or Litecoin (trading USD, aka US dollars, for cryptocurrency).
- Consider signing up for another exchange and trading cryptocurrency for cryptocurrency(and then transferring that back into Bitcoin, Ethereum, and/or Litecoin, and then back into coinbase, and then back into USD). Don’t forget to record your transactions for the tax man and to brush up on the tax implications (I can’t stress that enough).
- I strongly suggest you use a bank account, and likewise strongly suggest you don’t use a debit or credit card. The fees are way lower with a bank account. The fees are rather high without one.
- When you sign in with your bank account you’ll need to input your bank account login. That may feel shady, but is the process (read about it at coinbase).
- If you use your bank account, you have to wait 3-5 days for your bank to approve the pairing (so you can’t trade for about a week after you sign up).
- There are limits to how much you can buy/sell in a week. Adding a photo ID and other payment methods will increase your limits. Otherwise your limits increase (quickly) over time as you trade.
- Coinbase now has instant purchase when you buy with your bank account. CAVEAT: You [apparently] need to meet certain undefined criteria at the moment to qualify, and this isn’t offered to all users. It used to be that you had to wait days to get your coinsy. Now, assuming you meet the undefined criteria, you’ll be able to buy coins instantly. That is a big deal if they extend this to all users.
- There are fees involved with buying from Coinbase and some types of trading on GDAX (which can in cases get lower as you buy / trade more). Other exchanges have better rates than Coinbase (for example GDAX itself has better rates). However, rarely do exchanges have a better fee schedule than GDAX. In other words, when using Coinbase specifically, you’ll pay a little bit more than market price (or sell for a bit less than market price) and pay a small fee when trading on coinbase (this is a trade-off for ease of use). NOTES: To be clear, there are essentially two sets of fees when you buy with coinbase. One is them charging you more per coin than on GDAX or other exchanges, the other is an actual fee (currently paid in crypto, not USD, so if you buy 1 Ether, you get a little less than 1 Ether but pay the market price). That is the price you pay for them doing all the work and taking the risk of the price changing quickly when you buy. Not a reason not to use coinbase and only use GDAX every time, but it is something to keep in the back of your mind if you start making lots of buys.
- Set up 2-factor authentication. That helps to secure your account by sending a code to your phone when you log in.
- To actually trade coins you need to go into settings and make sure your wallets are set up (BTC, LTC, ETH, and USD wallets can be found under “accounts”).
- The benefit of a USD wallet on coinbase is that you can put money in that and then buy coins instantly from the wallet. If you try to buy directly with your bank account the transaction can take about a week. A credit card doesn’t have this problem, but generally limits are lower on a credit card. TIP: I almost always deposit USD in my wallet as opposed to buying coins directly from Coinbase via my bank account when using Coinbase to buy (I do this on-the-go sometimes). You can also wire money if you need the funds to be in the wallet quicker. On that note, I almost always then use GDAX to buy/sell coins when I’m by a desktop (then use Coinbase as my wallet and mobile app).
- You don’t have to buy a whole coin. You can buy fractions of coins. BitCoins are expensive here in 2017, so consider buying fractions of a coin to start if you don’t have a big bankroll. Its has historically been a mistake to buy only ETH and LTC because BTC costs more. You want to think of which one will increase in and retain value, buying all three in equal $ amounts (and ignoring how many of each coin that amounts too) is one way to avoid making the wrong choice based on price tag per coin.
- When you buy a coin, take a breath and review the information. An extra decimal place can mean big money considering a single BitCoin can trade for over
- Download the app. This lets you trade cryptocurrency from your phone. The market is volatile, transactions are slow, when it is time to buy or sell you need to do it ASAP.
- Set alerts. Alerts can help you decide when to buy or sell.
- There is a feature that lets you buy incrementally over time. Averaging in a position on a weekly basis is a nice conservative move that Coinbase will automate for you.
- Cryptocurrency is volatile! There is always the chance that the market will crash, or that you will face some other catastrophe. Cryptocurrency isn’t a centrally controlled and regulated fiat currency. If you lose a coin or someone cheats you, there is essentially nothing you can do about it (which is why you want to have 2-factor authentication set-up).