Wrapping your head around Crypto is hard, even harder is managing the complexity of crypto exchange fees. The stakes are high too. You can see in her Stardust Summary that Theresa has spent hundreds of dollars in fees just on her first few trades, today she just spends pennies. In this article we are going to breakdown some of the intricacies of Coinbase and cover how Theresa cut the fees she was paying by 95% and how you can too.
If you are new to crypto and need a general deep dive into fees, check out our article detailing everything you need to know about crypto fees. Otherwise let’s get into it.
Note: For the rest of this article we are going to refer to Coinbase’s traditional, default product as Coinbase Standard to better distinguish it from Coinbase Pro or the parent company Coinbase.
Real Life Case Study
Theresa, one of the co-founders of Stardust, has been trading BTC and other crypto since 2017 across a diversity of platforms including both Coinbase Standard and Coinbase Pro. While she originally signed up for Coinbase Pro in 2017 because it offered access to expanded trading pairs, the decision actually saved her a significant amount in fees especially as she began to transact more heavily. Let’s take a look at a real-life example:
Theresa bought $150 worth of BTC and received 0.02396041 BTC at a spot price of $6,019.93. The first thing to note is that $6,019.93 was not the fair market price of BTC then. Coinbase adds 0.50% on top as a hidden fee(we have an explanation of all the hidden fees here). The real price of Bitcoin, and what she should have paid was only $5,989.83.
As of writing, here are the quoted prices of BTC in USD:
Essentially if you buy 1 BTC on Coinbase Pro and immediately sell it, you’ll lose a penny. On Coinbase Standard, you’ll be out $387.48 even before transaction fees on that trade.
Theresa bought BTC at this inflated price with her subtotal of $144.24; and on top of that, the remaining $5.76 was collected by Coinbase as an additional transaction fee. It might sound like a small amount, but let’s break it down in terms of percentage and lost gains.
That amount of money represents 3.84% (4.34% with the inflated spread) of the total, but don’t forget, you will be assessed the same fees when you sell. Unless you plan to hold onto those exact coins forever in Coinbase, you will likely end up spending nearly 8% of the original total when all is said and done. You’ll have to pay the fee again to either convert it back to USD or transfer it off their platform.
In addition, that’s a lot of unrealized gains that Theresa left on the table. All those fees should have instead bought her 108,204 Satoshi (A sub-unit of Bitcoin equivalent to 1/100,000,000 BTC) more. As of writing, that would be worth $40.81, a ton of money when you consider that the entire original trade in 2017 was only $150!
Luckily there are few ways you can minimize these costs.
Make sure you use Coinbase Pro
Originally, Theresa started using Coinbase Pro because it had access to additional trading pairs. Luckily for us, we can use that to directly compare Coinbase Standard’s to Coinbase Pro’s fees, as a few days later she decided to buy $1,000 USD of BTC.
Coinbase Pro is a bit more complicated when it comes to reporting. It’s why we built an app for it. Essentially, they’ve broken Theresa’s single buy order into 10+ line items and 3+ orders. The summary is she got 0.17288821 BTC for $997.50 at a price of $5,769.62 and paid just $2.50 in fees. That’s 0.25% and with a very tiny spread.
Theresa went from 4.34% in fees on Coinbase to 0.25% just 4 days later by switching to Coinbase Pro. That’s cutting her fees by nearly 95%!!
As you can see between her first Coinbase Standard transaction and her first Coinbase Pro transaction, she is saving a ton of money…
Some Common Misconceptions about Coinbase Pro
A lot of users trade on Coinbase Standard because they think that Coinbase Pro cost money, or one is brokerage vs the other an exchange, or that it’s complicated and difficult.
If you’re curious if any of these are true, we are going to break it down for you. If not, just jump down to our section on how to use to get started.
Let’s break this down starting with what the costs for Coinbase Pro are; it’s nothing, $0. That’s really it, there are no major differences when it comes to signing up except one is coinbase.com and the other is pro.coinbase.com. You are going to save a ton of money on fees, but there is no cost to join.
The conversation of whether one is a brokerage vs an exchange is a lot more complicated. We’ve written 2,500-word articles on the topic, have YouTube talks about it, but the TL;DR is that neither Coinbase Standard nor Coinbase Pro are brokers. For that matter, neither are Gemini, Kraken, Binance, or any other ‘Crypto Broker’. Brokers have an obligation called ‘best execution’ that requires them to work for you and execute at the best price they can find. No ‘crypto broker’ currently shops around to get you the best deal on BTC when you enter a trade. If you want to know where the best deals are, you have to look that up yourself.
How to use Coin Base Standard vs Coinbase Pro
I will concede that it’s a busier UI, but it’s no harder to use than Coinbase Standard. All Coinbase Standard does is hide the charts and does a market order automatically. Luckily, market orders are the default order type on Coinbase Pro. So just ignore all the charts and focus on the left side of the screen and use it just like you would Coinbase Standard, that’s it. Switching to Coinbase Pro is as simple as just transferring your funds. No separate accounts or passwords, no fees, no surprises. In our opinion, it’s a no brainier to use Coinbase Pro vs Coinbase Standard.
Should you be using Coinbase Pro vs. Kraken Pro vs. Gemini?
Which exchange to use is a more difficult question. Between the three major regulated US exchanges, minimizing your fee largely depends on your trading volumes with Kraken Pro being the standout at lower transaction volumes, Coinbase Pro having a small window for 6 digit trading volumes, and Gemini Active Trader for power users and institutional investors. The spread of prices across exchanges is far larger than the fees at that point, however, as BTC spot prices vary by about 0.50% between the main exchanges.
As of writing, Coinbase Pro seems to be the best match for the narrow band of users who have around $100,000 in 30 Day Order Values. Significantly below that, Kraken Pro offers more competitive rates while Gemini offers better rates for institutions or power users with very high transaction volumes.
