Coinbase is a platform for storing, buying and selling cryptocurrency. They offer a ‘one-stop shop’, acting as a wallet and an exchange, plus a host of trading tools and resources. So, with more than 10 million customers and an exchanged digital currency of $ 6 billion, let’s see why day trading on Coinbase has become so popular. This page looks at how the trading platform works, while highlighting its pros and cons, including apps, fees, limits and rules for coin masters.
Note! If you plan to trade cryptocurrency, you don’t necessarily want to own actual coins. It can be cheaper and more efficient to trade price movements with derivatives, where you can also take advantage of the results. Check out our cryptocurrency day guide.
What is Coinbase?
Coinbase is a global digital asset exchange (GDAX). Essentially, it is a secure online platform used for buying, selling and transferring digital currencies. Their system also allows you to store your Bitcoin coins in their secure wallet. You can also host your Ethereum and Litecoin currency, plus other digital assets with fiat currencies in 32 countries.
If you want to start day trading cryptocurrencies, you need a platform to trade with, an intermediary to communicate with the blockchain network. This is what Coinbase can offer you, a fast and easy way to facilitate and trade your cryptocurrencies.
Why use Coinbase?
So if you are interested in storing and trading digital currencies, Coinbase can provide an important service. What are its advantages, and are there any disadvantages you should be aware of?
Advantages
Cut through noise
With Coinbase, you can skip the complex underlying technology associated with digital currencies. You don’t need to have a deep understanding of blockchain technology, or to have a long-term view of the success of currencies like Bitcoin.
The Coinbase trading platform offers a simple way to capitalize on the volatility in the cryptocurrency market. Volatility with which Bitcoin increased fivefold in the first nine months of 2017.
Margin trading
You can also benefit from Coinbase margin trading. This allows you to borrow money from your broker to make more trades. It is best to think of it as a short-term loan. The advantage is that trading on margin increases your leverage and buying power. This can allow you to boost your profits beyond what you can do with your checking account. If you see a big move on the horizon, you can really take advantage of it.
Additionally, Coinbase fees have been lowered when trading on margin. This means that you will not pay any interest or extra charges at this time. The downside is that you have to have a minimum of $5,000,000 invested on a discretionary basis to be eligible for a margin account.
Promising change for traders
Previously, after a transaction, customers had to wait several days to receive their digital currency. Now you can buy bitcoin and other currencies directly from your bank account. What does it mean? It allows you to trade with GDAX in real time.
While trading on Coinbase has been said to be aimed at institutions and large traders, this change will make it easier for day traders and the like. The popularity of this change was quickly evident. The price of Litecoin jumped more than 12% the afternoon of the announcement, followed by an increase in Coinbase day trading.
Powerful trading platform
The Coinbase trading platform has everything the intraday trader needs. It offers a sophisticated and easy to navigate platform. The platform has logs, advanced mapping capabilities and a simple ordering process. It also collects trading history and enables retesting. Since you will be spending most of your day on the platform, finding a system as comprehensive as Coinbase is a huge advantage.
Programs
The Coinbase mobile app features glowing customer reviews. It offers quick and easy mapping, plus fast execution speeds. No more missing an important price move because you’re stuck on a train or cooking halfway through your meal. Their app is available on Apple and Android devices.
Security
You also get reassuring security with Coinbase. 98% of the digital assets will be secured in offline storage. Coinbase promises that customers’ “sensitive data that would normally reside on our servers is completely disconnected from the Internet.” That data is encrypted and transferred to USB drives, as well as paper backups, which are then stored in deposit vaults around the world.
If you have invested significant amounts in Coinbase, you want extra security. This is where Coinbase Vault comes in. It offers delayed withdrawal and gives you a 48-hour grace period to cancel. In addition, you can have multiple approvers, ensuring that trading capital cannot be accessed as a result of a short judgment. It does even better and offers customers a multi-sig safe, which requires even more keys to unlock your cash.
Insurance
You also benefit from strong insurance protection. Because Coinbase has all fiat currencies in a USD wallet, it is covered by FDIC insurance. Coverage extends up to $250,000. So, even if Coinbase were to become insolvent, client capital would still be protected.
Disadvantages
Despite the numerous benefits of day trading on Coinbase, there are still several pitfalls worth pointing out.
Reliability
The complicated workings of blockchain and other unverified reasons have meant that the Coinbase payout system can be somewhat temperamental. Some customers report significantly delayed payout periods. As a short-term trader, you need quick and easy access to trading capital, and this may deter some potential clients.
Additionally, bugs have plagued the Coinbase trading platform from time to time, preventing some tools and aspects from working fully. While Coinbase is working hard to fix these issues, you don’t want to worry about platform reliability if you have trading decisions to focus on.
Pseudonymity
Trading through Coinbaise deprives you of the pseudonym. Your name is linked directly to your trading and bank accounts. This means that the transition history is simple to uncover. Additionally, you cannot actually verify that your transactions are happening on the blockchain. Instead, you can only put your trust in the middleman, Coinbase.
Essay
Fortunately, setting up on Coinbase is a walk in the park. You need to follow three simple steps before you can start trading.
- Register – This involves creating a digital currency wallet where you can store all online currencies.
- Connect – You need to connect your debit or credit to your Coinbase account. This allows you to exchange digital currencies in and out of your local currency.
- Purchase – the fun part. You buy the digital currency of your choice. Coinbase is the largest Bitcoin exchange in the world, but you can also buy Ethereum and Litecoin.
Once signed up and funded, Coinbase for trading Bitcoin and other currencies works much like other trading platforms. The platform offers real-time prices within trading hours, and won’t look too much like your usual online tracker.
Coinbase Trading Rules and Fees
Note the trading limits and regulations that you must comply with before you get started and set up an account.
Rules
Before you start using Coinbase and digital currency pairs, you need to understand account restrictions. If you use a bank account, you get higher limits of $100 transactions and up to $2500 per week. Depending on your bank, it will take considerably longer to verify transactions. If you sell Bitcoin, it may take a few days for the proceeds of the sale to appear in your account.
If you use a debit or credit card, you will limit the limits to $200 per week. However, you can buy digital currencies by transferring funds directly from your account to the website. These transactions appear instantly in your Coinbase wallet.
You can also use PayPal. You can easily sell every digital currency to your PayPal account. Once you cash out, your digital currency is exchanged into local currencies. This transaction will also take place immediately.
Fees
It offers a simple and competitive fee structure. GDAX offers zero fees on maker trades and generous volume-based discounts on all fees. These fees can see you pay as little as 0.1%.
However, they charge transaction fees for buying and selling digital currencies on their trading platform and in their marketplace. These fees vary depending on your location. In the US, for example, the transaction rate is 4% plus various additional charges, depending on the payment method. It is also worth noting that the price of instant transactions is also higher transaction fees.
Trade bots
Cryptocur currency and APIs for trading in Coinbase are extremely open systems, through which any intraday trader can try his luck. This means that using algorithmic trading on Coinbase should do big business.
If you’ve already formulated a successful strategy, why not increase the profits by using an automated bot to do the heavy lifting? You will find that the Coinbase exchange consists of many trading bots. You’re no longer just competing against a half-awake Joe at his table at home.
Take the Python trading bot, abundant on Coinbase. It follows a simple exponential moving average strategy. It aims to sell bitcoin once sufficient profit has been made to pay the transaction fees and a small margin. In high frequency trading, it can make thousands of trades per day, and hopefully make a profit in the long run in such a volatile market. How do you keep up with thousands of people already using such strategies?
This means that your strategy must be very accurate, efficient and smarter than the rest. You can then use a Coinbase trading bot to articulate the strategy and give you the competitive edge you need. Automatically executing trades based on pre-defined criteria can save you serious time, and every second of the day counts.
Final Word
The trading volume in Coinbase has grown over the past few years and it’s not hard to see why. Not only does it provide you with a secure wallet for your digital currency, but the GDAX platform is an intelligent platform suitable for traders of all experience levels. However, before you dive in, check that the transaction fees are competitive for your location and that you can meet the strict account rules.