In our prior installments, we talked about Bitcoin (BTC) and Ethereum (ETH), two cryptocurrencies that were worthy of a place in just about everyone’s portfolio: BTC is the big boy on the block and is a great store of value while ETH takes advantage of the computational features of blockchain technology.
Hopefully, I was also painfully clear that investing in any cryptocurrency – including BTC and ETH -- involves substantial risk. You can lose big. So, if you’re thinking about taking the plunge, do so sparingly. A good rule of thumb: Don’t set aside more than 1% to 2% of your portfolio for crypto.
Now, after all, that, if you’re set to invest in a little cryptocurrency, welcome to the club! I think this class of assets is the future. It’s super-exciting and chock-full of potential, including profit potential.
But before you can get to that potential, you’ll need to actually buy some cryptocurrency. So, today, we’re going to do a deep-dive into one of the best ways to buy crypto: By using the popular crypto exchange, Coinbase (COIN).
Coinbase Is Big And Easy
Unless you’ve been under a rock for the past few months, you’ve heard about the wildly popular IPO (actually, direct listing) of Coinbase. Although it's off its highs, the shares now boast an eye-popping $63 billion market cap. And while Coinbase isn’t the biggest on a global scale, it’s the biggest in the U.S.
On Coinbase, you can buy, sell, trade, or exchange a ton of cryptocurrencies. In fact, at last count, 44 cryptocurrencies were supported. While that’s a far cry from the 4K or so cryptos in existence, that’s enough selection for just about any crypto investor. And, of course, you can trade BTC and ETH there.
And if you’re wondering whether you’re going to have to buy an entire bitcoin (recently selling for $36,031), no need to worry. On Coinbase, you can buy fractions of coins denominated in U.S. Dollars. That makes it easy to figure out how much you want to plunk down.
Coinbase Can Be Expensive
When you’re ready to pull the trigger, Coinbase will charge you 0.50% for every transaction. On top of that, you’ll have to tack on 1.49% if you fund the trade with a U.S. bank account or 3.99% if you use a credit or debit card. All told, that means a Coinbase trade could cost you almost 5% per trade, which is steep. But if you’re just starting out – and take a long-term view of your first crypto trade, which I recommend – it’s doable.
Now, once you get your feet wet and you decide to your neighborhood’s next crypto gunslinger, Coinbase offers Coinbase Pro. You’ll get lower fees and more advanced trading features with that platform, like stop orders, limit orders, and advanced charting.
Opening An Account Is Easy... Plus Free Money!
Opening an account on Coinbase is easy. You’ll need some standard identity documentation, an email, a phone, and a browser or the app. It only took me a couple of minutes to set the whole thing up, get verified, and make my first trade.
One of the coolest features of Coinbase is that you can earn free crypto by learning. That’s right. With Coinbase Earn, you watch videos about a particular crypto. After completing a quiz or short task, you’re rewarded with that specific crypto.
Right now, on my Coinbase platform, I’m offered free Polygon, The Graph, Compound, and Stellar Lumens.
Coinbase stores 98% of its customer funds offline in drives and paper backup distributed around the work in safe deposit boxes and vaults. That means they’re virtually impossible to hack online. Wallets and private keys are also stored with AES-256 encryption. Coinbase also offers two-factor authentication by SMS or google authenticator app or login and trade activities.
For U.S. customers, Coinbase also offers FDIC insurance up to $250K for U.S. dollar deposits. These pooled custodial accounts are maintained at one or more banks insured by the FDIC.
Regulation Of Crypto Exchanges
If you wonder about the regulation of cryptocurrency exchanges, you should. And that’s because right now, crypto exchanges aren’t heavily regulated like their counterparts in the stock and futures worlds.
That said, because Coinbase is a U.S. stock and engages in money transmission, it is required to comply with financial services and consumer protection laws. It is regulated by the SEC and individual state regulations. In addition, it must comply with the Bank Secrecy Act, the USA Patriot Act, and other laws.
Down the road, keep your eye out for more regulation. At first, you’ll likely see self-regulation of crypto exchanges, which will probably take the form of self-regulating associations, like the National Futures Association. After that, a government entity or commission will likely spring up and work in tandem with a self-regulating crypto association.
Is crypto regulation a good thing? Without a doubt. One of the biggest hurdles that nascent exchanges and asset marketplaces have is inspiring confidence in the people that trade there. Once you put moderate regulation in place, investors will look at crypto exchanges as safe places for their money. And that’s bullish on the sector as a whole.
Next week, we’ll take a look at one of the more interesting coins out there. So, stay tuned!
Disclosure: This contributor does own Bitcoin (BTC) and Stellar Lumens (XLM). This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.