Cryptocurrency Trading Platforms

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Cryptocurrency Trading Platforms Overview

This month we take a look at 2 major cryptocurrency trading platforms, Kraken and Coinbase. These are two of the most high-profile crypto exchange platforms in the world. Each allows you to buy various currencies using fiat money (U.S. dollars or Euro), are geared for experienced and novice investors, and allow for high and low volume traders. We weigh the pros and cons of Kraken and Coinbase and explore their distinctive features, security, fees, ease of use, and more. While both platforms offer appealing elements, each has unique advantages that will appeal to different types of investors.

The Rise of Cryptocurrencies

It appears that cryptocurrencies have a bright future as banks, institutional investors, hedge funds, and retail investors continue to move into digital currency. As of 2021, there are around  4,000 existing cryptocurrencies, a dramatic increase since 2013. Despite many fears and uncertainty regarding cryptocurrencies, it has become a global sensation, attracting traders worldwide. In the United States, the percentage of cryptocurrency investors has reached 10%. The crypto market is over $2 trillion, of which Bitcoin accounts for 50%. This data illustrates that the future of cryptocurrencies is promising and has the potential for further growth.

The rise in the price of cryptocurrencies can be attributed to institutional support. Many publicly traded companies are now holding cryptocurrencies like Bitcoin to diversify and support their business. Tesla customers can buy cars using bitcoins. This announcement was made when the company chief, Elon Musk, announced the purchase of $1.5 billion worth of Bitcoin. Square, with it’s mobile payment service, Cash App, allows users to buy and sell bitcoin from their available Cash App balance. Paypal has announced that customers in the U.S. can pay with Bitcoin, Litecoin, and Ethereum. Their new option, Checkout With Crypto, allows conversion of cryptocurrencies to U.S. dollars without any transactional fee.

With this growing trend, the need for cryptocurrency trading platforms emerged. These platforms carry out the trading of digital currencies and are responsible for cryptocurrency value and price. Cryptocurrencies can be traded for other assets like fiat money. These trading platforms make money through transaction fees. The trading platforms are divided into centralized and decentralized exchanges. Centralized exchanges (CEX) involve the third party which controls the account to carry out a trade. Decentralized exchanges (DEX) do not require any central authority, and they enable peer-to-peer trading.

Kraken Versus Coinbase

Each exchange appeals to both industry investors and novices. Kraken offers features ideal for worldwide investors, while Coinbase’s digital options work well for U.S. investors.

  • Availability: Coinbase offers trading in over 100 countries and Kraken offers trading in 176. Both provide varying functions depending on where you live. For example, Coinbase isn’t available to Hawaii residents, and Kraken isn’t available to New York or Washington residents.

  • Customer Service: Service is available around the clock for both platforms in the form of live chat. Support can decrease, and wait times increase, during high-traffic trading times. Both offer help center guides and question-and-answer centers.

  • Margin Trading: Kraken offers margin trading with up to five-times leverage (average in the industry). Coinbase offers limited availability at three-times leverage.

  • Mobile Applications: Each exchange has a highly rated mobile application, offering all the features available on a web browser. However, Kraken’s app isn’t available in seven countries, including Japan and the U.S.

  • Security: Security measures are crucial when considering which exchange to use. Both platforms have solid security track records, and neither has had any significant breaches. Kraken stores 95% of its assets in guarded air-gapped cold storage and has strict surveillance across the entire platform and multiple checkpoints throughout the signup process. Coinbase keeps 98% of deposits in offline, geographically distributed cold storage. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 of an individual’s USD cash balances, a plus for U.S. traders.

  • Currencies: Both exchanges support USD, EUR, CAD, AUD, GBP, CHF, and JPY fiat currencies. Coinbase has 50 cryptocurrencies available for trade, while Kraken has 56. Investors wanting more currency options appreciate Kraken’s broader selection, but each provider offers different choices, so users looking for something specific can search both to find what they want.
    The major cryptocurrencies supported by Kraken and Coinbase include:

    • Bitcoin

    • Bitcoin Cash (BCH)

    • Cardano (ADA)

    • Chainlink (LINK)

    • Ethereum (ETH)

    • Litecoin (LTC)

  • Fees: One significant difference between Kraken and Coinbase are their transaction fees. Kraken falls well below industry average, calculating transaction fees according to 30-day trade volume. Coinbase’s baseline 4% transaction fee is one of the highest in the industry. (Upgrading to a Coinbase Pro account saves on trading costs, but Kraken’s fees are still much lower).
    For example, a $1,000 trade will cost $5 (0.50%) with Coinbase Pro, $40 (4%) with Coinbase, and $1.60 (0.16%) with Kraken.

  • Ease of Use: The ease of use for both Kraken and Coinbase is good. They both provide a reliable experience on desktops and mobile devices. Kraken’s security measures are a bonus for large sum investors, but the added security precautions can be trying for users who want to start trading quickly. Coinbase offers a quick startup process and keeps trading features and funding options simple, allowing inexperienced investors to get started trading right away.

Conclusion on Cryptocurrency Trading Platforms

While cryptocurrency trading is a growing trend, we recommend doing your research before you begin. Start trading with a small portion of your account, have an overall goal in mind, and have an entry and an exit strategy.

Happy Trading, Verdia

Charles E Winchester