NOTE: This article is not longer being updated, and may contain inaccurate information!
First Dogecoin went to the moon, and now Bitcoin's rise has made it one of the hottest assets on the market. Have you been thinking about possibly dipping your toes into crypto but not sure where to start, due to the crazy high prices, confusing fee structures and a myriad of platforms to choose from?
Don't fear! I was in the same boat not too long ago and want to help others by sharing my experience and learnings!
Important Note: Cryptocurrencies are relatively new, extremely volatile and not yet fully regulated. As such, be aware of the elevated risks associated with crypto trading and do your own research before making any financial decisions. All content below are opinions of CreditFred's alone.
How I Started
The thought of trading crypto was already daunting enough for me and was why I held off for so long. But sometime in the last couple of months, I figured it's better to start small today than never, even if it's tiny amounts that I am completely comfortable losing 100% of in the worst possible scenario.
It's true that Bitcoin can double in price over the next year, but it is just as likely it will fall back to the $30k mark or even $0 tomorrow. Personally, I think allocating 1% of your assets to crypto can be a good start, but this is just my opinion and not financial advice!
The key is what I mentioned in my stocks article - to dollar cost average. A way I like to think about it is:
Rather than buying that $4 coffee everyday from Starbucks, make your own coffee and use your savings to buy small amounts of whatever investments you think may increase in value.
Don't want to plow your own money in yet? No problem! Check out this post on how you can earn free crypto just by learning about blockchain technology:
I was hoping that I could use one of the existing apps I had to do my trading (e.g. Robinhood, Cash App by Square, etc.), but found all existing all-in-one services severely limited for many reasons (more on that later).
Unfortunately, after my research, even the dedicated crypto apps had shortfalls and there was no one app that had all the functionality I needed.
In today's article, I'll be sharing my current thoughts (remember everything here is incredibly new and subject to change at any time), weighing the pros and cons of each service, and hopefully help you get started on your crypto journey!
Before we begin, note that digital currency is not legal tender, thus not backed by the government and digital currencies are not FDIC or SIPC insured. This isn't limited to specific apps but across all current platforms. Hopefully as this space matures there will be more safeguards put in place. That being said, all platforms I will discuss today are not anonymous accounts, meaning they will report all activity to government and tax authorities (you can decide if that is good or bad).
The 30-Second Summary
I want to preface this by mentioning that you should do your own research and read through the entirety of this article before going heavy on crypto. However, here is the most concise summary of my experience/strategy after months of using these platforms:
- For simplicity, no transaction fee, and high interest rates, just go with BlockFi.
- Use Gemini if you are OK with a little bit more complexity in exchange for better prices (~1% less), then transfer over to BlockFi (no transfer fees!) to earn interest.
- Coinbase is worth signing up to earn the free coins, but that is pretty much it.
Founded in 2012, Coinbase is currently the largest cryptocurrency exchange in the US by trading volume and one of the largest crypto platforms in the world with over 43 million users across 100+ countries.
- Large, reputable cryptocurrency company
- Fully regulated licensed exchange, with 98% holdings in cold storage and the remaining 2% in secure hot servers that are fully insured in the event of a cyber-attack. USD wallet FDIC insured up to 250k.
- Fund transfers are available to trade instantly (this applies to new users too)!
- Easily transfer to/from Coinbase Pro (see below) with no fees
- Simple UI, easy to use and a solid mobile app
- Ability to take short quizzes and earn various cryptocurrencies - a great way to start learning and owning coins without putting in your own money
- Custodial service, which means you don't have direct access to your coins. You can remedy this by transferring to another platform or offline wallet (something Robinhood does not allow)
- Nearly non-existent customer support (although they are said to be investing in this area)
- Relatively high transaction fees for small traders. However, you can simply switch over to Coinbase Pro to overcome this (see below)
- Coinbase Pro mobile app UI and functionality is very limited
Pro-tip: Use Coinbase Pro (after getting bonus from Coinbase)!
Interestingly, Coinbase offers a separate website and mobile app (for free) called Coinbase Pro that has a more advanced trading interface, but because it is an exchange, the fees and prices you see will be much more favorable. You can sign in using your existing Coinbase account and transfer funds between your two accounts for free instantly.
Sign up for Coinbase using a referral link (mine is below) to get started with $10 in Bitcoin (buy the minimum $100 to qualify). Then, complete various quizzes to earn more crypto coins for free! Once you are ready to make bigger trades, download the Coinbase Pro app, use your existing login, and make your subsequent trades on the Coinbase Pro platform for lower fees. You will have the ability to transfer your assets to another platform or even an offline wallet at a later time if you wish to do so. For more serious long-term investments into crypto, consider BlockFi (see below).
[Referral link] We'll both receive $10 in Bitcoin when you buy or sell $100 or more (not including fees) on Coinbase (not Coinbase Pro!) within 180 days of signing up.
Founded in 2017, BlockFi's mission is to bridge the worlds of traditional finance and blockchain technology by redefining banking for the digital age. It provides crypto-backed loans, high-interest crypto savings accounts, and crypto trading services.
- Earn incredibly high interests (savings) for your crypto currencies, such as 6% APY on Bitcoin, or even 8.6% APY on GUSD (stable coin pegged to value of USD) UPDATE 6/29: Rates have changed, see here for more info!
- Holdings by Gemini Trust company, one of the largest crypto exchanges
- Backed by investors such as Akuna Capital, Avon Ventures, Coinbase Ventures, SoFi, etc.
- One of the safest places (other than holding in your own offline wallet) to store your crypto
- Simple, minimalistic, focused on being a long term (as opposed to trading) platform
- No fees to buy/sell crypto, however, note that sometimes it can be built into the offer price (+1% premium in my experience). I wouldn't worry too much about it unless you are trading hundreds of thousands worth
- [COMING SOON] BlockFi crypto credit card, to join the waitlist today, sign up here!
- Centralized - they technically own and store your assets. Your assets are lent to institutions, but this is no different to what traditional banks do with your money and assets today anyways
- One free crypto and stablecoin withdrawal per month - BlockFi is meant to be a savings/holding account, i.e. not great for high frequency traders. Withdrawals can take up to 7 days. Note that ACH withdrawals for stablecoins are fee-free.
- Initial deposits take 3-5 business days to post.
Currently there is no instant trading functionality many are used to seeing on platforms like Robinhood or Coinbase. Your first trade might take a week or two after signing up to go through.UPDATE 3/29/2021: BlockFi has added instant ACH, so you can now start trading and earning interest immediately!
- Higher Prices - Based on my experience, it's about 1% higher than Coinbase Pro or Gemini quotes, which probably isn't a big deal for most beginner traders, but can be a difference of $500+ if you are trading Bitcoin at over 50k/coin. Keep in mind that the high-yield interests will more than likely cover your markup in no time!
- Limited App Functionality - The minimal app currently do not have some standard features like time-trend charts showing the change in value of your portfolio over time (both Coinbase and Gemini do).
This is my favorite platform and where I will be keeping my long term holdings. If you are in this for the long term, keeping your coins with BlockFi is relatively safe (as far as risks in crypto space go) and the ability to earn 6% APY on your Bitcoin is insane! However, the long time it takes to transfer funds via ACH into your account and start trading can cause you to miss out on buying the dip, so I have been using various other platforms to buy and then transferring over to BlockFi.
Another use case is to use BlockFi as a super high-interest savings account for your cash. Currently, converting your USD to GUSD (Gemini USD stablecoin) 1:1 can allow you to get 8.6% APY on your US dollars, way higher than any other savings accounts out there. Since the GUSD is pegged to the dollar, you will not experience the fluctuation you see in other cryptocurrencies like Bitcoin. However, the tradeoff is that GUSD is blockchain technology, thus no longer legal tender, and you will not be covered by the standard FDIC insurance offered in most traditional savings accounts. This will be a risk decision you will have to make on your own.
[Referral link or use code
2ecdf12b] Deposit $100 or more into your BlockFi interest account and earn $10 in Bitcoin! Note: You will need to hold your initial deposit for at least 30 days. Referral payments are made on the 15th of every month following fulfillment of a 30-day holding period.
Founded in 2014, Gemini is a regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy various digital currencies. Gemini is based in New York, where some of the most stringent financial regulations make the centralized exchange one of the safest places to trade crypto.
- Reputable, secure, fully regulated
- Ability to earn interest in a portion of your assets (although rates are not as great as BlockFi)
- Deposits are available for trading instantly!
- Advanced users can use ActiveTrader platform for lower fees and better prices (similar to Coinbase/Coinbase Pro)
- Fiat balance is FDIC insured and offers customer funds insurance
- Only a small percentage of crypto is held online to minimize the risk of loss from hacking, with the bulk of crypto reserve in a secure, offline cold storage facility with many safeguards in place
- No withdrawal (mining) fees - although this is usually a negligible amount, this can be really great if you want to place limit orders and then transfer over to a platform like BlockFi to earn higher interest!
- API support
- High fees (just switch to ActiveTrader in the settings to overcome this), but there is still a small fee similar to Coinbase Pro
- Potentially long verification process - be prepared to have your funds locked inside Gemini for a long time while this is ongoing (could be 1 month+)
- Centralized (although you do have the choice to transfer out to your personal offline wallet)
- ActiveTrader platform not available on mobile
- Cryptocurrency types available for trading are limited compared to other platforms
In my experience, Gemini is one the most secure platforms available, having a vigorous verification process and requiring two-factor authentication every time you sign into the website (they also offer a mobile app). If you are looking for a reputable, secure, and easy-to-use platform that gives you sophisticated trading tools and ability to buy/sell frequently with minimal fees, this could be a great choice! However, prices are not always the best on Gemini (ActiveTrader improves this a bit), so make sure to pay careful attention before being too reliant on a single platform. I sometimes buy on this platform if prices are substantially lower, and then transfer over to BlockFi to earn the high interests.
[Referral link] We'll both receive $10 of Bitcoin after you buy or sell $100 within 30 days of signing up!
I'm sure there are others I have missed, so feel free to let me know in the comments below! Here are a couple others that I have some limited experience with, including why they may not be the best for me (at least for crypto trading purposes):
Most people (including myself) already have a Robinhood account, so buying crypto is incredibly easy and commission-free (the fee is built into the purchase price somewhat). However, one major downside is, as of now, crypto assets in Robinhood cannot be transferred either to an offline wallet or another platform, severely limiting the flexibility and security of your investments. You also don't earn any interest on your holdings, so for long-term Bitcoin holders, this may not be the best place. UPDATE 9/22/2021: Robinhood announced that they will soon be rolling out "wallets", potentially paving the path to crypto transfers in/out of the platform. Will update post when we know more!
Square's all-in-one finance app that combines P2P payment (think Venmo), debit card account, stocks and Bitcoin all into one. Different from Robinhood, you can transfer your Bitcoin to another account, but there is a (imo expensive) fee to buy/sell, and Bitcoin is the only crypto-currency supported at this time. Update 3/14: If you are a non-US citizen that do not have a license or state-issued ID, do not use this to buy Bitcoin, as their Customer Support is horrendous and the automated system will reject alternative documents such as your passport, EAD card, etc.
Avoid this! As of March 2021, there is still no ability to transfer crypto purchased in Paypal to any other location. Paypal also has been known to freeze your assets for seemingly random reasons and report inaccurate transaction information to the IRS, so it is best to avoid at all cost!
Quick Fee Comparison
The fees involved in buying, selling, and transferring crypto are incredibly confusing and can vary a lot depending on the service (Gemini, Coinbase, etc.) and the specific platform (API, web, mobile, etc.) the transaction was made on. Keep in mind that these fees are in addition to the spread and possible "hidden fees" you will see built into the "price" of crypto you are purchasing.
For the purposes of this article, I will show a quick comparison that applies to small retail beginner traders. Note that I am simplifying certain edge cases and, depending on the platform, trade volume, and various factors, your rates may vary. In general, if you are not transacting 5 digits+ in crypto every year, simply picking a low fee option and buying at a price you feel is good should be enough.
Coinbase: $0.99 (10%)
Coinbase Pro: $0.05 (0.50%)
BlockFi: No fees
Gemini (Web): $0.99 (10%)
Gemini ActiveTrader: $0.04 (0.35%)
Coinbase: $2.99 (3%)
Coinbase Pro: $0.50 (0.50%)
BlockFi: No fees
Gemini: $2.99 (3%)
Gemini ActiveTrader: $0.35 (0.35%)
Coinbase: $7.45 (1.49%)
Coinbase Pro: $2.5 (0.50%)
BlockFi: No fees
Gemini: $7.45 (1.49%)
Gemini ActiveTrader: $1.75 (0.35%)
Coinbase: $298 (1.49%)
Coinbase Pro: $70 (0.35%)
BlockFi: No fees
Gemini: $298 (1.49%)
Gemini ActiveTrader: $70 (0.35%)
See below for complete fee schedules, including fees for selling or transferring:
Unfortunately, there isn't one single platform that I can 100% stand behind at this time. For each platform, there is at least one missing functionality available on another platform that I wish was included. However, don't let this be a hindrance to dipping your toes into crypto!
Based on my personal experience, I recommend starting with Coinbase to earn some free crypto and also learn the basics of how blockchain works. Then, when you want to get more serious, BlockFi is imo currently the BEST platform to buy directly (since prices are only about 1% more than other options and there are no transaction fees) and HODL for the long haul, earning serious interests for simply holding!
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