Coinbase Investment: A Beginner's Guide To Getting Started

Coinbase is a cryptocurrency exchange that allows users to buy, sell, hold, and exchange cryptocurrencies. It is one of the largest cryptocurrency exchanges in the US, with more than 110 million verified users. Coinbase supports over 250 tradable assets, including popular cryptocurrencies such as Bitcoin, Ethereum, Solana, and Dogecoin.

To invest in Coinbase, you will need to open an account and link a payment method. You will also need to be at least 18 years old and have a government-issued photo ID. Once your account is set up, you can start trading cryptocurrencies on the Coinbase platform.

It is important to note that Coinbase charges fees for trading, and these fees can be complicated and vary depending on your account type, transaction size, and funding source. Additionally, Coinbase has faced criticism for its high transaction fees and poor customer service.

Before investing in Coinbase, be sure to do your due diligence and carefully consider the risks involved.

Understand Coinbase's financial history and assess its financial reports

Coinbase is a cryptocurrency exchange platform that was founded in 2012. It is a popular platform with a user base of 110 million verified users as of Q4 2022 and is available in over 100 countries. Coinbase has a headcount of more than 3,400 employees and a $330 billion asset base, making it one of the biggest crypto exchanges globally.

The platform offers an intuitive and user-friendly interface, making it a good choice for beginners. It supports over 250 cryptocurrencies and NFTs, including popular options like Bitcoin, Ethereum, Dogecoin, and Ripple, as well as less popular but sought-after options like SUI and MAGIC.

Coinbase has been criticised for its high transaction fees, which are higher than the industry average. There have also been complaints about its poor customer service, with slow response times and non-human communication.

In June 2023, the Securities and Exchange Commission (SEC) charged Coinbase with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. This, along with other consumer complaints, has given the company a bad reputation with consumer regulatory bodies.

Coinbase has evolved over the years, adding and removing coins and rolling out upgrades to improve the user experience. In June 2022, they announced the sunset of Coinbase Pro, replacing it with Coinbase Advanced Trade to provide advanced crypto investment services on a single platform.

Coinbase's financial history and performance can be assessed through its financial reports. The company has over 30 products for individuals, developers, and businesses, each providing a different trading experience. The platform offers a simple way to convert crypto to cash and vice versa, and it supports various payment methods for U.S. customers, including instant cashouts to bank accounts.

Coinbase's fee structure is tiered, with makers paying between 0.00% to 0.40% of their transactions, and takers paying a higher percentage, ranging from 0.05% to 0.60%. These fees can be reduced based on the tier and transaction volume.

In summary, Coinbase has a strong global presence and a large user base, offering a wide range of crypto assets and an intuitive platform. However, it has faced criticism for high fees and poor customer service, and it is important to carefully review their financial reports and regulatory standing before making any investment decisions.

Evaluate Coinbase's potential compared to your investment horizon

When evaluating Coinbase's potential compared to your investment horizon, it is essential to determine if the anticipated growth of Coinbase aligns with your investment timeline. The criteria for success may vary depending on whether your time horizon is short or long-term. As an investor, you want to assess whether the stock is expected to follow a bullish or bearish trend.

Coinbase Global, Inc. (COIN) is a leading cryptocurrency exchange platform in the United States, founded in 2012. It went public on the NASDAQ on April 14, 2021, marking the first time a crypto trading company was listed on a U.S. stock exchange. Coinbase's business model revolves around facilitating the buying, selling, and storage of various cryptocurrencies for investors, generating revenue through maker and taker fees and interest on personal loans.

As of May 2024, Coinbase Global holds a performance score of 10, indicating possible diversification benefits within an investment portfolio. While its returns are expected to increase less than the market during bullish periods, losses are projected to be smaller during bear markets. Coinbase Global's stock is considered highly volatile, with a Beta of 0.67. This means that over a 90-day investment horizon, it is expected to generate 9.09 times more return on investment than the market but also be 9.09 times more volatile.

When considering investing in Coinbase, it is crucial to assess its financial health and growth potential. This includes analyzing financial statements such as the income statement, balance sheet, and cash flow statement. Additionally, evaluating valuation ratios like the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and price-to-book (P/B) ratio can help determine if the stock is overvalued or undervalued compared to its peers.

Select a brokerage

Coinbase is a cryptocurrency brokerage platform that simplifies trading and storing cryptocurrencies. It is ideal for beginners with little crypto knowledge and advanced users needing something less complicated. The platform offers an intuitive and user-friendly interface, making it easy for users to navigate and trade cryptocurrencies in a few steps.

Coinbase offers a wide range of products and services, but the main Coinbase exchange, Coinbase Wallet, and Advanced Trade are best suited for individuals looking to trade. The Coinbase exchange provides a simple layout for anyone to navigate and trade cryptocurrencies. The Coinbase Wallet is a self-custody wallet that allows users to purchase cryptocurrencies and explore the world of crypto. Advanced Trade is a native trading platform that offers advanced users more tools and security for their trades, including access to real-time order books.

Coinbase Prime is another offering from Coinbase, a full-service prime brokerage platform that provides institutions with the tools to execute trades and custody assets at scale. It offers comprehensive financing solutions and the ability to securely custody a wide range of assets.

Coinbase also has an option called Coinbase One, which offers no-fee trades and other benefits for a monthly fee of about $30.

Choose an investment strategy and size

When investing in Coinbase, it is important to determine an investment strategy and size that aligns with your financial goals and risk tolerance. Here are some key considerations for choosing an appropriate investment approach:

Diversification:

Diversification is a crucial aspect of investment strategy. It involves spreading your investments across various asset classes, such as stocks, bonds, options, precious metals, and cryptocurrencies. By diversifying your portfolio, you reduce the risk associated with putting all your eggs in one basket. Determine how investing in Coinbase's stock (COIN) fits into your overall diversification plans.

Investment Horizon:

Consider your investment horizon, which is the amount of time you plan to hold your investments. Evaluate whether the anticipated growth of Coinbase meets your short-term or long-term objectives. This will help you decide if the stock aligns with your desired time frame for potential returns.

Risk Tolerance:

Before investing in Coinbase, carefully assess your risk tolerance. Investing in cryptocurrencies and initial coin offerings (ICOs) is considered highly risky and speculative due to the volatile nature of the market. Ensure that you are comfortable with the potential for significant price fluctuations and that you are financially prepared for possible losses.

Dollar-Cost Averaging (DCA):

Dollar-cost averaging is a long-term investment strategy that involves investing a fixed amount of money in an asset, such as Coinbase's stock, at regular intervals, regardless of the price. This strategy helps to reduce the impact of market volatility by averaging out the cost of purchases over time. DCA is particularly effective when you believe in the long-term appreciation of your investments but expect short-term price volatility.

Investment Size:

Determine the amount of Coinbase stock you want to purchase. Consider your financial capabilities and how investing in Coinbase fits into your overall investment portfolio. Assess how many shares you want to acquire and whether you plan to hold them for the short term or the long term.

Remember, investing in Coinbase or any other cryptocurrency platform involves risks. It is always advisable to consult with a financial professional before making any investment decisions to ensure that your strategy aligns with your specific circumstances and goals.

Understand Coinbase's fee structure

Coinbase's fee structure can be complicated and is not very transparent. The fees depend on your account type, the size of the transaction, the funding source, your country/region, payment method, and the product.

For smaller transactions, you’ll pay a spread mark-up of 0.5% of your trade value plus a flat fee based on the size of your transaction. For transactions above $10 and up to $25, the flat fee is $0.99. For transactions above $25 and up to $50, the flat fee is $1.49, and for transactions above $50 and up to $200, the flat fee is $1.99.

At amounts above $200, you’ll pay a spread mark-up of 0.5% of your total trade value, plus a variable fee that depends on how you pay for the crypto. For example, an instant card withdrawal incurs a fee of up to 1.5% of the transaction, with a minimum fee of $0.55.

Coinbase Pro offers a more straightforward and lower fee structure for advanced traders. The fee structure for Pro uses a maker-taker model, with fees between 0% and 0.60% per trade and lower costs for larger dollar transactions. For example, a transaction of less than $10,000 has a 0.40% maker fee and a 0.60% taker fee, while a transaction between $10,000 and $50,000 has a 0.25% maker fee and a 0.40% taker fee.

Coinbase operates a tier-based system for its maker and taker fees, allowing users transacting with larger volumes to pay less in fees. Makers pay between 0.00% and 0.40% of their transactions as fees, while takers pay between 0.05% and 0.60%. These fees can be reduced according to your tier and the amount you transact.

There are also other fees besides the network and fixed crypto trading fees. For example, withdrawing your crypto incurs a 1.0% charge.

Coinbase does not charge users to hold their assets in a digital wallet or to transfer cryptocurrency within the Coinbase network.

Frequently asked questions