I am pretty new to crypto-trading – about six weeks in at this point – and I was a sceptic.
I have always been wary of potentially high earning schemes ultimately proving to be some kind of a Ponzi or other scam. I am financially trained and conscious of how the financial system works and have a keen analytical mind. However, I have always been guided by two basic principles to ensure tight financial controls and responsibility. Namely:
- Prudence – simply underestimate your income capacity and overestimate your overhead. Apply this at all times and conduct your analysis correctly and your real picture will always be better than your projections.
- If something is too good to be true than it probably is.
My family had come across numerous stories of a £400 seed translating into £500 crypto per month, but I have always sneered at such claims. However, my family are well aware of my skills and encouraged me to have a go. In a later article I will discuss strategies – some of which I have developed – see my article on Investment Halving (followed up by a real example that can be read here) and others which have stumbled upon.
So while having a secure grasp of financial principles (which has enabled me to immediately start blogging quite prolifically – this is my 7th post here in a couple of weeks) I had no idea how to start Cypto Trading - so I Googled it and this is how I discovered Coinbase.
Coinbase absolutely owned the first page of my Google search to such an extent that I didn’t go any further. Two words in particular struck me TRUST and UNDERWRITTEN – in other words it is both secure and investments are insured, aside from trading losses, which must always remain the trader’s responsibility.
So whether by chance or design I ended up opening a Coinbase account and transferred funds from my bank account. I had already decided to invest in Ethereium as I had researched its price and saw that while it wasn’t subject to major fluctuations it moved enough to release a profit. At this stage I really wasn’t sure whether to milk to cow or wait for a massive upturn.
Early on I realised that Coinbase.pro offered a far better deal, but when I visited it was really intimidating. Compare the following two interfaces – screenshot at more or less the same time.
The Coinbase interface is clean and simple and the Pro version is so scary that you don’t know where to start, unless you are already an experienced trader. It isn’t helped by the fact that the Pro version is lit up like a Christmas tree on steroids at a rave!
It is all very distracting.
So it seems very simple. Use Coinbase while you are learning, it is simple and completely intuitive and if it works with you stick with it.
But wait –there are some traps out there and now I have reached the real point of writing today.
This is mainly aimed at newbies who are thinking of using Coinbase. It may also benefit more experienced users too. I am not saying Coinbase is bad, but there are some quirks and I hate this quirkiness.
Many complain that Coinbase fees are high and yes they are, but if you factor this in it should be plain sailing. Buy and hold, and sell at a profit. If your purchase has proven to be disastrous consider using Investment Halving.
So what are the traps?
Trap 1: The Shown Buying Price isn't the Actual Price
You never buy crypto for the shown price. It is often 1 or 2 percent off. Coinbase's argument, I realised belatedly, is that the shown price is the best price they can get and inevitably you will end up paying more. Just yesterday I was looking at COSMOS (atom) and the screen price was £3.17 however when I previewed the offer it was £3.21. More about previewing later.
Likewise when selling the same works in the opposite direction Let’s have a quick look at the maths. The best way to calculate the resale figure is to build it around a resale input figure as it is not as simple as the investment amount plus 1.49%. The ‘profit’ is also subject to 1.49%. As always the figures presented are arbitrary and only to be considered as an example, although the principles are correct.
Figures in light blue are automatically calculated by the spreadsheet and the white cells require the trader’s input.
So there you are waiting for the figure to go up to at least £3.32 (or on Coinbase you can just watch the total value of the crypto currency and wait for it to exceed not £400.00 but £400.00 plus commission – in this case £407.00). As you are watching the price goes up and you realise you are moving into profit.
You have a decision to make. Should I milk the cow and take a small profit (£0.94 based on the figures above) or should I wait for it to go higher and release a greater profit?
It achieves £3.31 and sticks.
£3.32 (Great), £3.33 (even better), £3.29, £3.30, £3.32, £3.28, £3.33.
It is stabilising exactly on the point of profit so you decide to milk the cow to achieve the profit (122.754 Units multiplied by £3.33 equals £408.77. Once you subtract the Coinbase commission of £6.09 and the realised profit is £2.68).
Unfortunately it is not that simple...
Trap 2: The Selling Price is not the Shown Price either
You select Sell All – great £2.68 profit for me (not a lot but at least it is a profit!). The transaction is processed and you check you GBP wallet. It has been credited with £397.84 and you have netted a loss of £2.16. Why? You almost scream in frustration at the computer. You played fair and did the maths and a small profit should have been yours.
When you have calmed down and you check the transaction you realise that Coinbase has sold your COSMOS for £3.29 despite it showing £3.33!
It lied! It deceived me! You feel cheated and disappointed (Yes this did happen to me – remember I told you I stumbled across some things – this was one of those moments)
Trap 3: Use Sell All at your own risk
The third trap, connected with the above is that the trader cannot preview the sale before confirming if selecting Sell All. Press that button and you are committed and you have no idea how much the trade is worth. Trading on a margin makes this even more risky as illustrated above. NEVER, NEVER, NEVER Sell All. Use the preview button and sell at a profit and keep a residue. If you want a clean wallet to make future transactions easier to calculate transfer the residue to another currency that you generally don’t use for trading – for example a stablecoin like DAI or BAT.
Trap 4: Convert - Don't Sell
Coinbase Fees are expensive and eat your hard earned profits (well maybe not so hard earned, but after spending endless hours checking and rechecking the prices). Consider converting rather than selling. It is often cited that one of the advantages of Coinbase Pro vs. Coinbase is the avoidance of fees. Converting avoids fees too.
FInally transfer funds to Coinbase Pro to withdraw to your bank account to avoid fees.
When I set out to write this post it was meant as a warning on using Coinbase and while it still fulfills its intention it has actually turned into a review. So here is the bottom line.
I like Coinbase.
It is clean and easy to use, but watch out for the traps or it will eat all of your money. Having said that it has a great deal more transparency and a clearer fee structure than most exchanges. They don't claim to be funded by the market spread on transactions and then add fees that you knew nothing about. This is reminiscent of the bad old days of budget airlines when you thought you were buying a £15.00 ticket that inexplicably ended up costing £150.00 (It still happens but now they need to show the customer at each stage how the fees stack up). I guess this is the price of trading in an unregulated market.
Be careful! Be wise! Don't fall into the pit traps they have set for you...
...and the best of luck!