One of the many benefits of using Coinbase Pro as opposed to Coinbase is the fact that the fees are greatly reduced to as low as 0%. You can track the market and trade history and monitor open orders. Created back in 2015, Coinbase Pro is an evolution of the trading platform GDAX, which was rebranded to Coinbase Pro in 2018. Both strategies may reduce the amount fees eat into your returns.Coinbase Pro is a trading platform offering its users a secure way to buy, sell, and trade cryptocurrencies across 99+ trading pairs. This means it's worth considering the costs of your trading, and trading less if you can. Of course, in recent years the dramatic price rise in many forms have cryptocurrencies, have made relatively high trading costs a rounding error, but if returns are lower or negative in future periods, then the high costs of turnover will become more apparent. Low turnover strategies and generally a good idea, all else equal, and given higher trading costs, that's particularly true of crypto. Nonetheless, frequent trading can be a real cost, potentially turning a gain for the underlying currency into a trading loss. This topic is worth bearing in mind because the trading costs for crypto assets are currently an order of magnitude higher than the costs of trading popular stocks and shares, this isn't surprising for a new market and costs have been declining and may continue to do so. Also, this is an area where comparison shopping is helpful, because fees can be updated at any time and spreads change constantly. A low fee is little consolation in the event of a major security problem. Other potentially lower fee trading services include Kraken, Binance and CEX.io. Remember, the cost of trading is just one consideration, you should also evaluate the security and ease of use of these services. Of course, the currency pair you are trading matters too. If you use a service such as Coinbase, then total fees can be a lot higher, potentially up to 4% if you fund a transaction with a credit card or more at times of high volatility. However, with limit orders, there is no guarantee that your order will be filled depending on how the market moves. If you use limit orders, which many lower cost exchanges accept, that may reduce your fees. Fees can have a real impact on your performance and that impact will become more obvious in future years if returns to cryptocurrencies are lower than historically. So if the price of Bitcoin rose 20% over that 5 years, for example, then you'd actually end up with a loss, yes a loss, of roughly 76% if you were trading in and out monthly, due to fees, but earn 18.4% if you followed a buy and hold strategy. Yet, you'd pay only 1.6% if you traded in and just once. If you did that trading via GDAX, which is a lower cost exchange, then roughly you'd pay an astonishing 96% of your returns in fees if you traded every month for 5 years at the market rate in low volumes. The good news is that spreads may be narrowing, last year spreads were a lot higher than now.įor example, if on average, if you trade once a month, then your trading costs will be essentially sixty times higher than if you trade once a month. Generally, pairs that are traded more frequently should see lower spreads, but other factors matter too. Spreads are tracked here and can be around 0.2%-1.5% with a lot of the variation driven by the currency pair you're trading and when you're trading it. Fees are the costs that exchanges show you on their fee pages, spreads are the difference between the price you pay and the average price of the cryptocurrency you buy. The implication of all this is that the more you trade, the more it will cost you more in fees and spreads.
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