Coinbase’s New Coin-To-Coin Model – Better Than Direct Deposit To Coin Conversions?
In a bid to further improve user experience on its trading platform, Coinbase just rolled out a new feature that allows traders directly trade with coins instead of converting to fiat first before trading those coins.
This action means that traders can now skip that extra step, when trading, and just go ahead with their trades. This is a good improvement as it shows that Coinbase values its user’s experience.
But, is this extra feature cheaper for traders to use? Will the erstwhile fiat to coin arrangement cost more than this new development?
This is an important question considering that in the past, all traders had to first convert whatever coin they had to dollars first and then use those dollars to buy the new coin.
For instance, if you wanted to buy BCH and had bitcoin, you would first convert the bitcoin to USD and then, buy the BCH with the USD. This process was quite slow and tedious, often causing traders to lose a significant part of their transactions in the often highly volatile market.
The new feature improves on this process, making cryptocurrencies easily accessible to all traders and users.
“By focusing on ease of use, and designing for simplicity, we’ve tried to make crypto more accessible to everyone. This latest feature that allows customers to convert from one crypto directly into another.”
Currently though, there’s a limit to the kinds of coins that can be traded directly with each other.
“Customers can convert between Bitcoin (BTC) and Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), 0x (ZRX), or Bitcoin Cash (BCH). Converting is available on Coinbase.com and in the iOS and Android apps. Conversions complete instantly and at a lower cost than if done via two separate transactions.”
But, it does appear that the last sentence about transaction fees being cheaper isn’t really cheaper. A quick analysis of the cost implications show that the fees, while not astronomical, can still be quite significant, depending on the volume traded.
The exchange currently charges a lot for transactions. The spread fee fluctuates between 0.50 and 1 percent (or a flat fee of between $0.99 and $2.99 depending on the transaction volume), and is usually attached to a standard buy in fee of 1.49 percent.
Also, it charges a direct to coin fee of 1 percent. Combined, transaction fees are between 2.99 and 3.49 percent.
Worse is their instant buy using your card. This attracts a 3.99 percent fee. This is currently the highest fee charged by any crypto platform in the market. Other platforms like Binance and Bittrex only charge between 0.25 and 1 percent for all transactions.
While these charges might seem considerably higher than that of other exchanges, there are also the perks of the trader not being subjected to extreme volatility as the transactions are faster. So, the tradeoffs could be worth it over time.
Currently, the coin-to-coin trading option if only available to residents of 34 countries with native payment access. These are the first set of countries they’re testing these on.
Once all the kinks have been worked out and the feature proven to work seamlessly, the company will then open it up to all other countries allowed on its platform.