Cryptocurrency

“How To Crypto” – Part One: Buying on an Exchange

Bitcoin, Bitcoin, Bitcoin – you’ve read all about it, heard it discussed on CNBC, Forbes, and Business Insider, and you’re ready to take your first dive into crypto.  Buying crypto on an exchange is easy – very much akin to opening a bank or brokerage account – but in many ways even easier, as the process is very streamlined and usually entirely online (even identity verification).  After you set up your account, you can transfer funds via ACH or wire and you’re ready to go making your first purchase. However, while account setup may be easy and the process actually rather familiar, some of the names may not be so familiar.  Traditional banks like J.P. Morgan and Wells Fargo have not even dipped a toe into retail cryptocurrency services (they have for their own proprietary solutions), and while you may have seen names like Coinbase or Binance thrown about in news stories, you may not know too much about them.  When considering any place where you’re going to transfer money, it’s important to know who you’re going into business with. Let’s take a look at some of the biggest crypto exchanges available in the U.S., who’s behind them, and how they work.

Coinbase

Coinbase is arguably the most famous name in U.S. crypto to date.  In fact, Coinbase is actually the biggest cryptocurrency exchange in North America, with over thirty billion users – five million or so of which have come on board just in the last year.  That said, Coinbase has been the go-to U.S. exchange since 2017, even before the run-up in price that occured in December of that same year. Coinbase is the brainchild of Brian Amstrong and Fred Erhrsam, and came into being as part of the “Y Combinator,” a startup accelerator responsible for a portfolio of companies valued in total of over $155 billion, including other high-profile names from the likes of DoorDash and Dropbox to Airbnb and Instacart.  Founded in 2012, Coinbase raised over $500 million from some of America’s best-known investors, including capital from the New York Stock Exchange, United Services Automobile Association, and Andreessen Horowitz.  

Based in San Francisco, Coinbase is a fully licensed and regulated exchange in the U.S.  They also operate in over a hundred other countries across the globe, facilitating more than $150 billion worth of business.  Additionally, Coinbase is also a co-founder of the Circle Consortium, whose dollar-backed stablecoin USD Coin is accepted by governments in countries such as Bermuda for government-related payments like taxes.  One of the oldest official exchanges in the U.S., Coinbase is often the preeminent exchange for those new to crypto. With a neat, user-friendly interface, Coinbase makes the process of signing up and buying crypto clean and simple.  Offering the staples of the industry, such as Bitcoin, Ethereum, and Litecoin, Coinbase also offers several other tokens for those interested in venturing out, in addition to providing easy-to-absorb video tutorials about many of their lesser-known offerings.  

With a desktop version, a mobile app, and their own custodial wallet, Coinbase facilitates the process of buying and keeping cryptocurrencies rather seamlessly.  Coinbase fees, meanwhile, can be on the steep side. That said, their version of Coinbase for professional traders, Coinbase Pro, is available to anyone to sign up, and comes with significantly lower fees.  If you’re only planning on purchasing Bitcoin (or your crypto of choice) once, the few extra steps in account opening may not be worth it. If you’re thinking of buying regularly, however, it’s well worth considering.

Gemini

Gemini is the brainchild of the Winklevoss twins, made famous from the 2010 movie “The Social Network” – in which their tussle with Facebook founder Mark Zuckerberg was revealed to the world.  Since then, Cameron and Tyler Winklevoss have ventured into cryptocurrencies and found their niche in the Bitcoin world. Beginning to invest in Bitcoin even before 2013, the brothers themselves have Bitcoin holdings of over one billion.  Their exchange, Gemini (named after the astrological constellation of twins), was originally funded from their own investment and opened for business in 2014. A licensed digital asset exchange and custodian regulated by the New York State Department of Financial Services, Gemini is also one of the world’s first exchanges to be independently certified for information and data security.  

Voted “Best Crypto Exchange” in 2019 by Markets Media, Gemini offers arguably one of the most user-friendly platforms for buying crypto.  With no minimum amounts required for either ACH or wire transfers, fast transactions with clear communication, and shorter holding periods on funding, Gemini’s website and app both offer a straightforward user experience essentially devoid of any unwanted surprises.  Meanwhile, their “Cryptoverse Order” allows customers to buy an equally-weighted basket of cryptocurrencies simultaneously, for investors who want to automatically diversify their portfolio. Good service, however, usually has the fees to go with it, and it’s true that Gemini’s costs are quite high.  While they’re on par with Coinbase, Gemini’s lower-fee option for active traders, unfortunately, is only available to select customers.  

Binance.US

Binance.US is the newcomer to the party.  It’s parent company, Binance, has been operating for two years abroad, however, and is in fact the largest cryptocurrency exchange in the world in terms of volume.  With over $1.5 billion traded each day on average, Malta-based Binance operates extensively across the globe, and their educational materials are translated into over fifteen languages.  Chinese-Canadian businessman Changpeng Zhao founded Binance in 2017 after having worked with some of the largest financial service providers in the world (such as the Tokyo Stock Exchange and Bloomberg) and building high-frequency trading systems for brokers from Wall Street to Shanghai.  

The U.S. branch of Binance, meanwhile, launched officially at the end of September.  Binance.US hit over ten million dollars in daily volume within a month of launch, and offers the most extensive range of trading pairs of any of the U.S. exchanges.  Both “Basic” and “Advanced” trading screens will give you an experience similar to the professional trading programs of Coinbase and Gemini without any extra account opening requirements.  The added complexity offers more information, though some users may find it less user-friendly for the same reason. That said, Binance.US’ frequently asked questions page is good about walking you any confusing processes (with pictures) if you find you need it.  The benefit of having trader-type status directly is that you’re automatically afforded lower fees, and even amongst trading programs, Binance offers the very lowest fees of all. Specifically launched to serve U.S. customers, Binance.US is San Francisco-based and complies with all U.S. regulations regarding cryptocurrency trading.  

There are other crypto exchanges that also operate in the U.S.  You may see names pop up like Kraken, Bittrex, and others, and you may even find at some point that these other exchanges are a better fit for you, depending on your crypto journey.  A smaller or more boutique exchange, just like a town bank or credit union, may offer other services that meet more specific needs. Though just like banks have their big players – such as J.P. Morgan Chase, Bank of America, and Wells Fargo – crypto does too.  If you’re new to crypto, Coinbase, Gemini, and Binance.US are a great place to start.

Read next: “How to Crypto” – Part Two: Storing Your Funds

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