A Single Company With Two Platforms - Coinbase and GDAX
Coinbase and GDAX maintain their own separate websites but are connected to each other and owned by the same company.
Although it’s known that Coinbase is geared towards cryptocurrency beginners while GDAX targets more experienced traders, it is worth trying GDAX to enjoy many other benefits as I will explain them below.
GDAX is a full-fledged cryptocurrency exchange where you can trade Bitcoin, Ethereum, and Litecoin with various order types.
Coinbase also seems to provide its unique features like
Recurring Buys that are not available in GDAX.
Coinbase and Cons
When it comes to finding a good bitcoin exchange, Coinbase tends to be viewed as a trustworthy exchange and be seen on the top tier of the list.
However, once you have signed up for the website and are ready for trading, you will realize how high their fee is.
About Coinbase’s high fees, simple googling shows interesting comments and suggestions about Coinbase’s high fee online:
- Comments in Bitcion Subreddit
- Other comments in Bitcoin Subreddit
- How to not pay COINBASE fees
- How to Stop Paying Cryptocurrency Exchange Fees by using GDAX
Findings and Analysis
Today, I have spent some time confirming the actual fees incurred at the time of buying a bitcoin both at Coinbase and its exchange platform GDAX. For this exercise, I have used a real trading account with a real money to get the actual facts and results.
After the review and analysis of all the transactions I have performed as noted below, I have concluded that I should stay away from Coinbase for trading purpose and that I should trade only on GDAX as an alternative so that I am not charged with the avoidable fees. After trading, I can still transfer the cryptocurrency from GDAX to Coinbase for free if I wish.
Buy Orders Using a Real Account
Ok. Let us take a closer look at how the actual Buy order works in both Coinbase and GDAX.
Basically, once you signed up for Coinbase, you can continue to sign in GDAX with the same account since the account is shared.
Let’s move on.
Buy Orders in Coinbase
I will be performing a buy order in Coinbase and then navigating to GDAX to execute a market order and a limit order in sequence.
The following screenshot shows a confirmation page after a buy order using $10 in Coinbase. Surprisingly Coinbase charged $0.99 as a fee. It’s known that they have their own fee schedule and charge a different amount of fee based on the dollar amount range the amount falls into.
As a result, only $9.01 after all the fees has been used to buy 0.0012502 BTC at $7206.85. This presents two possible concerns for potential investors.
High fee: For the order, only $9.01 is used after the high fee of $0.99 is deducted from the original order amount of $10
Too much "slippage": What’s also concerning is that the market order price is a lot higher than GDAX’s best ask price, $7170.01 at the moment shown in the screenshot. The difference between Coinbase’s executed price $7206.85 and $7170.01 is $36.84 or 0.5138% of GDAX’s price $7170.01. It looks like this much slippage is too high to ignore for most traders and investors.
Here’s a screenshot of two screens - a screen of my buy order confirmation in Coinbase and another screen of GDAX market prices at the moment:
Note that 0.0013BTC above is a rounded BTC amount and its real amount is 0.0012502 BTC as shown in the screenshot below:
Buy Orders in GDAX
Let’s move onto GDAX to see how it differs from Coinbase.
If you are signed in on Coinbase already, you don’t have to type in user credentials to sign in on GDAX again since they share the same account and browser session. In this case, simply navigating to GDAX.com will get you signed in also on GDAX.
The beginning USD and BTC balances in GDAX are $85.08 and 0 BTC respectively at the moment.
The first order I placed was a market order using $10.
According to SEC, a market order is defined as follows:
A market order is an order to buy or sell a stock at the best available price. Generally, this type of order will be executed immediately. However, the price at which a market order will be executed is not guaranteed. It is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed. In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price or “real time” quote.
The execution of the market order was very fast and smooth thanks to the heavy volumes and tight bid-ask in the exchange.
Here’s the screen where you can see the filled order at the bottom and the balance of bitcoin 0.00139122 BTC I got from my first order.
Although the screen might be a bit confusing at first, you will soon get familiar with the screen layouts and how it works once you play around it.
Now that you have finished the market order, let’s move onto the next order type, limit order.
According to SEC, a limit order is defined as follows:
A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute.
I have attempted to place a limit order to buy $10 worth of bitcoin, 0.0013937 BTC being calculated as $10 / $7174.99 per BTC = 0.0013937 BTC.
However, with this limit order, I ran into an error saying that
Amount must be greater than 0.01BTC. Pleace market orders to trade smaller amounts.
This indicates that Coinbase has placed a restriction on the amount of Limit order size for some reasons. Please remember that there was no restriction on Market order size in our first market order previously.
After I entered the lowest acceptable order size of 0.01 BTC in the Amount field, I was able to proceed as shown in the next screen:
However, the limit order was not accepted immeidately. With limit order, this is what often occurs - If nobody is willing to take my order at the specified price, the order won’t be filled. In the meantime, the price has gone up a bit againt my order and I didn’t want to wait too much time for the price to come down to my specified price level. Therefore, I cancelled the limit order and placed a new limit order of 0.01 BTC at 7190.89 as shown below:
Yes, this time, my limit order has been filled and the total amount of the bitcoin balance has moved up to 0.01139122 BTC. Great!
Now that we have two orders filled in sequence, let us take a closer look at how the fees have been charged. Click the Fills on the right corner and see the Fee column. The second line is for the market order and the first line is for the limit order. You can see there’s no fee for the filled 0.01BTC limit order whereas there’s about 0.25% fee for the filled market order amount as shown below:
Ok. We are done with orders. Sometimes, you may also want to transfer those bought bitcoin to somewhere else. Here’s the screen where you can do in GDAX. You can either transfer the bitcoin to Coinbase account or other BTC addresses.
For now, I will focus on a
Transfer/Withdraw to Coinbase Account.
I just ran into an error when I attempted to transfer bitcoin to BTC Vault.
I don’t know why a direct transfer to BTC Vault is not supported in my account.
Anyways, I can still use BTC wallet account as a target and then I can transfer it again from Coinbase wallet to its vault once I go back to Coinbase account.
So, is Coinbase no use?
Well, it depends.
Coinbase allows customers to set up an automatic recurring buy on a regular basis - ie. daily, weekly or monthly. Despite this convenience of doing this on your behalf, the execution mechanism and the executed price and incurred fees still follow the same Coinbase rules, which favor againt most traders and investors.
Another good feature I have found useful is the Vault service which can provide further protection for their customers.
If you are not thinking of storing them on your own, Coinbase Vaults might be an alternative way to store your coins until they find a much better way of keeping their coins.
Preferred way of buying coins
Here’s my preferred trading flow with minimal fees and best price execution:
Buy coins at GDAX either with market order or limit order (About 0.25% for market order and No trading fee for limit order, as of today)
Transfer the coins to Coinbase Wallets
Go to Coinbase (no need to login since they use single-sign-on)
Transfer the coins to the Vaults
Thanks for reading!
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