Trading and Investing

What is GDAX & Coinbase Pro?

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June 7, 2021
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    Coinbase was originally built by Brian Armstrong, a former Airbnb engineer, and Fred Ehrsam, a former Goldman Sachs trader, to make it easy for non-technical people to use Bitcoin. After securing $150,000 through Y Combinator in June 2012, the company expanded its focus to include professional traders through what’s now known as Coinbase Pro.

    Let’s take a closer look at the company’s evolution over the years and why Coinbase Pro (formerly Coinbase GDAX) has become the most popular platform for professional cryptocurrency traders.

    A Brief History

    Coinbase may have begun as a platform for non-technical people to use Bitcoin. Founder and CEO Brian Armstrong recognized early on that it wasn’t easy for non-programmers to buy and sell cryptocurrencies. Prior to Coinbase, they had to download a software wallet onto their computer and operate a node on the bitcoin network.

    In 2015, the company broadened its focus to financial professionals. The company raised $75 million from the NYSE and several major banks, expanded to support Ethereum, and launched the Coinbase Exchange—a U.S. bitcoin exchange for professional traders that was rebranded as the Global Digital Asset Exchange (GDAX) or Coinbase GDAX a year later.

    The company’s goal shifted to becoming the world’s largest crypto exchange with an international footprint that extended beyond just the United States. With the rise of other crypto exchanges and the ubiquity of its Coinbase brand, the company eventually rebranded Coinbase GDAX as Coinbase Pro in 2018 to streamline its branding across different markets.

    Coinbase vs. Coinbase Pro

    Coinbase provides an easy way for anyone to buy and sell cryptocurrencies. While long-term investors could use Coinbase to buy and hold assets, active traders may want more in-depth insights into the market and greater control over their trades. Active traders are also much more concerned over fee structure given the volume of trades they make every month.

    Coinbase Pro is built for professional traders whereas Coinbase Prime is built for institutional traders. These days, institutional clients account for roughly half of the $225+ billion assets on its platform., but even individual professional traders generate greater revenue from fees given their higher volumes than typical Coinbase users.

    GDAX Coinbase Pro
    Coinbase Pro’s user interface. Source: Coinbase

    There are several capabilities that set Coinbase Pro apart from Coinbase, including:

    • Real-time Data: Coinbase Pro provides a WebSocket feed that lets traders access real-time market data along with a trading API that supports programmatic trading bots. Traders can also view a live order book to see market depth and provide greater insight than simply looking at the market price.
    • Order Types: Coinbase Pro offers limit orders and stop orders in addition to simple market orders. Limit orders enable traders to buy or sell at a specific price whereas stop orders enable traders to sell an asset when it hits a specific price, which provides them with a lot more flexibility in managing their positions.
    • Low Fees: Coinbase Pro has a maker-taker fee structure that translates to lower costs for high volume traders. By comparison, Coinbase uses a spread, flat fee, and variable fee depending on a variety of factors. Coinbase fees can be upwards of 3.49% compared to around 0.5% or lower for most Coinbase Pro users.
    • Diverse Assets: Coinbase Pro provides access to bitcoin and more than 50 altcoins, which is more than the standard Coinbase accounts. These altcoins open the door to new opportunities but may be more volatile and unproven than established coins.
    • Technical Tools: Coinbase Pro provides a range of technical analysis tools, including real-time price charts with technical indicators, as well as an API for advanced analytics.

    Traders and investors should carefully consider these factors when looking at Coinbase vs. Coinbase Pro for their exchange requirements. Fortunately, it’s easy to transfer from Coinbase to Coinbase Pro in a few steps.

    Coinbase Pro vs. Other Exchanges

    Coinbase Pro comes with some unique features that make it more stable and secure than other exchanges. For instance, all U.S. dollar balances are FDIC insured for up to $250,000 whereas crypto assets on the exchange are fully insured. About 98% of all Coinbase assets are stored offline in cold storage and there has never been a successful Coinbase hack.

    Of course, there are also some drawbacks to keep in mind. Coinbase has been criticized for its privacy practices following the acquisition of Neutrino—a blockchain startup that sought to uncover the identity of address owners. The company has also expressed interest in selling its analytics software to the DEA and IRS, which is a red flag for some privacy-focused users.

    There are many alternatives to Coinbase Pro, such as:

    • Binance US
    • Kraken
    • Bitstamp
    • Gemini

    You can download a more comprehensive list of alternative U.S. exchanges here.

    Coinbase Pro tends to be highly liquid compared to many other exchanges, but their fees are on the high end. In some cases, professional traders may be okay with these higher fees in exchange for the high-quality platform, unbeatable security, and strong reputation. Traders might also use a variety of exchanges based on their unique requirements.  

    Getting Started

    Coinbase is one of the most user-friendly cryptocurrency platforms out there. You can sign up in a few easy steps by visiting Coinbase Pro, clicking Get Started and following the steps. Note that all Coinbase Pro users will need to provide some form of identification, such as a state-issued photo ID, to buy and sell—including with the standard Coinbase account.

    If you already have a Coinbase account, you can easily transfer from Coinbase to Coinbase Pro:

    1. Go to the Coinbase Pro page.
    2. Select Deposit under Wallet Balance.
    3. Select the currency type.
    4. Deposit from Coinbase to Pro.
    5. Select the Coinbase Account.
    6. Enter the amount to transfer.
    7. Select Deposit.

    In addition to trading cryptocurrencies, Coinbase Pro users have access to important tax documents that they need to file taxes each year. With the IRS cracking down on tax evasion, it has never been more important to ensure that you’re accurately paying what you owe. These documents can be found in the Coinbase Tax Center.

    Coinbase provides the information needed to help complete your taxes, but it doesn’t provide done-for-you taxes and only includes transactions within Coinbase. In order to ensure an accurate tax return, you’ll need crypto tax software like ZenLedger, which aggregates transactions across exchanges and auto-computes your capital gain or loss.

    GDAX Coinbase Pro
    ZenLedger’s Easy to Use Interface - Source: ZenLedger

    ZenLedger even pre-fills popular tax forms to make it easy to ensure that everything is filled out correctly and/or integrates with TurboTax to autocomplete your crypto taxes. You can also find opportunities to harvest tax losses during the year in order to reduce your year-end tax liability—potentially saving thousands of dollars.

    Get started with ZenLedger for free!

    Alternatives to Coinbase

    Use the following checklist of U.S. crypto exchanges to explore some alternatives to Coinbase Pro.

    • Binance US is a world-class crypto exchange with support for hundreds of altcoins while maintaining some of the lowest fees in the industry.
    • Kraken is known for its top-notch security and high trading limits. Unfortunately, there are some limits for U.S.-based traders and investors.
    • Gemini was founded by the Winklevoss twins and is known for its regulatory compliance and exceptional customer support.
    • eToro is a popular platform for trading all kinds of securities, including cryptocurrencies. It also offers CopyPortfolios™ to easily build crypto portfolios.
    • FTX is a leading crypto derivatives platform that offers access to futures, options, volatility, spot, and leveraged tokens with up to 100x leverage.
    • Crypto.com is a popular platform for those seeking a lot of different capabilities, such as paying their bills with crypto or loaning cash.

    The Bottom Line

    Coinbase has expanded its focus from novices to professional traders over the past few years. Coinbase Pro, formerly known as Coinbase GDAX, offers real-time insights into crypto markets, advanced order types, technical tools, and lower fees than conventional Coinbase accounts. While there are other exchanges with lower fees, few can match the security and reputation of Coinbase GDAX/Pro.

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