Even at .5% a trade, if you keep USDC in Coinbase, it will cover the cost of your trading fees

Coinbase recently decided to make users pay half a percent fee per trade which is a big bummer, pissing lots of people off on Reddit. Coinbase Pro reduces fees slightly over Coinbase, but 1/2% is still a huge amount of money lost with every trade. Many people, myself included, prefer trusting Coinbase with their funds as it is the most well known exchange to U.S. customers. And there have been a lot of exchanges hacked.

Avoiding these fees is a hassle. You could send your money to Binance or Kraken but now you are stuck with withdrawal fees which Coinbase does not have. You are going to save some in purchasing fees but not as much as would make this a highly desirable way to do things. It is inconvenient to shuttle your funds around, unless you can do some arbitrage, and it is not without risks to be sending your funds back and forth from different websites. But ultimately, you’re just not saving enough money for this to work.

Coinbase, however, did something clever when it instituted the higher fees: at the same time as they raised fees, they created the USDC interest program. By storing USDC on their platform you earn a 1.25% interest. Rewards accrue daily and compound monthly. You can recoup most/all the cost of trades just by storing money as USDC on Coinbase.

Coinbase’s strategy helps their platform by increasing the amount of USDC holders, but it also disincentivized holding your own keys, which is a major deal in crypto. As they say, not your keys not your crypto. Not personally storing your crypto is akin to taking the freedom Bitcoin provides and saying, “eh, I’d still like my bank to hold onto my money”. To be fair, sometimes it makes sense to store some on an exchange. Just do yourself a favor and buy a Ledger if you have more than 1 BTC.

Why even hold USDC when you can buy all the bitcoin you can right away? Because Dollar Cost Averaging, “DCA”, can be an important investment strategy (buy low, sell high anyone?). Having money in USDC insures you have money ready to buy in case prices drop sufficiently, conveniently keeping it out of your bank account and away from superfluous spending.

An additional nice thing about using Coinbase is that when you need to withdraw funds to your bank account, it happens very fast, almost always (in my experience) a day or two faster than the listed 3-5 business days. Many times the money has arrived in my checking account the next day.

Coinbase earn also helps offset fees

Coinbase has another way to recoup trading losses. Right now you can earn about $40 watching short videos on Coinbase through their earn program. They are literally giving away free EOS, XLM, OXT, XTZ, DAI, and BAT. If you want, you can immediately convert those altcoins to cash or bitcoin.

Last updated: December 25, 2019


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