What is the best method to invest in cryptocurrencies?

Coinbase and Robinhood are two of the most popular places to trade cryptocurrencies, but which one is best for you? The answer depends on your needs, especially on how much cryptocurrency trading you intend to do and the costs you are willing to pay.

Coinbase and Robinhood may appeal to different types of traders, although there is likely to be significant overlap. CoinBase is a cryptocurrency exchange that deeply caters to traders in the world of digital currencies. In contrast, Robin Hood is a trading app that allows users to buy and sell stocks, ETFs, options, and some types of cryptocurrencies without any out-of-pocket costs.

Both companies have faced scrutiny from regulators in recent years. THE The Securities and Exchange Commission sued Coinbase in June 2023, alleging that it illegally operated as an exchange, broker-dealer, and clearing house, and that it offered and sold unregistered securities. The lawsuit alleged that Coinbase knowingly violated securities laws designed to protect investors. Coinbase said it will continue business as usual.

In 2020, Robinhood agreed to pay $65 million to settle SEC charges that it deceived customers about payments it received from trading firms for sending customer orders to them. The SEC found that customers received trade prices that were lower overall by $34.1 million even after accounting for the lack of commissions. Robinhood neither admitted nor denied the SEC’s findings.

Here’s how Coinbase and Robinhood differ in a few other key aspects.

Coinbase vs Robinhood: cost

The fee structure on Coinbase and Robinhood is significantly different, and it doesn’t help that Coinbase intentionally obscures much of its fee structure from potential customers (even if it discloses them before actually placing a trade). That said, Robinhood isn’t exactly straightforward about how it is compensated.

Robinhood’s fee structure is simple, compared to Coinbase’s. In line with the stock and options broker’s “no commission” model, you will not pay any costs directly out of pocket for buying and selling cryptocurrencies. Instead, the cost of the trade is actually converted into a markup of the spread on the trade. So you will actually pay more when you buy and receive less when you sell than if you receive the best market price at the time of the transaction.

Coinbase’s fee structure is confusing to say the least. Not only does it charge variable fees based on the amount purchased, but it has a basic service tier and an advanced tier, each of which has different fees. And Coinbase recently started obscuring fees for its basic service, making it difficult for potential customers to see how much they’re paying (spoiler alert: Prices are high if you just buy a little cryptocurrency at the basic level. )

For smaller trades, you will pay a spread markup of 0.5% of the trade value plus a fixed fee based on the size of the trade.

Coinbase’s fee structure

Transaction amount

Fee

At the lowest levels, around $10, you’ll pay a fee that eats up nearly 10% of your purchase. But even at $200, you’re still paying a hefty 1.5% or so. And this is in addition to the 0.5 margin spread already taken into account in the purchase or sale price.

For purchase amounts over $200, you are still paying that 0.5% spread margin while a variable fee depends on your source of funds.

Coinbase funding fees

Payment method

Fee

If you choose to use Coinbase Advanced, the company’s highest level of service, you’ll be able to get lower overall fees, even if you trade with smaller amounts. Coinbase Advanced is more clear about these fees, but the structure is scaled and depends on whether you are adding liquidity (where the fee ranges from 0 to 0.4% of trade value) or taking liquidity (with fees ranging from 0 .05 to 0.6%).

Advantage: Robinhood, for the simplicity of its fee structure, even if its information is no better than that provided by Coinbase.

Coinbase vs. Robinhood: Coins available for trading

Coinbase supports trading in more than 200 different cryptocurrencies, including the largest ones like Bitcoin, Ethereum, Cardano, Solana, Dogecoin, and more. So, you’ll probably find what you’re looking for and also a lot of what you’re not looking for. Of course, Coinbase doesn’t deliver thousands of other much smaller digital currenciesbut this will matter to almost no one except niche traders.

In contrast, Robinhood allows users to trade only 15 digital currencies: Aave, Avalanche, Bitcoin, Bitcoin Cash, Chainlink, Compound, Dogemoneta, Ethereum, Ethereum Classic, Litecoin, Shiba Inu, Stellar Lumens, Tezos, Uniswap and USD Coin. However, the app offers traders access to real-time data on these cryptocurrencies and others.

Advantage: Coinbase, for its much wider range of coins available.

Coinbase vs. Robinhood: Types of Securities Offered

When it comes to the type of securities offered, Coinbase is still cryptocurrency. If you want something else… actionsETFs, options – you’ll have to find them elsewhere.

In contrast, Robinhood offers a broader range of securities, including stocks, options, ETFs and cryptocurrencies, although it does not offer bonds or mutual funds. However, the app will attract many traders with what it offers, so it can appeal to a large audience even with a shallower cryptocurrency pool.

Advantage: Robinhood, for its wider range of offerings.

Coinbase vs. Robinhood: Cryptocurrency Custody

If you’re looking to manage the custody of your crypto assets yourself, Coinbase is probably your best bet. The exchange offers its own wallet, but you can also store assets yourself via your wallet. You will then be able to choose the solution that best suits your needs, whether you are looking for a hardware wallet or a software wallet or you just want to leave it with Coinbase for trading.

Robinhood offers Robinhood Wallet as a separate app from the main Robinhood platform. The app is a self-custodial wallet that acts as a portal to store and manage your cryptocurrencies on networks like Ethereum or Bitcoin.

Advantage: Coinbase has the advantage here of offering more options. However, if you intend to trade frequently, this matters less.

Coinbase vs. Robinhood: Staking Rewards

Coinbase and Robinhood also differ significantly in terms of cryptocurrency staking, a process through which cryptocurrency owners receive income from their holdings. Staking is like earning interest on a bank account, albeit with significant differences and risks.

With Coinbase, users can stake their crypto assets, which are then used to validate transactions on a given currency’s blockchain. Currently, customers can earn staking rewards on dozens of cryptocurrencies, including Ethereum, Tron and Cardano. Coinbase takes care of the technical details behind the scenes, and you earn additional coins by keeping your assets there.

Robinhood offers bets on Solana only starting in May 2024.

Advantage: Coinbase, to offer staking rewards on multiple coins.

Bottom line

Which company is best for you ultimately depends on your needs, but it’s fair to say that those who focus heavily on cryptocurrency or many types of cryptocurrency will find Coinbase a better fit. On the other hand, those who are interested in some popular crypto coins as part of a larger portfolio may prefer Robinhood and may also want to check out rivals Webullwhich also offers cryptocurrency trading.

Editorial Disclaimer: All investors are advised to conduct their own independent research on investment strategies before making an investment decision. Furthermore, investors are advised that past performance of investment products is no guarantee of future price appreciation.

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