Coinbase Global (NASDAQ:COIN) made history by becoming the first cryptocurrency exchange to be listed as a public stock in the United States. The company’s April 2021 IPO valued it at around $86 billion, and its price continues to mirror that of Bitcoin ($BTC) and the crypto sector as a whole.
While Coinbase may get all the headlines, it’s actually in second place in a market dominated by rival Binance. In fact, the Cayman Islands-based crypto exchange processes over 5x more daily trading volume than Coinbase, its closest competitor.
So, which is the better crypto market between Binance vs Coinbase?
Although the numbers above seem impressive, American investors aren’t using the same Binance marketplace as the rest of the world. To be compliant with US regulations, Binance created a U.S.-based subsidiary called Binance.US.
Binance CEO and founder Changpeng Zhao (CZ) remains on the board of both companies, which are powered by similar software but list different tokens.
Each company takes a different approach to trading, much like stock trading apps Robinhood (NASDAQ:HOOD) and Webull. So, which crypto exchange is best suited to whom?
Coinbase for Beginners
Coinbase was launched in June 2012 by co-founders Fred Ehrsam and Brian Armstrong, who serves as the company’s CEO.
During global lockdowns, Brian went all in on the decentralized office; Coinbase lacks a physical headquarters. Regardless, it generated $1.14 billion in revenue 2020, which grew to $3.62 billion during the crypto boom in the first half of 2021.
Much of this was from proceeds from its direct listing within its first decade of existence, and it didn’t hurt that Bitcoin and the crypto industry reached historic highs during that timeframe.
Coinbase fees are not in line with brokerage firms – a low dollar amount charged per transaction. Instead Coinbase charges a % of the overall amount transacted. It also applies fees to credit card or bank account purchases. All USD balances are FDIC-insured, and it uses AES-256 encryption in its digital wallets.
It supports over 100 cryptocurrencies, along with all ERC-20 tokens. It offers basic trading features and is a great option for beginning traders. Coinbase Learn & Earn is a great way to earn free crypto tokens, and there’s a referral bounty offered too.
The vast majority (98 percent) of its holdings are in cold storage, making it much safer than most storage options. Of course, nothing is perfectly secure, and web2 vulnerabilities can still expose private user data, like an October 2021 hack of over 6,000 customers.
Unfortunately, that wasn’t the first Coinbase exploit either. Making things even more confusing, there are two different Coinbase wallet apps in mobile stores that each do different things.
Coinbase vs Coinbase Wallet
Although Coinbase is a safe exchange, crypto exchanges are not necessarily safe places to store your assets. That’s because the company ultimately stores your private keys in a centralized place.
Although that makes it much easier to transact with so many different blockchains while trading crypto, this setup makes Coinbase a single point of failure that you may not trust.
Thus, the company released a Wallet app that is separate from its exchange. You can store your private keys directly on your device, but you must still transfer to Coinbase when transacting. Both integrate easily with PayPal and your wallet can be linked to banking apps like USAA.
Per Coinbase, “Think of your Coinbase.com account as a brokerage that can store your crypto for you, and Wallet like a traditional cash wallet that gives you direct and complete control over your own crypto assets.”
So, how does Binance compare?
What Is Binance?
Binance was founded in 2017 and is now the largest cryptocurrency exchange in the world by trading volume. Because authorities in both the U.S. and U.K. are investigating the exchange, it’s not able to operate directly in either country. And they’re not alone, as Japan and Thailand also have probes.
Still, Binance offers a much broader spectrum of crypto investments, with over 500 cryptocurrencies available. It’s much cheaper than Coinbase, with fees ranging from 0.015 to 0.10 percent per trade.
It also offers much more advanced trading options, like limit orders, peer-to-peer, and more. It features similar 2FA verification and security to Coinbase. FDIC insurance is available for US balances in its country-specific interface, but Americans can’t access the original Binance exchange.
And it’s a bit more than just a name change.
Binance vs Binance.us
Both platforms have a nearly identical user interface, but there are several key differences between them.
To maintain compliance with U.S. regulators, only 60 crypto assets are tradable on Binance.US. Unlike Coinbase, there’s no wallet, so you’ll need a third-party wallet to securely store your own private keys.
The same advanced trading options are available on the limited pool of U.S.-available tokens. This means that there are still benefits to using Binance.US, even though U.S. users are restricted from using the main platform. However, you can’t use a credit card or perform margin trades.
Why (and Why Not) to Use Exchange Wallets
Storing crypto tokens in an exchange wallet is generally considered more dangerous than storing in your own private wallet. Many examples of exchange thefts – from Mt. Gox to Poly Network, which together account for over $1.7 billion in lost funds – illustrate the worst-case scenario of using these wallets.
Besides that, the regulatory heat Binance faces around the globe cannot be ignored when handing over your hard-earned money to an exchange. And you don’t typically get staking rewards from exchange wallets.
Several more secure options for crypto custody exist, including hardware, software, and paper wallets. Many legacy financial institutions like US Bank are expanding their ability to store crypto ever since the OCC enabled it.
Of course, there are advantages to holding at least a small portion of cash in your exchange account. It’s for similar reasons to why you would want liquidity in a brokerage account. It shouldn’t be a large portion of your net worth, but at least some cash and crypto in an exchange account can make it much easier and faster to transfer crypto.
Both exchanges are cheaper than a platform like Metamask and to mitigate risk, it’s not a bad idea to have accounts on both.
Coinbase vs Binance: The Bottom Line
Binance is the largest crypto exchange in the world, but its full accessibility for American investors is limited. And it’s a bit complicated for even the most advanced of traders. Still, it’s cheaper than competitor Coinbase, which is arguably safer.
As a publicly traded company, Coinbase is subject to intense regulation. It’s as close as the crypto industry has to a regulated exchange like Nasdaq or the NYSE.
Whichever you choose, consider keeping your crypto portfolio in an exchange wallet. It’s important to diversify between hot and cold wallets to hedge your financial bets.
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