Whenever one form of currency is exchanged for either goods or other forms of currency, there is some “slippage” where a bit of the value is lost. This usually comes in the form of processor fees, the ridiculous 3% that gets
taxed tacked onto credit card and Paypal transactions. But conducting BTC transactions using Coinbase introduces its own forms of slippage which can be avoided.
Exchanging USD into Bitcoin Using Coninbase
Coinbase owes its popularity due to how convenient it is to link your bank account and begin funding your Bitcoin wallet. But Coinbase forces you to wait 4-5 business days, which conveniently allows them to make interest off of your deposits. This is the first Coinbase slippage – a subtle time loss of money in the form of lost interest, but more important is the wait you have to endure to use those funds (you transferred into your Bitcoin wallet presumably because you need Bitcoin now, not next week). Bitcoin’s price fluctuations can come into play here as the strike price might change drastically from when you placed your order. Now roughly the half the time you’ll come out ahead when the price of BTC goes down and you’re able to buy more. But the other half of the people who had to watch the price go up while their funds sat dormant are right to be a little mad.
Some Other Coinbase Fees
Coinbase’s main platform doesn’t give you the best possible price for BTC. You actually have to log into their GDAX trading platform to get a fairer BTC price. You can use your same Coinbase login credentials for the GDAX site. But since most users don’t know that GDAX even exists, most people end up getting shorted a bit of Bitcoin when they exchange on Coinbase.
Another slippage with Coinbase occurs if you want to get your BTC, Ethereum or USD wallets cashed out instantly via a debit card. Coinbase does offer a the Shift Card debit card, but there is a $2.50 fee to withdraw cash. This is in addition to the ATM fee that the machine operator charges. Limits for the Shift Card include $200/day in cash withdrawals and $1000/day in spending. The Shift Card otherwise has no percentage BTC to USD conversion fee (Coinbase by comparison has a 1.49% fee on any bank transfer). There is also a $10 issuance fee for the card.
If you need to regularly get cash out of BTC, you know that Coinbase isn’t always the best option. Coinbase and Circle will close accounts due to “non-supported transactions”. In Coinbase’s case, some of the closing have been ridiculously paranoid acts that have hurt innocent people.
The BitPay card is an alternative to Swift Card (Coinbase) that has some nice features. One of the primary benefits is that it isn’t attached to a bank. It’s generally better to go with a smaller bank that wants your business versus a larger bank when it comes to using a bank with Bitcoin as you’re hoping they’ll want your business enough to put up with a bunch of BTC transactions going into your bank account. Most banks still aren’t equipped to deal with Bitcoin, so it’s best to avoid them when possible. But the BitPay card functions more like an actual bank account than Coinbase (which is more of a trading exchange). BitPay requires ID and social security number for you to open an account.
The BitPay card allows for Bitcoin funding. It’s like Coinbase in that it can be funded by your bank, but it’s a $5 charge. For $4.95 per reload (and avoiding your bank), you can add money to the card at stores in the Green Dot and Western Union networks. But getting your bank out of the equation is better for privacy purposes. It’s always safer to use a middle wallet because the bank issuing the Bitpay card (or whatever BTC debit card you’re using) would be suspicious if you were cashing out gambling profits. Let’s say you were using a sports book like Nitrogen or 5Dimes. Even without your bank involved, it’s still better to go from a sports book to something like Airbitz card before taking money out of your BitPay card. This means you’re going from BTC payment source -> blockchain -> BitPay card. Exodus.io is another good blockchain app that allows instant exchange of cryptocurrencies for those of you sick of the inefficiencies (or slippage) of a trading exchange like Poloniex. Bitfinex offers among the highest prices when selling Bitcoin, so you may also want to do a bit of Bitcoin trading if you want to fade your originating transaction.
Besides the already mentioned fees, there’s a $5 / month fee if you don’t use your BitPay card for 3 months. The maximum amount per transaction is about $750.00, with a $2.00 fee for every ATM withdrawal. If you can’t find an ATM that dishes out larger bills, you can always try buying a money order for that amount. You can also use your BitPay card as a Venmo funding source, which is another way to avoid fees (when depositing from Venmo into your bank). It’s best to not leave too much BTC on your card.
It’s always a good idea to spread your risk around and use multiple BTC wallets from different companies. It’s also smart to buy things with your Bitcoin debit card you would otherwise spend cash on. And if you have gift cards, converting them into Bitcoin (even popular ones like Amazon and iTunes) will net you at best 70% of the cash value of your cards on a site like Paxful. You’re better off selling them at CardPool or EJ Giftcards for cash and better prices compared to trading them for bitcoin.