Coinbase adds lower cost crypto-to-crypto conversions
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This feature might end up being very valuable to Coinbase and its customers.
Coinbase has announced that it will be rolling out crypto-to-crypto conversions for its users, with a feature appropriately labelled "Convert."
It will be gradually made available to all users in all 34 countries served by Coinbase. Initially, users will be able to convert between bitcoin (BTC) and Ether (ETH), Ethereum Classic (ETC), Litecoin (LTC), 0x (ZRX) or Bitcoin Cash (BCH) through the Coinbase site and the Coinbase app.
1% spread
The main advantage is that it offers a considerably more cost-effective way of accomplishing crypto-to-crypto conversions with fewer transactions than was previously available.
To convert BTC to ETH, for example, while staying within Coinbase, one would previously have had to sell bitcoin and then use those funds to buy Ether and in the process pay fees in the form of a 0.5% spread plus an additional fee on both the buying and selling. The cost of using the Convert feature is just a 1% spread.
The additional fee varies depending on the region and purchase method, but the lowest possible fee on fiat buying/selling was previously 1.49% (standard buy/sell in UK, Singapore and Europe).
So even in ideal circumstances, converting BTC to ETH within the Coinbase ecosystem would previously have involved total fees of about 3% plus a 1% spread. Getting that down to a straight up 1% spread is naturally far preferable.
In many cases, it would have been much higher. It might be especially practical for smaller conversions, which instead would usually attract a flat fee. On small transactions of just $10, for example, the fee comes out at a flat 99 cents – or about 10%. So you'd lose about 20% to fees trying to convert $10 of crypto.
It could be especially valuable to users such as those in Australia, who would otherwise have had to pay fees of 3.99% – twice in a row – to inefficiently sell one crypto then buy another.
Significantly for Coinbase, this might remove a major customer exit point. Beyond the potentially hefty fees, when one has to actually sell their crypto in order to convert it, they're probably far less likely to hang around. It could go a long way towards keeping users within its own ecosystem and promoting more activity. It could be the start of a bit of a turning point, as Coinbase becomes more of a place to convert crypto and hang around, rather than just buying, selling or transferring.
Of course there's always Coinbase Pro, which is still the cheaper option, with no market maker fees and taker fees of only 0.1-0.3%, although it's more for advanced users and active traders.
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