Cryptocurrency enjoyed a massive bull run in 2017, and things are only looking brighter as we kick off 2018. New investors are flooding in to invest. But cryptocurrency can be overwhelming for beginners to understand. Exchanges can seem like intimidating places. New ones are popping up left and right, which is good because some are going down in flames. Fortunately, we’ve got your guide to one of the oldest, safest, and most popular exchanges on the market: Kraken.
Cryptocurrency tipped over into mainstream consciousness last year, and for good reason. Businesses and websites started accepting Bitcoin, governments began to grapple with its implications, and a lot of investors got rich. Even more profitable than Bitcoin were some other coins. You might’ve heard of Ripple, which grew 4000% in a matter of weeks. Or Litecoin, which saw a 6x increase in days. The money attainable in cryptocurrency blows away the returns on any traditional investment.
Most cryptocurrency is bought and sold through exchanges. A crypto exchange functions like a stock market exchange. Coinbase is a big name most people have heard of. But there are plenty of other options, some of which offer more flexibility and lower fees. Kraken is a great option, so we’ve broken down everything you’ll need to know before you click to buy.
Review of Kraken: Getting Started
First things first, you’ll need to make sure Kraken is legal and usable in your country. For most people, including Americans and Europeans, this will be a formality. However, there are some exchanges that only allow users from certain countries. Bitfinex, one of the biggest Bitcoin exchanges, announced in 2017 they would no longer be serving American customers for legal reasons. Always do your homework, and make sure you’re eligible to use Kraken.
Next, you have to decide how you’ll fund your account. Kraken supports deposits and withdrawals in dollars, yen, pounds, euros, and Canadian dollars. This is a big upgrade over exchanges like Bittrex, which don’t accept fiat currency. To use many altcoin exchanges, you need to buy Bitcoin or Ethereum and send those coins to an exchange, to buy other cryptocurrencies. It’s a hassle. Fortunately, Kraken cuts out that step.
So you create an account. Before you can get trading, you’ll need to verify yourself and prove you aren’t a robot. Kraken has five tiers of verification, each with their own restrictions and privileges.
Tier 0 lets you create an account and look around, but you can’t touch anything. All you need is an email, but you can’t trade, deposit, or withdraw. Tier 1 requires your name, birthday, country and phone number. It allows you to deposit and withdraw cryptocurrencies from the exchange. Not deposit and withdraw fiat, like dollars or euros. If you’re tier 1, you have to fund your account by sending Bitcoin or Ethereum purchased elsewhere. You can, however, trade fiat and crypto.
Tier 2 requires your address but potentially gives you the right to fund your account via fiat currency, depending on the country. Tier 3 users can deposit fiat as well, again depending on their country (American, Japanese, Canadian, and German investors must be Tier 3 to deposit fiat). You’ll be required to upload a valid government ID and recent proof of residence.
Lastly, tier 4 is similar to Tier 3, but with higher funding limits. This is for high rollers or corporations. A signed application form and KYC documents must be submitted. Some companies may have to contact Kraken directly to set up accounts.
Overall, Kraken’s verification process is fairly similar to other exchanges and even easier in some ways. Verification is an annoying, but necessary, process. Some exchanges require a government ID from the get-go. It’s nice that Kraken offers some different levels.
Kraken Fees and Coins
So you’ve registered, verified your identity enough to trade, and got some funds. Let’s get to the good stuff: the coins. And they’re good. Kraken has an exceptional selection of altcoins, many of which can be purchased directly from fiat currency. That’s truly rare for an exchange. Most altcoin exchanges only offer purchases in Bitcoin or Ethereum.
Kraken has Bitcoin, Bitcoin Cash, Dash, Dogecoin, Melon, EOS, Ethereum, Ethereum classic, Gnosis, Litecoin, Iconomi, Augur, REP, Stellar, Monero, Ripple, ZCash, and Tether. They’ve got all the biggest names and some of the hottest up-and-coming coins.
A lot of exchanges that take fiat currency, like Coinbase, Gemini, or GDAX, have limited coins to choose from. They’re easier for beginners to get up and running on, but they don’t have a lot of options to invest in. There are altcoin exchanges like Poloniex, Cryptopia, and Bittrex that sell tons of altcoins. They’ve got small currencies you can’t get anywhere else. But they aren’t newbie-friendly, and generally, don’t allow fiat deposits. To use crypto-only exchanges, you have to buy Bitcoin somewhere else and send it there to spend.
Kraken is well-positioned in-between these two types of exchanges. Kraken’s fees are pretty reasonable for most trades as well, although wiring fiat can be a little pricey. The ability to buy altcoins with fiat is truly rare. Kraken gets some points from us in this category.
Margin Trading: Hold on to Your Hat
If you’re feeling your oats and you’ve got nerves of steel, Kraken could be your one-stop shop for margin trading. “Hodl,” a purposeful misspelling of “hold,” is the most common cryptocurrency investment strategy. Most investors just buy coins and hold them indefinitely, thinking long-term. For margin traders and those looking to ride daily swings, Kraken has a leveraged trading platform.
Kraken’s trading interface can look a little intimidating. As it should: active trading isn’t for beginners. Margin trading, especially, isn’t for beginners.
You can margin trade Bitcoin, Ethereum, Ethereum Classic, Augur, Monero, and Tether on Kraken. These coins all have various currency pairings. For example, Bitcoin can be traded tied to dollars. This pairing would be listed as “XBT/USD.” A “XMR/EUR” pairing would be Monero and Euros. Kraken offers up to 5x leverage for advanced investors.
Is Kraken Safe? Security
Security is mission-critical to the success of an exchange, and fortunately, Kraken has some of the best. Kraken has two-factor authentication, which is mandatory for any smart crypto investor. The site uses PGP/GPG encryption and has never been hacked. That’s saying something the land of crypto. In 2014, the Bitcoin exchange Mt. Gox was hacked and some 850,000 Bitcoins were stolen. That’s billions of dollars of money at today’s prices. After the hack, Kraken was the first exchange to create a cryptographically verified proof of reserve system, which shows that the exchange holds 100% of customer funds. There’s a lot of shady exchanges out there, so this transparency is commendable. Most coins are kept offline in cold storage. No exchange is perfect, and crypto experts advise against leaving coins on an exchange as a rule, but Kraken is about as safe as you could hope for.
Kraken vs Coinbase
How does Kraken stack up against Coinbase, one of the biggest exchanges in America? Let’s break it down. Coinbase’s user growth has been explosive: the site now has several million more users than Charles Schwab. It’s got name recognition and is most people’s gateway to crypto.
Coinbase is very beginner-friendly. The interface is easy to use, and GDAX, Coinbase’s advanced trading platform, is a little better-laid-out than Kraken’s. Coinbase just added 3x leverage for margin traders.
When you buy a coin on Coinbase, the site does a great job explaining how much you’re paying, and how much cryptocurrency you’re getting.
However, Coinbase’s fees are brutal. Kraken is significantly cheaper. Kraken’s selection of coins is also vastly superior. Coinbase just has Litecoin, Bitcoin, and Ethereum. Kraken has all those and a dozen more. There’s no right answer, just the right exchange for you.
Kraken is a great platform, but it’s not perfect. Kraken has a two-star rating on CryptoCompare.com. Reviews about exchanges tend to be dominated by those with bad experiences: the vast majority of happy users don’t write reviews online.
That said, Kraken gets killed in user reviews. Users have problems verifying. Users have problems adding cards. Users have problems depositing money. Users have problems withdrawing money. Users trades fail and aren’t executed. There’s a worrying amount of dissatisfied Kraken users out there.
It’s tough to judge which of these problems are due to Kraken’s inherent flaws, and which are due to the fact that every exchange on the planet is swamped right now. Cruise reviews for Coinbase, Bittrex, Poloniex, or any other exchange, and you’ll see the same complaints. Exchanges simply don’t have the infrastructure to handle the demand they’re seeing. Binance, the hottest new exchange, has a full-time employee whose sole job is to requisition new servers. Exchanges are all buckling under the weight.
Wrapping it All Up
On balance, Kraken is a solid exchange with fiat support and a good assortment of trading options. The verification system is solid, as is the wide range of coins offered. The margin trading doesn’t offer as much leverage as some websites like BitMex, but it’s still a respectable platform for serious investors.
Kraken does seem to be having some issues scaling up, but its sterling security record is commendable. Kraken has some serious pluses over established exchanges like Coinbase. Serious investors might want higher leveraged trading or a wider altcoin selection, but there are platforms that specify in those things. Overall, Kraken is a great platform for new and intermediate investors.