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Kraken Review 2021 | Fees, Pros, Cons | Buy & Sell Bitcoin

Kraken Review 2021 | Fees, Pros, Cons | Buy & Sell Bitcoin
Jordan
Major
Updated: 02 May, 2021
21 mins read

Introduction

With the increasing popularity of cryptocurrency, so has the demand for trading platforms for this new asset class. There are over 500 crypto exchanges in the market, and the number keeps on growing. But trading platforms are never the same. Some are more cost-effective to their users, while others are more accessible in more countries. Some are safer than others, while others offer more user-friendly interfaces ideal for beginners.

In this guide, we are focusing on Kraken, one of the oldest cryptocurrency trading platforms. You will learn some of the features and services the exchange offers, the cost of using the platform, the security measures it takes to protect its systems, and its pros and cons.

About Kraken

Kraken exchange
Kraken exchange’s homepage screenshot.

Kraken is a San-Francisco, California-based cryptocurrency exchange founded by crypto-enthusiast Jesse Powell in 2011. Powell was, at the time, responding to a security breach at the infamous Bitcoin trading platform MtGox and aimed to build a more robust, safer, and reliable Bitcoin exchange.

Kraken launched two years later, in September 2013, with initial coin support for Bitcoin and Litecoin, a close variant of Bitcoin. It also supported the Euro currency to facilitate sales and purchases between the two digital assets.

Since its launch, Kraken has grown to become one of the largest and most trusted crypto exchanges due to its strict adherence to financial regulations. Additionally, it is worth mentioning that Kraken is among the few trading platforms that have never suffered a security breach. It is a testament to its robust security measures. We will delve deeper into its security and safety policies in a later section of this guide.

There are two broad crypto exchange classifications – that is, centralized and decentralized platforms. The former is run and governed by a central body such as a company or an individual.  In contrast, the latter is run by a decentralized organization, often a network of nodes or computers incentivized to govern the platform. Kraken is a centralized exchange run by its parent company Payward, Inc.

Kraken features

A distinct feature amongst different cryptocurrency exchanges is the services they offer. Some are focused on creating a pure trading platform. In contrast, others have morphed into diverse service providers to cater to the growing demand for complementary services, including staking, loans, custody, among others. Kraken is no exception.

At the time of its launch in 2013, it was a pure trading platform. Eight years later and Kraken has expanded to a suite of products that appeal to its customers and help it stay ahead of the competition. Here are some of the notable services it offers:

Trading

At its core, Kraken is a cryptocurrency exchange allowing its users to buy, sell, and trade between several digital assets, including BTC, LTC, ETH1/2.0, Ripple’s XRP, ADA, EOS, BCH, XDG, and USDC, among others. More than 55 cryptocurrency coins and tokens are supported on the platform, together with seven fiat currencies for deposits and withdrawals to and from bank accounts. The seven base currencies are USD, EUR, CAD, GBP, CHF, JPY, and AUD.

There are several methods of trading supported by Kraken. These are:

  • Spot trading – involves the buying, selling, and trading between assets on the spot market. The settlement of the trades is immediate, and delivery of the assets happens on the spot. Users can either fulfill market orders or create new orders to be fulfilled at a later price point, also called limit orders.
  • Margin trading – a common trading practice through which a trader leverages their positions using borrowed assets. This way, they can open much larger positions, thereby amplifying their gains (as well as losses.) Kraken allows traders to leverage their trades with up to 50x their margins.

Watch the video: Introduction to Kraken Margin and Leverage trading

Margin and Leverage: Introduction.
  • Futures trading – an advanced feature commonly offered by traditional stock exchanges but is now making its way into crypto trading platforms, including Kraken. Futures are agreements or contracts between buyers and sellers to settle a trade at a later time for a fixed price.

Watch the video: Introduction to Kraken Futures

Intro to Kraken Futures.
  • Over-the-counter (OTC) trading is the settlement of orders between buyers and sellers that are usually too large to be listed on the platform’s order book. Traders get to interact on a more direct basis with the platform acting as the intermediary facilitating safe transactions. The minimum trade size supported on the Kraken OTC desk is 100,000 USD.

Cryptocurrency staking

Cryptocurrency staking is becoming increasingly popular in the crypto sector as an easy way of getting passive income from crypto investments. Staking involves holding a given asset in a wallet to qualify to validate transactions and participate in the governance of that specific network.

Compared to mining, staking requires fewer entry requirements. Depending on the network and the level of involvement, entry costs could be almost nil.

Kraken offers its users an easy way to participate in staking by holding their assets with the exchange. This way, the exchange becomes a staking pool using its users’ assets to run validator nodes and partake in the governance of various staking networks on behalf of its users.

Kraken supports seven networks that use staking within their consensus mechanism. These are Ethereum 2.0, Polkadot (DOT), Cosmos (ATOM), KAVA, FLOW, Tezos (XTZ), and Kusama (KSM). The rewards from staking vary depending on the staked asset because different blockchain networks utilizing staking offer varying rewards to their validators.

Watch the video: Kraken ‘Intro to Staking’

Intro to Kraken Staking

Here are the annual rewards rate (APR) you can expect by staking your assets with Kraken (the rewards can vary from time to time):

  • Ethereum – 5%-17%
  • Kusama – 12%
  • Tezos – 5.5%
  • Flow – 9%
  • Cosmos – 7%
  • Kava – 4.5%
  • Polkadot – 12%

Check out our definitive guide to cryptocurrency staking to understand more about staking, which coins to stake, and which platforms to use. In the guide, we also feature Kraken as one of the few crypto exchanges that currently support staking.

Kraken Terminal and Cryptowatch

The Kraken Terminal and Cryptowatch are professional-focused trading interfaces designed to provide all the tools necessary for trading. The terminal is a stripped-down version of the Cryptowatch with more or less the same interface available on the Kraken Pro trading interface and access to markets available on Kraken.

Users of the Terminal interface will have access to functions such as:

  • OHLC Chart
  • Indicator Panels
  • History scrollbar
  • Drawing Tools
  • Order book & Depth Chart
  • Trading form
  • Trading Feed & History
  • Alerts & Error notifications, etc
The Kraken Terminal is professional-focused trading interface designed to provide all the tools necessary for trading.

Cryptowatch takes the Terminal interface a notch higher, connecting the user to more than 25 other cryptocurrency platforms. It acts as an aggregator or a crypto trading bot pulling information from every user’s account through the APIs. Cryptowatch has access to over 4,000 markets supported across the 25+ crypto exchanges.

Here are the extra features you can get with Cryptowatch over Terminal:

  • Synchronized portfolio showing all account balances on up to 25 trading platforms
  • Charting tools and indicators such as MA, MACD, RSI, and Bollinger Bands
  • Advanced charting interface
  • Ability to chat with other traders through the Trollbox
  • Alerts and notifications for price, volume, and TA indicators
  • Streaming prices and order books from multiple crypto trading platforms
  • Google Sheets integration
  • Automation of trading rules through Zapier integration

Some of the features available on the Cryptowatch interface are free, with the option to upgrade for the full experience. To use the interface, Kraken users can connect their Pro accounts to Kraken Terminal.

API integration

Automated trading is a given these days, and all leading trading platforms support this feature. It is unlikely to be profitable and sustain trading activities with manual trading processes such as analyzing the market, opening and closing positions.

For that reason, traders created trading bots to do just that. They exist in various forms – as standalone desktop or mobile applications and web applications.

These trading bots or software utilize API integration to connect to various trading platforms such as Kraken. API is an acronym that stands for Application Programming Interface. It allows two or more interfaces to interact with one another automatically.

Kraken, just like most major crypto exchanges, offers an API to its users to interact with their accounts through a third-party interface. There is a lot one can do with the Kraken API feature, including getting access to publicly available market data and private user data.

Some common ways to use the Kraken API include:

  • Access to tradable asset pairs
  • Access to the order book
  • Access to tradable assets info
  • Access to info on recent trades and recent spread data
  • Access to user account trades and balances
  • Open and close orders
  • Fund and withdraw from an account
  • Wallet transfers, and;
  • Authenticate mobile app connectivity

Mobile apps (Invest / Pro / Futures)

Kraken’s mobile apps are available to users on both Android and iOS platforms. They are a great solution to customers seeking more flexibility when accessing their accounts, especially on the move.

Kraken offers three versions of the mobile app for investing, pro trading, and Futures trading. They each have the following features:

Kraken Invest app

  • It offers an intuitive onboarding interface to buy crypto using payment cards. Purchases can be made through predefined amounts such as $50, $100, etc.
  • Track crypto asset prices
  • Track portfolio performance and create favorites
  • Withdraw funds to external wallet (if enabled through API function)

Kraken Pro app

This is the trading version of the Kraken app allowing users to exchange between all supported assets and fiat currencies. It has the features:

  • It provides access to the trading (Pro) platform.
  • The interface can be customized to show different info panels, including the order book, charts, and indicators overlays, etc.
  • Access to margin trades with up to 5x leverage
  • Supports market and limit order types

Kraken Futures app

The Futures app gives its users access to the Kraken Futures platform. It has the following features:

  • Enables seamless asset transfers between the Spot and Futures wallets
  • As opposed to the Pro version with 5x leverage on margins, the Futures app provides up to 50x leverage
  • 24/7 personal support service

One distinctive feature amongst the three versions of the Kraken app is their first-time login process. For the Invest app, the process is more conventional. The user only requires a username and password to log in. This is not the case for the other two versions.

The Pro version will require an API key to log in, which you can generate through the web interface by visiting the API Key Management page. Using the API key, the user can control what functions are done through the mobile app and which ones are restricted.

On the other hand, the Futures version requires a mobile token that can also be requested through the web interface. This is served through a QR code which is only valid for a couple of minutes. The user has to scan the token to log in to their account.

You don’t have to worry, however, since these are just first-time login procedures. Subsequent logins can be done using the device’s biometrics (fingerprint or FaceID) or the conventional PIN/password.

Kraken Bank

The Kraken Bank is a first-of-its-kind product expected to launch in phases starting later this year (2021). According to a bank charter granted to Kraken in September 2020 by the State of Wyoming, Kraken is cleared to launch a “Special Purpose Depository Institute (SPDI) that will only allow it to hold customer funds on a 1:1 reserve ratio.

The license only permits the Kraken bank to hold funds on behalf of customers, but unlike a true banking institution, it will not be offering loans based on those deposits.

In the blog post announcing the bank charter approval, Kraken revealed that it is planning on launching the bank initially with the following services:

  • Digital asset custody
  • Demand/deposit accounts (DDAs)
  • Wire transfer and funding services.

The Kraken Bank expects to offer its services to all US residents when it launches except New York residents.

Knowledgebase resources

Blockchain and cryptocurrency are highly technical topics, so Kraken maintains a section with educational resources from which its users and the community can learn. The exchange has four kinds of resources:

  • Cryptocurrency guides – these are text-based resources explaining blockchain-related topics.
  • Podcast – audio-based content on blockchain topics streamed on platforms including iTunes, Spotify, and Google Podcasts.
  • Webinars – these are live video recordings featuring industry players and the Kraken team seeking to inform and educate on events and topics that matter to the Kraken community.
  • Videos – could be the webinar recordings or general video-based content submitted to YouTube for the blockchain community to consume

Getting started with Kraken

There are four stages to getting started with the Kraken exchange. These are:

  1. Creating an account
  2. Securing the account
  3. Verifying the account
  4. Funding the account

1. Creating an account

Head on over to the Kraken homepage, then click on the blue “Get Started” button on the bottom left of the screen or the top right “Create Account” button.

The sign-up form below should appear.

Kraken-sign-up

Provide a valid email address, a unique username, and a secure password. An activation email will be sent to the email provided with an activation key. You can either click on the link within the email to activate the new account or copy the activation code and input it within the account activation form.

2. Securing the account

Earlier, we mentioned that Kraken is one of the safest cryptocurrency exchanges in the market. And that may be true, but even the most robust security systems are susceptible to human errors and mistakes. Your account’s security is a proactive measure that cannot be outsourced.

To help you with your security practices, Kraken has the following tips:

  • Create a strong password. In the previous step, you must create a password that will be associated with your account. Use one with more than fifteen characters and not easy to guess.
  • Make use of Kraken’s two-factor authentication (2FA) settings. 2FA allows you to set up an extra authentication step other than the password using either a hardware token such as YubiKey; or an authenticator app such as Google Authenticator, Microsoft Authenticator, or Twilio’s Authy.
  • Setup a Master Key. As applicable to Kraken, a Master Key is a second-layer password and 2FA combo that you can use to reset your password. The Master Key is created the same way you create your 2FA credentials. However, the Master Key can be used to prevent a password reset through a compromised email account.
  • Take great caution with the use of your API keys. In the features section above, we mentioned that API keys could be used to access your Kraken account through the mobile app. While creating the API key pair, do not provide more permissions to your API keys than necessary.

3. Verify the account

To use your Kraken account, you need to verify your identity. Popularly known as KYC (know-your customer), this is a regulatory provision to curb money laundering and terrorist financing activities. Additionally, it helps protect you against unauthorized access.

Documents

These are the documents you’ll need to verify a Kraken account:

  • Valid Government-issued ID document. This could be your travel passport, national ID, or driving license. There’s a minimum age limit of 18 years to open an account with Kraken.
  • Proof of address document. A variety of documents can be used to verify your address. They include bank statements, residence certificates, utility bills, or tax documents, among others. Kraken requires that any document to be used to verify your proof of address must have been issued within the preceding three months.
  • A Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) for US residents.
  • A passport photo for the US and South African residents.

Account verification levels

Kraken provides up to four levels of account verification, with each unlocking access to various services. Additionally, they also require slightly different verification documents.

  • Starter – this is the basic verification level. You only need to provide your email, phone number, date of birth, and indicate a physical address. No ID or proof of residence is required. Limits for this level include low crypto withdrawal amounts, no support for fiat deposits and withdrawals, limited access to margin trades, and no access to Futures, the OTC desk, and the business account.
  • Express – only available to US residents, excluding those in NY, WA, TX, and US territories. Verification information required is occupation details and the SSN. This level provides no access to the Kraken Invest app, no support for crypto deposits, and withdrawals and fiat deposits are limited to a lifetime cap of $9,000. Additionally, this level has no access to staking, Futures, the OTC desk, and the business account.
  • Intermediate – verification documents required are valid ID, proof of residence, and passport photo for US and South Africa residents. Other requirements include occupation information and an SSN for US residents. This level offers high limits to deposits and withdrawals of fiat currencies, withdrawal of crypto, and unlimited limits for crypto deposits. However, this verification level doesn’t provide access to the dark pool, OTC desk, and business account features.
  • Pro – this is the highest level of verification, and it gives you access to every product and service offered by Kraken. Verification requirements in this level are similar to the Intermediate level’s except that you have to undertake a KYC questionnaire to provide your financial information with the Pro level.

Geographic restrictions

Opening a Kraken account is also subject to geographic restrictions. The following countries are not supported:

  • Afghanistan
  • Congo-Brazzaville
  • Congo-Kinshasa
  • Cuba
  • Iran
  • Iraq
  • Libya
  • North Korea
  • Syria
  • Tajikistan

US residents in the States of New York and Washington (WA) also can’t access Kraken.

4. Funding the account

Kraken offers two main funding options. These are cryptocurrencies and fiat (traditional) currencies.

Except for the accounts under the Express verification levels, the rest have unlimited crypto deposits. That only applies to the supported virtual assets, which are about 55 in number.

Fiat deposit options vary by currency and location. The more popular funding options for each base currency are as follows:

  • US Dollars (USD) – Swift, Wire Transfers, Etana Custody, and the Silvergate Exchange Network (SEN). 
  • Euros (EUR) – SEPA Transfers, Wire Transfers, and Etana Custody.
  • Canadian Dollars (CAD) – In-person deposits (Canada Post), Wire Transfers (InterFIN) for Pro verification level business accounts, and SWIFT (Etana Custody and Bank Frick).
  • Great British Pound (GBP) – Faster Payments System (ClearJunction) and SWIFT (Etana Custody and Bank Frick).
  • Japanese Yen (JPY) – SWIFT (Etana Custody).
  • Australian Dollars (AUD) – PayID, Osko, SWIFT (Etana Custody), and local bank transfers.
  • Swiss Francs (CHF) – SWIFT deposits to Liechtenstein-based Bank Frick (only available to Pro verification level business accounts).

Kraken fees

Kraken is one of the cheapest cryptocurrency exchanges currently. Its fees are highly competitive, depending mainly on the individual customer’s prior 30-day trading volume. This applies to the trading fees, not fund deposits and withdrawals, which also vary depending on the methods used.

It’s worth noting that Staking funds with Kraken is free.

Here’s a brief rundown of the fee schedule. For the complete schedule, visit the Fee Schedule page.

  • Purchases
    • Direct (through account balance) – 1.5% for crypto and 0.9% for stablecoins (e.g., USDT)
    • Debit/Credit cards – 3.75% + €0.25
    • Wire Transfers/SWIFT/FPS/SEPA, etc. – 1.7% + $0.10
  • Trading fees
    • Maker fees: 0.16% – 0.00%; Taker fees: 0.26% – 0.10% (the higher the 30-day trade volume, the lower the fees)
    • Stablecoin trades, Maker/Taker fees: 0.20% to 0.00%
    • Futures trades, Maker fees: 0.02% to 0.00%; Taker Fees: 0.05% to 0.01%
    • Margin trades, opening fees: 0.01%to 0.02%; Rollover fees: 0.01% to 0.02% every 4 hours

Please note: Trading fees are generally more favorable for makers as opposed to takers. Makers create liquidity in the marketplace by placing limit orders, while takers take away liquidity by fulfilling the orders present in the order book.

Kraken security

Security is a proactive approach. Exchange users are encouraged to maintain high security and safety practices to prevent any losses to their assets. On the other hand, exchanges have the responsibility to ensure the security of their users’ assets. They are mandated to maintain the highest security policies.

Kraken is a highly secure trading platform. Despite being one of the oldest crypto exchanges, it has managed to keep its customers’ assets safe without a single security incident ever reported.

Additional proof of Kraken’s security robustness is the number of bug bounties rewarded. Bug bounties are common security programmes that encourage researchers to report any system vulnerabilities they may find. According to Kraken, only one bug bounty has been paid out so far, meaning only one major vulnerability has been discovered with the Kraken system.

Here’s how the exchange approaches the safety and security of its systems and customers’ assets:

  • 95% of assets under custody are kept offline in air-gapped cold storage facilities across geographically distributed locations.
  • Customer and account information is always encrypted at rest with restricted access.
  • The company maintains its servers as opposed to using cloud services. The servers are under 24/7 proactive surveillance through guards and video monitors.
  • The company regularly takes routine system audits in addition to running a bug bounty.

Kraken also takes active steps to provide security tools to its users to manage their accounts better and ensure their assets’ safety. They include:

  • Second-factor authentication (2FA)
  • Highly customizable API key permissions for mobile apps functionalities
  • Restricted email functionalities
  • Use of Master Key for extra account security
  • Global Settings Lock (GSL) to prevent unauthorized access
  • Use of PGP privacy to sign email correspondence with its users
  • Highly responsive customer support for emergency concerns
  • Secure browser experience using SSL encryption
  • Encryption of data when in transit and in rest state.

These are only the top-level security measures that Kraken has implemented. The exchange touts its security as “industry-leading,” and it’s easy to see why.

Pros and Cons

Pros

  • Highly secure with no record of security incidents
  • Very competitive trading fees and zero staking fees
  • Intuitive and easy-to-use web and mobile apps interfaces
  • Supports a wide selection of crypto assets
  • Supports several funding options
  • Provides multiple account verification tiers allowing users to open accounts depending on the documents they have
  • Widely accessible across the world
  • Customer service includes live chat for immediate support
  • Offers several products, including margin and futures trading, staking, and custody. Soon to launch the Kraken Bank.
  • It is highly regulated in multiple markets.
  • Multiple mobile app versions for specialized usage
  • Provides educational resources for beginners and experts alike

Cons

  • Highly regulated and therefore adheres to KYC provisions. Some crypto traders prefer platforms without KYC requirements to maintain their privacy.
  • First-time mobile app logins using API keys may be unintuitive to most users.
  • Leverage for margin trades capped at only 5x (for Futures trades its 50x)
  • Exchange supports very few staking coins

Conclusion

You’ve made it to the end of our detailed Kraken review. The exchange has a lot to offer its users. We highlighted its best features and why you may consider opening an account with the platform.

We also took you through how to open an account, secure, verify, and fund it to start using it. The process is relatively simple and straightforward.

We have also provided you with some high-level pros and cons to help you gauge whether or not to use the platform.

Hopefully, you are now more knowledgeable about Kraken. It is a highly robust crypto exchange focusing on the security and safety of its assets and the privacy of its users’ information.

Kraken Review 2021 | FAQ’s

Is Kraken exchange safe and trustworthy?

Kraken is one of the oldest and safest cryptocurrency exchanges. It is based in San Francisco, California, and registered as a Money Services Business (MSB) through the US FinCEN and Canada’s FINTRAC. The exchange is yet to report any security incident since its launch.

Is Kraken beginner-friendly?

Both Kraken’s web and mobile user interfaces are intuitive to use. The exchange offers a beginner-friendly mobile app that is ideal to buy cryptocurrency assets on the move. The Starter verification level requirements are low enough that any beginner may sign-up and start trading immediately. Additionally, Kraken has an educational resources section to get up to speed on blockchain and crypto trading.

What funding options does Kraken support?

Kraken offers a wide range of funding options whose availability depends on the user’s location. These include wire transfers, SWIFT deposits, credit/debit card payments, local bank transfers, and even in-person deposits (in Canada). There is also the option to fund your account through crypto deposits from a third-party wallet.

Is Kraken a bank?

Kraken is not yet a bank. At the moment, it is a crypto exchange. However, it did receive a bank charter approval from the State of Wyoming in September 2020 to form a Special Purpose Depository Institution (SPDI) that it calls the Kraken Bank. Kraken plans a phased launch of the Kraken Bank starting sometime this year (2021). The bank will be headquartered in Cheyenne, Wyoming.

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Jordan Major
Author

Jordan is an investor and market analyst. He's passionate about stocks, ETFs, blockchain, and digital assets. At Finbold.com, he delves into the technicalities to obtain future trends for new market traders and gives insights into user-friendly platforms for beginners.