How to Use Coinbase to Make Money - Millionaire by Next Year (2024)

In April 2021, I was somewhere in Arizona when I decided to download the Coinbase app. I had no idea what it really did or what using it entailed, but I was curious and wanted to find out.

Since then I’ve converted $1,250 USD into different crypto assets. There have been a few ebbs and flows in the market but I’ve still come out ahead. If I liquidated my crypto assets today I’d have more cash than I started with and I have an NFT to boot.

How to Use Coinbase to Make Money - Millionaire by Next Year (1)

In this article, I’m going to show you how to get started and how to use Coinbase to make money.

Affiliate Disclosure: MBNY participates in many affiliate programs. Some of the links below are affiliate links and MBNY may be compensated for any purchases made through those links. You can read more about thathere.

What is Coinbase

Coinbase is an exchange that allows average folks like you and me to buy, sell, and hold cryptocurrencies. I call Coinbase a “custodian” platform because you don’t have to have your own crypto wallet use it. The main benefit of this is that you won’t have to worry about protecting your seed phrase.

Coinbase makes money by charging fees for trades made on the platform. These fees are similar to what brokerage firms used to charge before Robinhood did away with trade fees. When I made my first Ethereum purchase back in April I paid a 1.5% fee that was deducted from my purchase. That means I transferred $1,000 USD from my bank account but only had $985 with which I could purchase Ethereum.

There are different types of accounts you can have on Coinbase: a normal individual account, a business account, and a Coinbase Pro account. Like most financial institutions, the fee structure varies based on how you plan to use the platform. You can read about the fees Coinbase charges for individual accounts and retail products here.

Obviously Coinbase is a company — a publicly traded one at that — and has to generate a profit. The fees you pay support their business model while also supporting the blockchain infrastructure itself. When you execute a transaction on the blockchain you have to pay a fee called gas which covers the cost of processing your transaction. This type of fee is similar to transactional fees you pay for real world municipal services like getting a marriage license or registering your car with the DMV. Because Coinbase is an exchange, not a decentralized wallet, you aren’t directly paying the gas fees — Coinbase is.

How to Set Up an Account on Coinbase

Getting started on Coinbase is easy. I did it within a few minutes from my Google Pixel while living in my car. You’ll need to follow these steps to get started:

Download the app
Create an account
Verify your identity
Connect your bank account to add funds
Start buying crypto

Coinbase created a step-by-step guide you can also find here.

One thing you might be wondering about is the relationship between your Coinbase account and your regular bank account. To make your first crypto purchase you’ll have to use cash — or fiat currency — from your bank account. Once you make your first purchase you can either continue converting cash into crypto or you can convert existing crypto into other crypto coins.

Likewise, to cash out any crypto earnings, you’ll need to have a bank account from which you can withdraw money. Coinbase did create its own debit card to help you spend easier but before you sign up I’d recommend reading the terms of service. I opted to not get their debit card after I reviewed the fee structure and saw they charge a 2.49% fee for purchases made with crypto (although they don’t charge any fees when you use U.S. dollars stored on Coinbase).

I wanted to share this because there is a belief that decentralized finance is an alternative to the banking system. While that is true to some extent, you will still need to use existing banking infrastructure to get initial access to crypto markets.

Earn Free Crypto with Coinbase

Coinbase is a fintech company which means they measure success by the number of new users they acquire. Lucky for you that means there are rewards if you recruit your friends and family to join Coinbase too. Cashing in on incentive programs can be an easy, pain-free way to dip your toes into the crypto world without risking too much of your own cash at first.

Get Free Bitcoin for Signing Up

When you join Coinbase they’ll give you $5 in Bitcoin just for signing up. I know that’s only worth 0.000081 BTC as of today, but hey you gotta start somewhere right?

Invite Friends to Join Coinbase, Get Free Bitcoin

After you set up your account you can begin inviting friends and family to join Coinbase. When they use your referral link, you both can earn $10 worth of Bitcoin. Think of all the DogeCoin you could buy with that!

Free Learning Challenges

Just like Coinbase is trying to acquire new users, so is every new crypto project too. Some altcoins — smaller coins built on the Ethereum blockchain, for example — offer learning challenges within Coinbase that allow you to earn free crypto. While they only pay out $1-$5, you can then trade those altcoins for other coins. If you follow the altcoin market closely you can easily trade out these free coins for other coins and double your earnings.

How to Use Coinbase to Make Money - Millionaire by Next Year (2)

Strategies to Make Money on Coinbase

Cashing in on free rewards is great, but it isn’t going to make you a ton of money. If you’re looking to get in on the crypto craze there are a few strategies you can use to do so. Just like you can buy stocks on exchange platforms — think Robinhood or TD Ameritrade — Coinbase can be used to buy and sell crypto for profit.

Disclaimer: the following are theoretical ways you can use Coinbase to make money. If you do turn a profit, you need to keep in mind the tax implications of crypto trading. While U.S. tax laws aren’t really in step with the crypto market, they are trying to catch up. I personally treat crypto trading like I do stock trading when it comes to financial gains. I use CoinTracker to keep tabs on my investments. As always, consult your financial guru of choice and tax prepper before diving into crypto investing.

Buy and Hold Crypto

You can play the long game by buying and holding crypto. This is a good strategy if you can get in on the ground level and if you think certain coins will go up in value over time.

I am personally doing this with Ethereum because I think it will go up as the infrastructure around it is being built. With NFTs and smart contracts coming online it’s only a matter of time (in my opinion) until other real world entities begin leveraging the Ethereum blockchain.

With this strategy, you’ll want to have a keen sense of geopolitical disruptions or at least read the paper on a regular basis. Earlier this year Bitcoin lost half its value after China cracked down on it. As more and more average people like you and I begin eschewing traditional banking for decentralized finance, central banks around the world will begin cracking down. This probably won’t eliminate crypto but it can certainly result in a lot of volatility that you might not be comfortable with.

Day Trade Altcoins

Frequently trading one crypto for another is akin to day trading in the stock market. Unlike the stock market — which regulates day traders — the crypto market is unregulated. This gives you more opportunity to turn a profit quickly but it is a lot riskier and can come with a hefty tax bill.

Day trading crypto is like betting. You can make an educated guess if you understand the fundamentals of blockchain, defi, and smart contracts, but at the end of the day, it’s still betting.

If you want to pursue this strategy, start doing your research. Study the fundamentals and get in on the conversations happening around the different altcoins. If all of us learned anything in 2021 it’s that subredditors know a thing or two about investing.

Stake your Crypto to Earn Interest

Coinbase can also be used to hold crypto and earn interest on it at rates that are more than double normal savings accounts. Staking in crypto functions in a similar way a certificate of deposit or money market account does at a bank: you “stake” your crypto on the blockchain for a period of time in exchange for some sort of benefit.

While earning interest on your crypto is an easy way to make passive money off your assets, you do eliminate the opportunity to liquidate your assets should the price of a coin tank. This is important to consider with crypto because it is much more volatile than just socking your money away at a traditional bank.

You can only stake your crypto with coins that use a proof-of-stake protocol. This protocol requires significantly less energy to operate than the alternative proof-of-work protocol. Elon Musk single-handedly tanked the crypto market earlier this year with a single Tweet about the environmental implications of Bitcoin. This is why proof-of-stake coins are worth paying attention to and why staking could be a great way to generate digital passive income.

Other Ways to Make Money with Crypto

Buying and selling crypto isn’t the only way to make money with your Coinbase account. Internet 3.0 is here and with it, new opportunities to use your crypto profits to buy assets that could wind up increasing your overall net worth.

Buy and Flip NFTs

I’m obsessed with NFTs and there is a good reason why. NFTs are the digital extensions of culture. The same people dropping bank on StockX are slowly entering the NFT world.

You can use crypto to buy and sell NFTs in the same way you would use cash to buy and flip sneakers or sports cards. With cultural assets, you have to do your research and know what to look for. Some things are more collectible than others and thus will command a much heftier price tag.

Check out OpenSea.io and begin studying the NFT market for yourself. Look for undervalued pieces and begin buying them up. A 12-year-old made 6-figures selling his own NFT collection, what’s stopping you from making some extra cash flipping NFTs?

Lend Your Digital Assets

Lending digital assets is a newish concept to me but it makes sense. Think about it: decentralized finance is basically banking 2.0. The same people who figured out you could lend money to borrowers at the start of the 20th century are now doing the same thing with the blockchain.

NFT Fi is a lending service that allows you to use NFT assets as collateral to make loans to other collectors. They’ve even created their own Discord to moderate conversations on NFT-backed loans.

This is a very high-risk way to make money, but if you study NFTs and really become an expert on them, you could buy, sell, and lend your way to a small fortune.

Final Thoughts

Much to the chagrin of Jamie Dimon, crypto is here to stay. It gives little people like you and me the chance to sit at the adult’s table. If you don’t believe I refer you to the great GameStop Short of 2021 for evidence of this.

Coinbase isn’t the only way to buy crypto, but it’s the easiest. You can open your own wallet using MetaMask (which I also have) but that comes with its own risks. If you lose your seed phrase, you lose everything. There are wallets out there chock full of appreciated Bitcoin that have been lost forever.

Coinbase is a great way to dip your toes into crypto and the platform provides resources that allow you to learn more about decentralized finance. It takes a few minutes to set up and can be done from anywhere — I did it while living in my car. I’m six months into my own experiment with Coinbase and can report a net gain on my initial cash investment plus the procurement of my first NFT.

With a little homework you can not only use Coinbase to make money but you can use it to learn more about how the blockchain is powering an entirely new world of digital banking too.

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