Kraken describes itself as the “largest Bitcoin exchange in euro volume and liquidity.” The exchange was founded in July 2011 by Jesse Powell, who holds a bachelor’s degree in philosophy from California State University, Sacramento.
The exchange is headquartered in San Francisco, and serves users from the entire of North America—with the exception of New York because of the BitLicense—Europe and Japan. Anyone around the world can easily use its entry level services, such as price charts and statistics. As of January 2017 the cyrptocurrency platform was the world’s 2nd largest in terms of volume.
Kraken has gone through three funding rounds and raised $6.5 million in capital from 13 investors, including Money Partners Group, Blockchain Capital and Digital Currency Group. The company has also completed five acquisitions, including crypto market visualization platform Cryptowatch, Bitcoin exchange Coinsetter and Dutch exchange Clevercoin.
Following the bankruptcy of Mt. Gox, the trustees of the receivership picked Kraken as the platform through which claimants could apply to receive lost funds.
The following are the advantages of using Kraken:
- A very popular platform for intermediate or professional crypto traders and occasional users
- Kraken has an excellent rank (5th) on the list of leading cryptocurrency exchanges
- Support for an increasingly wide range of high-volume cryptocurrencies as well as fiat currencies
- Bitcoin Cash credited to all users promptly & now open for trading
- Very low fees compared to other more “beginner-friendly” exchanges like Blockchain.info or Bitpanda
- Pioneering transparency: Kraken was the first exchange to carry out proof-of-reserves auditing
- Free deposits for Euro, Canadian dollar, and Japanese yen
- Super fast SEPA withdraws: mine usually take no more than 2 days (so much faster than any other exchange)
- Very reasonable fees: fiat & cryptocurrency trades/withdrawals are much cheaper than on other exchanges
- Excellent security initiatives: two-factor authentication is encouraged using Google’s 2FA app
- Supports margin trading for users seeking greater exposures with smaller upfront capital
The following are the disadvantages of using Kraken:
- The user interface is not as beginner friendly as other exchanges like Coinbase or CEX
- Account verification times are no faster than competing sites such as Bitstamp or Coinmama
- Up to $15 fees for every fiat deposit and withdrawal through SWIFT (international banks)
- Occasional arbitrary closure of accounts has been reported (when fraud is suspected), though this not as common as on Coinbase
- Slow buggy execution of orders, sometimes failing or taking up to 30 seconds, which can result in loss of money for professional traders
- Often unresponsive customer support following the recent cryptocurrency bull-market & large influx of new users.
- Like most custodial exchanges, Kraken holds the private keys to your account’s crypto address
Interview of Kraken CEO
The above discussion with Kraken CEO, Jesse Powell, dates from 2015 and was recorded at the CoinSummit conference. For a more recent interview check out this podcast episode from April 2016 – Trace Mayer and Jesse Powell discuss the past, present, and future of Kraken.
Services Available on Kraken
Users can buy and sell cryptos, as well as margin trade. Here are the 15 crypto coins currently supported by Kraken:
- Bitcoin (XBT)
- Ethereum (ETH)
- Monero (XMR)
- Dash (DASH)
- Litecoin (LTC)
- Ripple (XRP)
- Stellar/Lumens (XLM)
- Ethereum Classic (ETC)
- Augur tokens (REP)
- Iconomi (ICN)
- Melon (MLN)
- Zcash (ZEC)
- Dogecoin (XDG)
- Tether (USDT)
- Gnosis (GNO)
- EOS (EOS)
Fiat currencies supported on the exchange include euros, Japanese yen, US dollars, Canadian dollars and British pounds. Fiat deposits and withdrawals are completed through SEPA, Swift, and bank wires. US users can deposit and withdraw through bank wire service, which costs $5. Bank wire transfers from outside of the US cost US$10, €10 or £10. If you are in Canada, you can deposit or withdraw Canadian dollars (CAD) through bank wire at no cost. Users in the European Economic Area can deposit and withdraw using free SEPA wire transfer. Meanwhile, Japanese users can deposit and withdraw any amount below ¥5,000 through bank deposits free of charge. Kraken released a mobile app for iPhone in September 2014. However, reception has never been good. While users praise the smoothness of the mobile version of the website, they complain that the app is full of bugs and rarely works. The app has a rating below 3 in Apple App Store. As for the website, most beginners prefer to avoid Kraken because the website layout can be slightly confusing. However, most advanced users don’t seem to complain about the interface.
Who Uses Kraken ?
This review of Kraken would not be complete without giving you an idea of where and how people are using the site. Kraken ranks second after Coinbase in terms of website traffic according to similarweb.com. The exchange comes before Bitstamp, Xapo and Bitsquare, in that order. However, among the top five global cryptocurrency exchanges, Kraken claims the highest mobile use percentage (38.46%). Each of the others receives less than 27% of their traffic through mobile devices.
In terms of volume, CoinMarketCap usually ranks Kraken as between the fourth and sixth largest exchange. Those most of the time ahead of it include Bithumb, Bittrex, Bitfinex, Poloniex and OKCoin.
Kraken offer the lowest fees compared to all other major exchanges. For example – when I withdraw Euros through SEPA bank transfer I’m only charged 0.09€ by Kraken. That’s pretty amazing compared to the hefty 10€ average fee that corporate banking institutions charge their clients. Good job to these guys!
Fees depend on the tier in which your account belongs. The higher the tier and the amounts involved, the lower the fees you pay. Fees are calculated as percentages of trade volumes, and they range between 0% and 0.26%. Both the buyer and the seller are charged fees, with a buyer in a trade paying more than a seller.
The fee amount also depends on the currencies involved. A pairing of cryptocurrencies incurs lower fees than one that exchanges fiat with cryptocurrency.
In addition to percentage-based fees, users pay a flat processing fee of $60 per page for paper copies of communications.
Creating a Kraken account
Signing up for an account on Kraken is similar to creating an account on most online platforms. As described below, the exchange has included extra features on the signup page to secure and protect user accounts. The platform also meets Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements from US regulators.
The first step when signing up is to input your email address and create a password that is at least eight characters long and includes letters, numbers and special characters. You also have the option to share a PGP (Pretty Good Privacy) public key that the platform can use for added security when sending you emails.
You are also prompted to create a master key that gives your account a second layer of security that includes two-factor (2FA) login protection. This is especially useful when changing passwords or switching devices. The master key can be a password, a Yubikey password or public/private key pair, or Google authentication. You will need to store your master key separate from your other login credentials.
The second step in signing up is to activate your account. You’ll receive an email with an activation key that you then copy and paste into a second form. With this done, you gain access to your account.
The entire process takes between five and ten minutes and is largely smooth and easy to follow.
While Kraken has never had a major security incident like those experienced at Mt. Gox or Bitfinex, in July 2016 several users reported having their accounts hacked and funds stolen. Kraken later reported, however, that almost all the users affected failed to use two-factor login protection.
While Kraken provides users with public addresses for depositing cryptos to accounts, it holds the private keys to those public addresses. Therefore, as a user you have to trust their honesty and capacity to keep your cryptos safe.
Kraken exchange offers five types of accounts (aka – “tiers”). Immediately after you sign up, you get a tier 0 account. What differentiates the different levels is primarily the daily and monthly limits on fiat and cryptocurrency deposits and withdrawals.
The different tiers also expose you to different fee structures. The higher the account tier, the lower the fees you pay per trade. I actually found that upgrading to a different level was far easier than I had initially thought.
The tier 0 account allows neither deposits nor withdrawals of fiat or crypto funds. Therefore you can do little with a tier zero account except access price statistics and trading charts. To really get the feel of Kraken, you need to upgrade to tier 1 account.
With a tier 1 account, you can deposit and withdraw cryptos. There are no daily or monthly limits to how much you can deposit. However, you can only withdraw less than $2,500 worth per day and $20,000 per month. The account allows trading between different cryptocurrencies, but not between cryptos and fiat currencies. To qualify for a tier one, you need to update your profile with your full name, your date of birth, country of residence and telephone number. You may have to wait from one to three days after providing these details to be verified as a tier 1 account. The waiting period can be longer for people outside North America, Europe and Japan.
When you get a tier 2 account, you are eligible to deposit fiat currency up to $2,000 daily and $10,000 a month. You can also withdraw $2,000 in fiat daily and $10,000 per month. The amount of cryptocurrencies you can withdraw increases from $2,500 per day to $5,000. The monthly limits go from $20,000 to $50,000. To qualify for tier 2, you need to share your postal address with the exchange. Just like the previous tier, you may have to wait for several days for approval.
I just love the sizable volumes that this verification level enables – perfect for a serious trader. Indeed tier 3 affords you a daily limit in fiat deposit of $25,000 and a monthly limit of $200,000. The withdrawal limit for fiat currency increases to $25,000 and $200,000 monthly. The amount of cryptos you are allowed to deposit daily rises to $50,000 and monthly to $200,000. To qualify for a tier 3 account, you need to provide a government-issued ID and verify proof of residence by providing a copy of a utility bill no more than three months old. US citizens must provide a social security number. You are also required to upload an ID-confirmation photo. This is a picture of you holding the ID you provided for verification, alongside a handwritten, signed and dated note reading: “Only for trading digital currency on Kraken”
This level is reserved for corporate entities or for individuals trading at high volumes. I’ll be honest – I haven’t reached this tier yet and probably never will. Nevertheless, accounts in tier 4 can deposit daily amounts of up to $100,000 in fiat currency and $500,000 monthly. Withdrawal limits for both fiat and cryptos are $100,000 daily and $500,000 monthly. To get a tier 4 account, you need to contact support.
Similar alternatives to Kraken
Here are some Kraken alternatives that are very similar in terms of functionality and reputation:
- Gdax.com – high-volume pro trading crypto exchange (USA)
- Bitfinex.com – leading bitcoin exchange for day traders (Hong Kong)
- Poloniex.com – 2nd largest crypto exchange. Recent issues, as shown in my review of Poloniex. No fiat deposits (USA)
- Bittrex.com – largest crypto exchange. Recently overtook Poloniex in terms of monthly traffic.