We compared the features that are the most relevant for traders in 2020 for Canadian Bitcoin Exchange. These include funding and withdrawal methods, insured balance offerings and advanced trading features. Here’s what we found. As we head into the final quarter of the year, it’s no question that 2020 has been one of the most active years of cryptocurrency trading and innovation to date. The economic windfalls from the COVID-19 pandemic and resulting government “money printing” has made many re-assess the advantages of cryptocurrency as an asset class, with Bitcoin and DeFi leading the charge.

More mainstream than ever, Bitcoin has seen strong performance compared to traditional assets, as investors have looked for ways to invest their money outside the inflationary fiat currency landscape. Additionally, the DeFi rush has proven that a new class of financial products have arrived.

With the renewed excitement in the global market, the demand for Canadians to buy Bitcoin and other cryptocurrencies has continued to grow.

With new domestic and foreign trading platforms vying for Canadian Bitcoin Exchange dollars, and an increased focus on transparency, insured offerings and lower fees, the space is more competitive than ever.

To accomplish this, we partnered with Tokamak Inc., a leading crypto market data coverage company. Tokamak uses data science to combine hard-to-acquire data from the web to generate actionable intelligence about the crypto-asset industry.

Methodology – Canadian Bitcoin Exchange Comparison

We wanted to provide a holistic view of all of the trading platform offerings. Instead of looking just at fees, we analysed the entire experience. We evaluated the feature set, the fee methodology and funding and withdrawal processes for all platforms. We also wanted to highlight how much Bitcoin trading volume these platforms have on a daily and yearly basis. This can tell us if they are amateurs just getting off the ground, or if they are established players that operate like well-oiled machines selling millions of dollars of crypto assets on a daily basis.

Also, with Canadians still stinging over QuadrigaCX, corporate transparency, proof of solvency and insured offerings are newer themes that customers are looking to for their crypto platform of choice. We wanted to examine which firms were taking these additional measures and which aren’t.

Working alongside Tokamak, we were able to take a look at the publicly available market data. We also made trades on all of the platforms mentioned to measure pricing and to see if there were any additional fees incurred that were not mentioned in the affiliated fees page.

Feature Comparison Findings

*Click here to see the glossary

Here’s what we found:

Funding: Interac e-Transfer funding has emerged as the most convenient and easy way to fund your cryptocurrency account in Canada. Most platforms in Canada offer Interac e-Transfer and bank wires are also a common funding option which is used for larger amounts. If a platform offers Interac e-Transfer it’s a good indication that they are integrated with the Canadian banking system. Notable platforms that do not offer e-Transfer funding are Kraken Coinbase and Wealthsimple. They offer alternative ways to fund your account such as wire transfer, pre-authorized debit or credit card. It should be noted that credit cards are typically not a great way to buy cryptocurrency because credit card companies often consider buying cryptocurrency a cash advance, since you are trading one currency for another. Funding your account with cryptocurrency is also an important feature you may want if you are looking to move crypto assets from a secure wallet or another exchange to your account. All reviewed platforms offer this functionality with the exception of Wealthsimple.

Withdrawals: Interac e-Transfers, wires and direct debit are all great ways to withdraw funds from your account. There is also the matter of withdrawing cryptocurrency from your account to secure wallets or another exchange. Withdrawing your crypto to a personal wallet is considered best practice and most platforms allow this, however you will need to read the fine print to make sure the platform you want to use offers this. For example, Coinberry has certain coins they don’t allow withdrawals of, while Wealthsimple doesn’t allow crypto withdrawals at all.

Trading: As for the trading experience, some key areas of focus are limit orders, availability of coins, and a reliable OTC concierge service. As we mentioned previously, crypto can be extremely volatile. Being able to set your own price with a limit order can help users trade more responsibly, and create a predictable entry and exit points for their positions. Of the platforms listed, Kraken has the most trading features including limit orders, futures, stop loss, take profit and settle position orders. Coinsquare, NDAX and Bitbuy are other Canadian Bitcoin Exchanges that offer limit orders and live order books if trading transparency is important to you.

Security: Platforms conducting proof of reserves audits are an emerging trend, with Kraken, Bitbuy and Shakepay and VirgoCX all recently completing them. Proof of reserves are important because they are 3rd party proof that the platform holds on to the funds they say they do, and that they aren’t improperly storing or using client funds. This has been especially important to customers who were burned by Quadriga, Einstein or EZBTC. Also, how crypto is stored is incredibly important. Most of the platforms listed use cold storage for client funds, but having that cold storage insured is a step only a few platforms seem to have taken. Bitbuy, Shakepay, and VirgoCX are the Canadian Bitcoin Exchanges that recently announced insurance for some or all of their crypto holdings.

Transparency: There are two main ways platforms can push transparency. First off, transparency in how they make money, by disclosing their full fee model. Secondly, transparent exchanges with order books will publicly display trading volume, via an API or site aggregator such as CoinMarketCap. It’s good to know how much value is flowing through a platform at any given time. This can tell you if the platform is reputable with other traders, what type of traders are using it, and most importantly, what’s available at each price point so that you can plan trades accordingly. Kraken, Bitbuy and Newton all offer direct API connectivity as well.

Trading Comparison Findings

*Click here to see the glossary

Although different exchanges offer different coins and trading pairs, the one common denominator is Bitcoin. We decided to evaluate the trading experience based solely on Bitcoin since 70% of all trading volume in Canada is based on BTC.

Tokamak used existing connections to tap into publicly available market data. They also conducted trades on all of the platforms listed where API data is not available in order to stack up the pricing.

For the baseline price, we used the price displayed on Google when searching “BTC to CAD”. This data is provided by Coinbase, and represents a direct USD to CAD conversion of their going rate for 1 Bitcoin. We chose this price because it would typically be the most common way a Canadian would check the price of Bitcoin at a given moment if they were not active on any platform.

Buy price: At the time of the snapshot, Bitbuy had the lowest buy price compared to the reference price, with only a 0.01% difference. Kraken had the second-best buy price with a 0.42% difference. The highest buy prices were found at Wealthsimple and Coinberry with a 1.89% and 2.43% difference from the reference price respectively.  It was noted that the platforms with professional trading tools and transparent order books had the lowest buy prices where the brokerage style platforms had higher prices. This could speak to the clientele that both platforms attract, where the more price conscious and sophisticated users are flocking towards the more advanced Canadian Bitcoin Exchanges.

Sell Price: Kraken, one of the largest platforms in the world by trading volume, had the highest sell price at the time of the snapshot. As the exchange with the deepest order book, this was not surprising. Wealthsimple and Shakepay had the two lowest sell prices.

Spread: Kraken also had the lowest spread, meaning their buy price and sell price was the closest between any of the platforms. Bitbuy had the second-lowest spread. The largest spreads were seen on Wealthsimple, Coinberry and Shakepay. It’s no surprise that these platforms have the highest spreads considering their fee models, which is to say they make up for the loss in revenue with no deposit or withdrawal fees in their spread.

Volume: Kraken and Bitbuy seem to have the most active order books, as they both show significantly more volume when looking at the 24 hour period. This is good for traders because it means other users are actively trading, and you are likely to find a consistently low spread compared to less active platforms. Coinsquare was among the highest of 2020 volume, although there are questions whether their volume can be considered 100% legitimate due to recent sanctions from the Ontario Securities Commission. It’s worth noting Shakepay, Coinberry, Newton, and Wealthsimple do not have publicly available data.

Fees: The fee model for platforms is often the most talked-about comparison point, and we’ve shared all data about how these platforms collect fees in the chart above. To paint a fair picture, we decided to take a look at the total all-in price that one pays when purchasing Bitcoin. This cuts through the semantics of “no deposit fees” and “no trading fees” that many platforms use, and factors in the spread, and all associated platform fees if they apply. We call this fee the “best purchase fee”. It was found that Bitbuy, Kraken and Newton had the three lowest “best all in purchase fees”, while Coinbase had the highest at 4.47%.

Conclusion- Canadian Bitcoin Exchange

We encourage you to use the information compiled to make your own decision based on what you are looking for in a Canadian cryptocurrency platform. We hope we have painted a more holistic picture of how these Canadian platforms make money and cut through the marketing-speak of how each platform positions themselves.  Whether it’s a certain feature, a certain type of fee model, or just the best buying price, you now should have all the information needed to make an informed decision about the best place to buy Bitcoin in Canada.

Glossary of Features:

Interac e-Transfer: Interac e-Transfer is a money transfer service through participating Canadian financial institutions offered through Interac Corporation. It’s a simple way to transfer value from bank account to bank account. Typically, there are $3,000 limits per 24 hours implemented by banks.

Bank Wire: A Swift bank wire is a messaging network used by banks and other financial institutions that allows you to quickly and securely send larger amounts of funds. Usually, one is required to go into their bank and confirm their identity in order to send this out.

Pre Authorized Debit:  A direct bank connection debit, powered by Plaid or another similar technology. Money can be directly credited or debited from your bank account once you have given approval.

Crypto Deposits & Withdrawals: Ability to deposit and withdraw crypto assets via crypto wallets. This allows you to fully participate in the crypto economy by transferring to external wallets, platforms, staking pools, merchants and more.

Insured Crypto Balances: Insurance coverage for client crypto assets against loss due to theft, and other conditions.

Proof of Reserves: Proof of reserve audits are reports conducted by trusted 3rd parties that review platforms custodial practices and ensure that they are actually holding on to all the digital currency they say they are.

Transparent Orderbook: All of the live limit orders on both the bid side and ask side are viewable on a publicly viewable order book.

Limit Orders: A limit order is a type of order to purchase or sell a security at a specified price or better. For buy limit orders, the order will be executed only at the limit price or a lower one, while for sell limit orders, the order will be executed only at the limit price or a higher one.

Matching Engine:  An electronic system that matches buy and sell orders for a trading market. This is the core technology that runs a stock or cryptocurrency exchange. A matching engine will also determine if an order will be fully or partially filled.

Public API: A publicly available API that can be used to pull live data or perform algorithmic trading. Other functions include powering crypto ATM’s or other businesses.

Public Volume: Data publicly displayed on a platform data aggregation platform such as Coinmarketcap, CBIX, or CoinGecko.

OTC Concierge Service: Over the counter concierge service for larger transactions. These trades are completed “off book” and can save time and fees.

Futures trading: Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. Here, the buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.

Glossary of Trading Terms:

Best Sell Price: This is the best possible price to sell BTC on the platform at the time of the snapshot. Also known as the ‘bid’ price on platforms featuring limit orders.

Best Buy Price: This is the best possible price to buy BTC on the platform at the time of the snapshot. Also known as the ‘ask’ price on platforms featuring limit orders.

Spread: The spread is the gap between the bid and the ask prices of a security or asset. Otherwise known as the difference between what you can buy and sell an asset for.

24 Hour BTC Volume: Volume is the amount of an asset that changes hands over some period of time, often over the course of a day. This is the number of Bitcoins traded on the platform in the last 24 hours.

2020 YTD BTC Volume: This is the number of Bitcoins traded on the platform year-to-date in 2020.

Reference Price Difference: The percentage + or – that the platform’s price differs from the reference price used for the snapshot.

Reference Price: The price that was taken from Google and used for the snapshot. The reference price on Google is powered by Bitcoin data from Coinbase and uses a BTC/USD market price with a USD/CAD conversion rate from Morningstar.

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