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Kraken review

Kraken Review: High Liquidity Markets for Advanced Traders

Kraken in Brief

Founded in 2011, San Francisco-based Kraken became the largest Bitcoin exchange in euro volume before expanding into the US, Canada, the UK and Japan. Low transaction fees, high liquidity and advanced trading tools make Kraken a popular choice among experienced investors. Newer cryptocurrency traders can take comfort from Kraken’s conservative approach to coin storage, security and financial management.

That conservative approach has earned Kraken respect in the traditional financial industry. The Chicago Mercantile Exchange uses Kraken’s bitcoin pricing data as part of its bitcoin futures market.

Kraken’s rapid growth, however, hasn’t been trouble-free. Customers have complained about system downtime during trading volume spikes, inconsistent response times from customer service and slow processing of transactions. A new trade engine implemented in early 2018 had a rocky start but promises to better-handle the exponential growth Kraken has seen over the past few years.

Update: Kraken added support for Cardano (ADA) and Quantum (QTUM) in September 2018.

Pros

  • High liquidity
  • Proven reserves
  • Fiat and digital currencies
  • Advanced trading tools
  • Compliance with financial regulations

Cons

  • Downtime during trading volume spikes
  • Slow processing of deposits and withdrawals
  • Not enough support staff for growing customer base
  • All-but-abandoned iOS app

Keep reading our detailed review to find out everything you will need to know about whether the Kraken exchange is the right place for your digital currency trades.

What is Kraken?

History

Kraken’s founder, Jesse Powell, was already a long-term blockchain enthusiast when he was asked to help with the first hack of the Japan-based Mt. Gox exchange. The sloppy management and weak security made Powell realize that the bitcoin community needed a more professionally-run exchange.

Powell founded his San Francisco-based company, Payward, in 2011 and set to work creating a cryptocurrency exchange that could gain acceptance by the traditional financial industry and its regulators. Kraken emerged from public beta two years later. Within a year, the startup had the largest trading volume of any euro-based exchange.

After Mt. Gox collapsed into bankruptcy 2014, the Japan’s court-appointed trustee selected Kraken to search for and distribute missing bitcoins.

Kraken turned its attention back to North America in 2016 when it acquired two exchanges, the US-based Coinsetter and Canada’s Cavirtex.

Leadership and investors

Kraken CEO Jesse Powell
Source: Kraken

Jesse Powell continues to lead Kraken as the company’s CEO and is the public face of the exchange in the press and industry conferences. Other executives include:

  • David Ripley, chief operating officer: Ripley’s career started in enterprise software development. After getting his MBA, Ripley spent nearly seven years at Boston Consulting Group. He left to join the startup scene and founded blockchain tech company Gildera.
  • Christina Yee, chief brand officer: Yee joined Kraken from advertising agency gyro where she advised Fortune 500 brands. Prior to that, Yee leveraged her training in psychology to pursue a successful career in professional poker.
  • Kaiser Ng, chief financial officer: Ng joined Kraken after heading studio operations at game developer DeNA. Previously, Ng held senior finance positions in the Canadian tech and energy industries.

The privately-held start up has received Series A and Series B funding from Hummingbird, Trammel Ventures, Blockchain Capital, Money Partners Group and other investment groups.

The company’s early individual investors include Bitcoin Foundation Chairman Brock Pierce and BitGo co-founder Ben Davenport.

Protecting customers’ coins

Kraken takes a conservative approach to its operations designed to reassure cryptocurrency investors that they can trust their digital assets with the exchange.

Legal and regulatory compliance

Despite cryptocurrency’s unregulated status, Kraken operates as if it was subject to financial regulations. A panel of advisors and Kraken’s General Counsel conduct regular reviews of the regulatory environment and adjust Kraken’s policies accordingly.

The German-regulated Fidor Bank holds the funds from Kraken’s customers separately from Kraken’s operating accounts. The firewall between the two accounts means Kraken executives cannot borrow from the customer accounts to cover gaps in the company’s operations.

Coin listing policies

Kraken does not automatically accept every new cryptocurrency. It conducts a detailed review to filter pump-and-dump, experimental and other high-risk digital currencies.

Network security

Physically secured servers in a third-party data center, customer support, account verification and other business functions operate on their own separate, secured wired networks.

Kraken holds its customers coins in a combination of cold, semi-cold and hot wallets. Most coins remain in an air-gapped cold wallet with no online connections. The hot wallet only holds enough coin to provide liquidity for trades. A semi-cold wallet bridges the gap between the two to buffer trading spikes.

Customers can combine two factor authentication (2FA) for login, funding, trading and other actions with a separate 2FA Master Key for added security. Passwords, verification documents and other account information are encrypted and held behind multiple layers of secure systems. Customers can use PGP/GPG encryption to secure all email communication with Kraken.

Customer Support

Kraken handles customer support through a self-serve knowledge-base, a ticket system for registered customers and by monitoring social media and online forums.

Kraken does not provide telephone support. Any sites claiming to be Kraken phone support are scams.

Kraken reputation

Just about every cryptocurrency exchange struggled to deal with the massive influx of new traders in 2017. You can read tales of outrage in the various forums as people complain about the weeks and months it took for Kraken to process account transfers.

How to Join Kraken?

Who can join?

Kraken is available in for residents of Great Britain, the Euro Zone, Canada and Japan.

However, the fragmented nature of America’s state-by-state banking regulations means Kraken is not available everywhere in the United States. Creating an account is the only way to find out if Kraken is available in your state.

New Yorkers are definitely not on the list. Kraken refuses to accept the burden of working under New York’s BitLicense scheme.

Verification

Kraken verification tiers
Source: Kraken

Individual accounts

Kraken offers five verification tiers for individual traders that enable different levels of access and trading limits. Kraken approves Tier 0 automatically. Verifications for Tiers 1 and 2 usually come through within hours. Higher tiers require confirmation but generally get verified within a few business days.

  • Tier 0: Register with an email address to look around the Kraken interface
  • Tier 1: Register with your full name, date of birth, country of residence and phone number to deposit and withdraw digital currencies. Within the Kraken exchange, your trades can include fiat currencies.
  • Tier 2: Include your address to conduct transactions in digital currencies and, in certain countries, fiat currencies. Bank deposits and withdrawals may be available as well.
  • Tier 3: Provide a picture of a government-issued ID and proof of residence. This is required to deposit fiat currencies in Canada, Germany, Japan, the United States and other countries.
  • Tier 4: A signed application form and Know Your Customer documents open the higher funding limits in Tier 4.

Kraken is still working through the legal process of enabling certain tiers in some countries and certain US states. If you meet all of the requirements but reside in one of those areas, Kraken may grant you “Pre-Verified” status and access to services at a lower tier. As soon as Kraken makes it through that area’s bureaucracy, Pre-Verified customers automatically receive Verified status.

Business accounts

Businesses do not go through the same verification process. A separate application form sent through Kraken’s support system begins the business application process. Once complete, businesses receive much higher trading limits than individual accounts.

What You Can Trade on Kraken

Kraken supports seventeen different cryptocurrencies and five fiat currencies

Cryptocurrencies

Kraken accepts trades in seventeen digital currencies:

Auger REP tokens, Bitcoin, Bitcoin Cash, Dash, Dogecoin, EOS, Ethereum, Ethereum Classic, Gnosis, ICONOMI, Litecoin, Melon, Monero, Ripple, Stellar/Lumen, Tether, Quantum, Cardano and Zcash.

Fiat currencies

Kraken supports five fiat currencies: British pounds, Euro, US dollars, Canadian dollars, Yen

Currency exchanges

Kraken lets you make straight exchanges between one currency and another. This allows simple transactions like buying bitcoin or cashing out your bitcoins.

Advanced trading

Kraken allows you to place margin positions on currency-pair trades. Kraken’s system includes settings like stop loss and profit targets that let you control your risk.

Your Verification Tier will determine the size of trades you can make as well as the amount you can leverage your account. A Tier 1 customer, for example, will see margin limits of only USD1,000 while Tier 4 customers can borrow up to USD500,000.

Kraken customers in the United States can only keep their margin positions open for 28 days. Once that expires, Kraken must automatically liquidate the position without warning and without regard to any losses you may take.

Trading Tools and Fees

Trading interface

When you first set up a Kraken account, you’re presented with a simple, tabbed interface opened to the Trade tab. The Overview page gives you an at-a-glance summary of your account, trades, positions and ledgers. The Trade tab has additional pages where you can manage your orders, positions and trades.

Top of Kraken account page
Source: Kraken

Other tabs in the interface let you deposit and withdraw funds, manage your password and 2-Factor Authentications, account settings, and view your trading history.

Bottom of Kraken account page
Source: Kraken

There is also a dedicated tab for the verification process. All new accounts are set to Tier 0 by default. Levelling up to higher tiers requires going through each verification step. You can’t go straight to Tier 3, for example, without first completing the Tier 1 verification.

For the best trading experience, Kraken recommends using the Kraken Trading Platform rather than the account interface. This web app provides a consolidated presentation of charts, trends and trades so you don’t have to constantly switch between tabs.

Kraken trading web app
Source: Kraken

Mobile app support

Kraken does not support Android, but did release an app for iOS in 2014 with a limited feature set that let customers monitor market trends and their accounts. Two months later, Kraken added the ability to create and cancel trades.

Kraken has not released a major update to the app since adding support for iOS 8 and the iPhone 6 in October 2014. The last minor update added Japanese localization in mid-2015.

Customers complain that the app is difficult to use, slow to load, bug-prone and uses inconsistent assumptions for displaying similar numbers.

Unsurprisingly, Kraken’s customers have little nice to say about the app. More than 90% of the reviews give the app a single star. Overall the Kraken iOS app has a 1.3-star rating.

Deposits and withdrawals

Kraken fee schedule
Source: Kraken

Kraken charges fees to any transfer many currencies, fiat or digital, into or out of your account. These fees do not include any charges banks may apply to the transactions. For most fiat currencies, Kraken relies on wire transfers to and from banking institutions. Euro-zone customers can choose to use low-cost SEPA transfers.

As of March 2018, Kraken charges the following deposit and withdrawal fees:

Fiat currencies

Kraken only applies deposit fees to Euro wire transfers and US transfers. Euro SEPA deposits, Yen deposits and Canadian dollar wire deposits are all free. All fiat withdrawals incur a fee. Euro SEPA withdrawals are charged only €0.09 while Canadian dollar withdrawals are charged $10 CAD.

Digital currencies

Few of the digital currencies on the Kraken exchange will incur a deposit fee. EOS, Gnosis, ICN Melonport and REP deposits require an address setup fee. Kraken charges transaction fees for Ether, Ether Classic and EOS deposits.

Kraken charges fees on all digital currency withdrawals. Each bitcoin withdrawal, for example, will incur a ฿0.0005 fee.

Transaction fees

Kraken’s fees vary based on the currency pairs your exchanging and your trading volume. The fee schedule is structured on a maker-taker basis that rewards trades that add liquidity to the exchange.

Customers who conduct fewer than 50,000 trades over the previous 30 days pay the most in the case of Bitcoin-USD trades, 16 basis points for makers and 26 basis points for takers. Above 10,000,000 trades per 30-day period, the transaction fees fall to zero for makers and 10 basis points for takers.

Final word

Kraken is one of the digital currency exchanges that tries to conform with the standards and practices of the traditional financial industry. As a result, Kraken has implemented stringent verification requirements, tougher security measures, and more robust financial management practices.

Once Kraken gets its systems scaled to handle the massive influx of new traders, those policies will help establish Kraken as a trusted financial institution.

For new traders

Kraken’s approach to security and compliance should reassure those new to the cryptocurrency scene. While security is never perfect, Kraken has taken steps to ensure that, even if it does get hacked, the potential loss will be minimal. For example, Kraken keeps most of the coins it manages in a secure, offline cold wallet which requires multiple authorizations to access.

Having said that, Kraken’s trading interface has a learning curve that does little to guide novices through their first trades.

For advanced traders

Kraken’s management decided to focus on a limited portfolio of cryptocurrencies. Traders who are more open to risk may not find the coins they are looking for among the seventeen currencies Kraken offers.

On the other hand, those traders who prefer dealing in high-liquidity digital currencies will appreciate the high trading volumes that a large exchange like Kraken offers.

Christopher Casper

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