Table of contents
- Overview and History
- Kraken Products
- Kraken OTC Desk
- Kraken Institutions
- Kraken Mobile App
- Kraken Staking
- Kraken Dark Pool
- Kraken Main Exchange
- Fiat Gateways
- Deposit and Withdrawal Fees
- Kraken Margin Trading and Derivatives
- Kraken Futures and Perpetual Swaps
- Perpetual Swaps
- Funding Fee
- Futures Contracts
- Revenue Share Program
- Kraken Customer Support
- Operation Security
Overview and History
Kraken is one of the oldest and most well respected crypto exchanges in the world. They are an established player having been operational since 2013 with its parent company, Payward, being established in 2011. The founder, Jesse Powell, actually helped out in Mt. Gox’ hack. Mt. Gox was the largest bitcoin exchange in the world at that time handling around 70% of all transactions by 2013. Although Mt. Gox suspended trading and filed for bankruptcy in 2014, the hack can be traced back to 2011. That’s when Jesse Powell was asked to help and offer his expertise. After leaving his trip in 2011, he decided that there has to be a better and safer exchange, and 2 years later, Kraken was born.
Kraken is a crypto exchange offering both crypto and fiat denominated pairs. It was developed to provide a safer, fairer trading system using digital ledger technology. Although being a U.S. company, Kraken dominates the EUR crypto pairs globally making it a favorite among european customers. They handle around $500m worth of transactions daily. They currently have over 800 employees worldwide.
As of March 2020, Kraken supports all countries except Afghanistan, Cuba, Guinea-Bissau, Iran, Iraq, Japan, North Korea, Tajikistan. Kraken serves the entire U.S.A. except for the states of Washington and New York. Residents of Texas and New Hampshire are not allowed to trade or hold EUR pairs.
Kraken is also a favorite among institutional players (e.g. banks, hedge funds, High Networth Individuals) because of their unscathed security record. To date, Kraken has never had a security breach or hack. This is something that most crypto exchanges cannot say.
Kraken has been strategically acquiring other exchanges and companies as well. This is a quick way for them to expand their user base as well as offer more and better services to its users. Here’s a list of their acquisitions over the years. Kraken Acquisitions Archives
- January 2016 – American exchange, Coinsetter and Canadian exchange, Cavirtex
- June 2016 – Dutch Bitcoin Exchange, CleverCoin
- December 2016 – Wallet funding service, Glidera
- March 2017 – charting and trading platform, CryptoWatch
- February 2019 – U.K. regulated Futures platform, Crypto Facilities
- January 2020 – Australian cryptocurrency exchange, Bit Trade
While Kraken offers a comprehensive trading experience for retail traders, most of their new products are catered towards institutional players.
Kraken OTC Desk
OTC Bitcoin and Crypto Trading Exchange
Kraken Over-the-counter (OTC) desks allow trading to take place outside of the Kraken exchange. This allows big buy and sell transactions among bigger players to happen without moving the market or draining open orders from the market. They offer deep liquidity and a private, more personalized service to institutions and high net-worth individuals. This is available for all tradable pairs on Kraken including EUR, USD, and BTC. Whether you are trading blocks of $100,000, €10,000,000 or 2,000 Bitcoin, they can help you handle it in a discreet, secure and ultra-competitive way.
Institutional Cryptocurrency Trading
Again, touching on institutional products, Kraken offers the highest available API and funding limits, priority on-boarding and access to Kraken’s complimentary account management service catering to institutional clients such:
- Investment Banks, Brokers & FCMs
- Mutual, pension and hedge funds
- Insurance Firms, Endowments and other Asset Managers
- Proprietary Trading Firms, High-frequency Trading Firms, Algorithmic Trading Firms
- Crypto-related business, ATMs, Crypto Payroll, Wallet Services
Kraken Mobile App
Kraken’s mobile app, Kraken Pro, is quite new launching in October of 2019. While it does offer in app trading and interactive charting, setting it up can is different from the normal way of entering username and password. You will have to access the API tabs and generate new keys. You can limit the activities for each API key you generate. You then enter this to your mobile app or you can also scan it with your QR code. This is a good way to allow users more flexbility when it comes to security.
One thing that I found to be bothersome is that they have a separate app for their futures trading platform. Given that futures accounts are different altogether, this makes sense. Hopefully, they integrate both platforms together in the future for a more seamless mobile experience.
Kraken’s staking service follows the growing trend of staking services offered by exchanges. Kraken launched this service in December 2019. Instead of your funds just staying in the wallet, staking services allow it to earn interest based on the network’s annual reward rate (inflation rate). Right now, they offer the staking service for Tezos (XTZ) but plan to add a service for both ATOM and DASH as well. For the case of XTZ, annual yield is around 6% with 0 fees and payouts paid twice a week. This is definitely a great offer for those holding these tokens.
Kraken Dark Pool
Kraken’s dark pool service is another offering catering to institutional players. On a normal open exchange, placing a large buy or sell order can impact the market in certain ways. Seeing a large buy wall, other users might try to front run it and sellers might close their orders. This proves difficult for big traders to trade big amounts. Dark pool service is a separate orderbook where users only see their own orders. This allows them to anonymously send big buy and sell orders without revealing their interest to others. Currently, dark pool services are offered only for Bitcoin and Ethereum pairs. The minimum order sizes are 11.5 BTC (~100k USD) and 375 ETH (~50k USD).
Kraken Main Exchange
Kraken Order Forms
Kraken’s interface can be quite confusing when you’re used to other exchanges. For one, you won’t see charts when you click the trade tab. What you will see is an order form. The three types of order forms are : Simple, Intermediate and Advanced. The simple order form allows you to choose between buy and sell, market or limit order and finally the amount you would like to transact. The intermediate order form allows you a few more options like order start date and time, order expiry, as well as the leverage you would like to use. The advanced order mode allows an additional option to choose conditional closing types. It lets you choose between limit order, market order, stop loss order, take profit and settle position. These allows more flexibility for traders and most of these features aren’t seen on other exchanges.
Kraken pro is their trading mode that shows the charts, order books and market depth, what you will see with most exchanges. The drawing tools are available here. This is their custom built trading platform unlike other exchanges that integrated TradingView formats and charts. You will notice the tools here are very limited to the basics such as fibonacci, drawing tools and shapes. The indicators available are already preset. If you’re used to other exchanges full list of features, this will seem archaic and very limiting.
One of the main selling points of Kraken is that their exchange is heavily trading fiat to crypto pairs. Not only do they have great liquidity for these pairs, they also offer multiple deposit and withdrawal options for fiat. This means users can deposit fiat directly to Kraken and trading ASAP. They no longer need to convert to stable coins.
Before depositing, you will have to perform standard KYC. Here are the requirements for each account level. By providing more details and doing more KYC, more features (like futures trading) and higher withdrawal limits are will be made available.
Deposit and Withdrawal Fees
Crypto Deposit Fees
While most exchanges will not charge for deposits, Kraken charges for some crypto currencies such as ALGO, XTZ and ATOM. There is both an address setup fee (one time) and a deposit fee (for every deposit). There is also a minimum amount in order for it to be credited to your account. You can see the deposit fee schedule here: Kraken Cryptocurrency deposit fees and minimums
Crypto Withdrawal Fees
You will be charged a withdrawal fee every time you make a withdrawal. The fees and withdrawal minimum differ depending on the crypto currency. You can see the withdrawal fee schedule here: Kraken Cryptocurrency withdrawal fees and minimums
Fiat Withdrawal and Deposit Fees and Options
Being a fiat to crypto heavy exchange, Kraken not only supports a lot of major fiat currencies but also work with many payment and bank partners. Working with SWIFT is a major plus for big institutions since this is how they usually move their funds. Below you will see the USD and EURO deposit options. Different banking and payment partners will have different minimums, fees and processing time. For the full list, check this link: Fiat currency deposit options (fees, minimums, and processing times)
As for withdrawal, all the details are seen below. Not all will have a withdrawal option so you have to check this list beforehand. All first time fiat deposits will also have a temporary 72 hour withdrawal lock. Fiat currency withdrawal options (fees, minimums, and processing times)
Kraken Margin Trading and Derivatives
Margin trading allows you to borrow money from the exchange and use it to trade while using your available assets as a collateral. Margin trading in Kraken offers users up to 5x leverage to use.
Aside from the maker and taker fees, you will also be charged an opening fee and a rollover fee. Opening fee is the fee for opening a position (not placing an order), while a rollover fee is the fee for maintaining that position which is charged every 4 hours.
Kraken Futures and Perpetual Swaps
Kraken launched their futures platform in February of 2019. This happened after their acquisition of UK derivatives firm, Crypto Facilities. The deal was reported to be in the 9 figure range. This allowed Kraken to be one of the first crypto exchanges to offer both a Futures and Spot exchange.
One thing to note here is that signing up for Kraken futures is a different process altogether. You will need a new account and even a different 2FA. This is quite a hassle compared to other exchanges that offer both spot and futures with just one account.
Derivatives trading platforms allow users to trade derivatives of underlying assets. Users can buy more than their balance allows but with it also carries the risk of possible liquidation. In normal spot trading, your balance will never go to zero unless the underlying asset goes to zero. But with leverage trading offered by derivatives platforms, users can get liquidated depending on the leverage they use. Using a 10x leverage, a 10% move of asset can either double your holdings or bring it to zero.
Kraken Perpetual Swaps mimics the spot market price but since it is just a derivative of the actual market, price variations can vary but is often miniscule. Traders can long or short a position to profit from the increase or decline of a digital asset’s price, or manage their investment risks by hedging.
One thing to note about perpetual swap contracts is that they do not have an expiry unlike traditional futures markets. There will be a funding mechanism that is used to anchor the perpetual swap prices to the spot price. This will be explained in the funding fee section below.
One additional fee that is added for trading perpetual swaps is called funding fee. This is a fee added on top of the maker and taker fees. The funding fee essentially works as a mechanism to reach spot price equilibrium. When there are more buyers (long position) than sellers (short position), the funding fee is positive. This means those in a long position will pay the funding fee to short sellers. And if there are more short sellers, the funding fee is negative and short sellers pay those in long. You basically get rewarded for going against the majority. For more details as well as a computation check out this link. Perpetual Futures contract specifications
Funding rate is seen at the top of the chart in between the mark price and open interest.
Unlike perpetual swap contracts, futures contracts do have an expiry date. You can trade up to a max leverage of 50x. Kraken offers monthly and quarterly futures contracts. For example, if you are trading the March contract, you are trading the BTC contract that will expire at the end of March. If you expect the BTC price to settle at $10,000, you can buy it now for 8,800 and receive the BTC upon expiration. For futures contract trading, you will not be charged funding fees which is an main advantage against perpetual swap contracts. Futures contract often trades at a premium or discount depending on market sentiment.
Revenue Share Program
One unique way Kraken is enticing users to their platform is through their revenue share program. They distribute a 30% share of revenue per Contract Type with a $25,000 floor every week to clients who contribute liquidity to the Kraken Futures platform. Payouts increase as your liquidity share and volume share increases.
- Liquidity Share – Consistently provide liquidity by posting passive orders at tight spreads.
- Volume Share – Trade significant volume relative to other market participants.
Kraken Customer Support
Kraken offers multiple ways to help you with your account and trading issues. You can reach out to them via email or live chat. They have a very comprehensive FAQ as well. From experience, their live chat connects you with a customer support agent within a few minutes. Their support staff are courteous and very knowledgeable usually answering with helpful links. Their FAQ covers most of the topics from beginners looking to create accounts to developers needing API support.
Security is of paramount importance for any financial service or anything that deals with payments and money especially for large institutional clients. One of the things that makes Kraken standout is their security as seen in their zero hack history.
2FA – This has been a standard form of account protection. This involves using a separate device that generates a unique code or combination every few seconds. You will be asked to enter this upon signing in.
Session Length – You can set the allowed session length so your session expires every x number of hours.
Email verifications – Whenever you would like to withdraw funds, an email will be sent to your email address for you to confirm if this transaction is legitimate.
Hot and Cold Wallets – This is a standard procedure that separates revolving funds (hot wallet) and most user funds (cold wallet). The cold wallet is disconnected from the internet so it is less likely to be hacked. It is akin to banks not having all of their money locked in a giant safe. They only hold what they expect to be transacted that day.
Kraken has carved out a specific niche in the crypto exchange space. They are targeting institutional clients by offering a wide range of products for them. They also target people who prefer trading against fiat currencies and have good integrations with banks allowing for faster and easier deposits and withdrawals. They have a wide range of fiat pairs to trade from so users especially europeans have shown much favor for Kraken.
On the downside, Kraken definitely imposes a lot more fees than other exchanges from deposit fees to rollover fees. This may be because they are trying to be as compliant and transparent as possible. But with their mythic security reputation, bigger players wouldn’t mind these as they feel safer putting their trading funds here. Kraken’s strategy of acquisitions is also playing out well for them since they can quickly add new features and customers this way.