Whether you’re trading cryptocurrencies to try and make a profit or diversify your investments, you’ll do well to take stock of the different fees charged by the exchange platform you use.
There are hundreds of crypto exchanges up and running around the world. Everyone has applied a unique fee structure for all the different transactions they handle. Your job as a crypto investor or trader is to understand the nuances and complexities of these fees and how they break down, to make better choices about which platform to use, and to lower your trading costs.
Trading fees: Makers and takers
Spot traders will be all too aware of the trading fees that apply to virtually every crypto exchange. We’re talking about the fees charged when users swap one cryptocurrency for another, which can vary depending on the exact asset traded. These trading fees are the biggest expense for high volume crypto traders, and on most exchanges, they are split into two distinct categories.
On the one hand, we have maker fees, which are applied to users who place a limit order that isn’t immediately executed, but instead added to the exchange’s orderbook. When placing such an order, you are adding depth to the market, or in other words, injecting “liquidity” into the exchange. As a result, makers help the exchange to run better, and so their fees tend to be lower.
Then we have the taker fees, which are applied to orders that are immediately executed the moment they are submitted. Taker’s orders are matched with a maker’s order that’s sitting in the orderbook, and so they’re seen to be taking away liquidity from the platform. Because they’re executed instantly and reduce liquidity, taker fees are generally more expensive than maker fees.
One of the simplest and most affordable exchanges is VALR, which is somewhat unique because it doesn’t charge any maker fees at all, while its taker fees are among the lowest in the business. On fiat-to-crypto transactions, it charges a taker fee of just 0.1%, while for crypto-to-crypto trades, these are even cheaper, at just 0.05%. Those trading perpetual get even better rates, with taker fees of just 0.04%.
A more complex fee structure is applied by KuCoin, which operates a tiered model based on the trader’s overall volume or the amount of KCS tokens they hold. There are 12 tiers on KuCoin, with the lowest, level 1 user charged 0.1% for both maker and taker fees. The higher the tier, the lower the costs become. By the time users reach Level 5, the maker fees drop to 0%, while takers are charged 0.07% per order. Even better, when a user reaches Level 8, they’ll receive a 0.005% maker award, as opposed to being charged, though taker fees still apply.
It should be noted that many of the larger crypto exchanges, like Binance and Coinbase, vary their maker/taker fees based on the type of asset traded. Meanwhile others, like MEXC, strive to keep it simple, with a flat 0.2% charge for market makers and takers, regardless of the asset type or order volume.
Deposit Fees
While trading fees are the most significant expense for most crypto exchange customers, they’re certainly not the only consideration. Most exchanges also charge fees for depositing and withdrawing money, usually fiat, and sometimes even for cryptocurrencies, so it pays to be aware of these costs.
In the case of VALR, South African Rand (ZAR) deposits using a card incur a 3.9% transaction fee, though customers who use a digital method such as banking are not charged any fees. The exchange also charges fees of 0.13% for USD and EUR deposits.
Coinbase also provides options for free deposits, with both ACH and SWIFT options being free of charge. However, wire transfers incur a pricey $10 fee per transaction, while SEPA Instant transfers are charged 0.15 EUR.
Withdrawal Fees
Most exchanges provide options for free or very low cost deposits, but withdrawals can be a different story. In fact, withdrawal fees – where the user withdraws fiat or sends crypto to a private wallet – tend to be a very significant earner for some exchange platforms.
One of the most confusing platforms when withdrawing crypto assets is Binance, which charges a different fee structure for every token it supports – and it supports an incredibly long list of tokens. It’s a similarly complex story at Bitfinix, another popular exchange, although that platform excludes a great many tokens from withdrawal fees, making it a good option for some traders.
To keep withdrawal fees to a minimum, traders are recommended to keep such transfers to a minimum. By withdrawing larger amounts less frequently, it’s possible to benefit from substantial savings. Some exchanges offer a limited number of free withdrawals per month. For instance, with VALR, users are given 30 free ZAR withdrawals per month and charged 8.50 ZAR for each withdrawal afterward. The Kraken exchange platform also allows for a limited number of free withdrawals per month.
Navigating Crypto Exchange Fees
The complexity of crypto exchange fees can be a little daunting, and it will take time to understand how each platform operates, but for those who trade frequently, it’s worth taking the time to do this. With a better understanding of an exchange’s fee model, it’s possible to plan your deposits, withdrawals, and swaps more strategically, in order to reduce your overall trading costs.
Traders are advised to compare the maker and taker fees of various platforms, along with their deposit and withdrawal charges, so they can work out which exchange will cost them less in the long run.
Source: https://coincodex.com/article/61155/understanding-the-ins-outs-of-crypto-exchange-fees/