April 30, 2023

How Much Are Cryptocurrency Exchange Fees?

How Much Are Cryptocurrency Exchange Fees?

There Are Additional Costs To Consider When Trading Crypto

Cryptocurrency was once an asset class avoided by investors and retail traders. Today, trust has improved, and popularity continues to increase.

To get involved in the markets, traders need to access the services of a cryptocurrency exchange. However, many people don't factor cryptocurrency exchange fees into their calculations.

After all, a crypto exchange provides a service, so its users have to pay for it.

In this article, you’ll learn all about the different types of fees to look out for, what you can expect to pay, andsome things to look out for.

What is A Cryptocurrency Exchange?

A cryptocurrency exchange is like the stock market but for cryptocurrency. They are online marketplaces where investors go to buy, sell, exchange, and swap crypto.

There are two types of exchanges – centralized exchanges (CEX) and decentralized exchanges (DEX). Eachoffers different functionality and fees.

The main difference is that CEXs are governed by centralized, for-profit corporations. On the other hand, DEXs are completely decentralized, relying on liquidity and users.

CEXs provide the easiest cryptocurrency onramp, enabling investors to exchange fiat currency (USD, EUR,GBP, JPY, etc), for crypto.

Whereas DEXs are essentially a middleman, facilitating peer-to-peer crypto transactions. They do not use fiatcurrency, only cryptocurrencies.

Cryptocurrency Exchange Fees Explained

Every cryptocurrency has its own fee schedule. So, if fees are your main consideration over functionality and security, then you need to compare the rates of each exchange.

Percentage fees are calculated based on the trading volume of your account. Usually, this is a tiered system, meaning the higher your trading volume, the lower the percentage fee becomes.

Additionally, cryptocurrency exchange fees usually use a maker-and-taker model.

If you place an order, buy or sell, that can be immediately filled by the order book, you are the taker.

Alternatively, if the order you place can’t be filled immediately, but is filled later by another customer, you are the maker.

Maker and taker fees differ, with makers being charged less than takers. As an example:

Coinbase taker fees range from 0.05% and 0.60%.

Whereas, Coinbase maker fees range from 0.00% and 0.40%

Fees Opening Trades vs. Buying Coins

Cryptocurrency transaction fees vary based on the type of transaction you’re doing.

Opening a trade and taking ownership of coins are different.

With trading, you can open a buy or sell position, depending on where you think the market is headed.

When you buy a cryptocurrency and take ownership of that coin, the only way you’re going to make any money is if its value increases.

The maker-and-taker concept is used for opening and closing trades. For example, using a pair such as ETH/BTC. You’ll be charged a percentage of the total of the previous 30-day trading volume.

However, if you’re looking to buy Bitcoin, Ethereum, or any other cryptocurrency with fiat currency – you’ll be charged a one-off spot trading fee.

A Rolling 30-Day Total vs. Individual Transaction Fees

Rather than each transaction accumulating individual fees at different rates, most exchanges use a rolling 30-day total to attribute a percentage value to your fees.

This makes their services more attractive to investors, especially those trading smaller volumes.

Individual crypto transaction fees can stack up quickly, especially if you’re executing frequent low-value transactions.

Every Exchange is Different

Fees for cryptocurrency exchanges and the services they offer differ. The industry is still heavily unregulated in some countries, while others have started to introduce certain regulatory restrictions.

Therefore, some exchanges are able to offer services others can’t.

Additionally, it means they can charge whatever cryptocurrency exchange fees they like.

Another factor to consider is that exchanges don’t list every cryptocurrency for trading or purchase. If you’relooking to diversify your portfolio, this is something you’ll have to factor in.

You may need to open accounts with multiple exchanges to build the portfolio you want.

Alternatively, you’ll have to buy a cryptocurrency the exchange does list, move it to a self-custody wallet, andswap it for the crypto you want. This is time-consuming and will incur even more fees.

Don’t Forget About The Miners

Every transaction blockchain transaction incurs a miner or gas fee. Exchanges pass this on to their customers.

When a new block is validated, a miner or miners receive cryptocurrency rewards.

Technically, when you buy crypto from an exchange, they’re the ones officially buying the crypto. Therefore,they pay the miner's fee.

When you go to complete your transaction, you’ll see a miners fee listed in the breakdown of fees.

In Summary: How Much Are Cryptocurrency Exchange Fees

Crypto fees will vary from customer to customer and exchange to exchange.

If you’re using an exchange to trade pairs, your crypto trading fees are usually calculated using your rolling 30-day volume with the maker-and-taker concept.

The consensus across most exchanges is the higher your trading volume, the lower percentage you will be charged.

Alternatively, one-off spot trading fees will apply if you’re using an exchange to buy crypto coins. This is variable and dependent on certain conditions, such as the current miners or gas fees and other liquidity measures.

It’s impossible to put a specific number on how much crypto exchange fees are because it depends on your activity.

However, you should compare the fees each exchange charges and assess which offers the best value for yourportfolio size and amount of trading activity.

Check out Escrypto’s institutional-grade wallets that offer facilities to buy cryptocurrency using multiple payment methods with favorable fees.

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