There are some things you can never escape when trading cryptocurrency. You can’t escape the volatility. You can’t escape the future market regulation. But first and foremost, you can’t escape the fees. Sure, compared to regular banking transfers and stock exchange trading fees, the cryptocurrency market is still competitive. But it is far from perfect.
When becoming a cryptocurrency trader, there are a few fees you need to look out for. These might seem insignificant at first glance, but over years of trading, they can add up to very substantial amounts. The fees are: deposit fees, maker/taker trading fees, flat trading fees and withdrawal fees.
Exchanges normally doesn’t charge any fees at all when you deposit cryptocurrencies. They’re happy enough that you have chosen to place the cryptos there. However, when you deposit fiat currencies, deposit fees are often charged.
Maker/taker trading fees
Every trade occurs between two parties: person 1 whose order exists on the order book prior to the trade, and person 2, who places the order that matches (or “takes”) the person 1’s order. Person 1, we call a “maker”, as he/she “makes” the order that gets executed. Person 2, we call the “taker” as he/she takes the order that the maker made. Many exchanges give fee discounts to the makers, as a way to promote liquidity at the exchange. One such exchange that really stands out is BitMEX. The BitMEX fees are 0.075% for takers, and -0.025% for makers, meaning that makers essentially get paid to trade!
Flat trading fees
There are also numerous exchanges that does not charge different fees between takers and makers. Usually, this fee model is called a “flat fee model”. The industry average flat fee is arguably around 0.25%. The Bittrex trading fees are exactly on this level (0.25% for both takers and makers), the Cryptopia fees are slightly below (0.20%) and the Bithumb fees are even lower, sitting at 0.15%.
Each cryptocurrency trader has to determine for himself/herself what trading fee model is most appropriate for his/her trading behaviour. Some traders that prefer to “go fishing” with limit orders should probably go for an exchange with maker fee discounts, whereas the flat trading fee is naturally more suitable for someone that just wants to pick orders off the order book.
Withdrawal fees are typically fixed at a certain level, regardless of the size of the withdrawn amount. So, if you withdraw BTC, it is the same fee for withdrawing 1 BTC as it is for withdrawing 1,000 BTC. The rationale behind this is that there is a network fee charged by the blockchain network behind BTC, and that network fee is a “fee per transaction” not “fee per BTC”.
The KuCoin withdrawal fees are set at 0.0005 BTC when you withdraw BTC, which is competitive and below the industry average. Industry average withdrawal fees (based upon the 350 exchanges listed in Cryptowisser’s Cryptocurrency Exchange List) are 0.0008 BTC when withdrawing BTC. If you’re instead looking at the Gatehub fees, they charge you 0.005, i.e., ten times what KuCoin charges, when you withdraw BTC. That is a big difference.
There are also some exchanges that doesn’t charge you anything at all when you withdraw BTC. The Changelly fees will set your back 0 when withdrawing cryptocurrencies.
Finally, there are a few exchanges that do not charge fixed withdrawal fees but instead charges percentage based withdrawal fees. BCEX, for instance, charges 0.50% of the withdrawn amount. This is competitive enough when you withdraw small amounts, but if you make bigger withdrawals, it is extremely expensive.
Again, you need to figure out yourself whether a fixed withdrawal fee or percentage based withdrawal fee suits your trading the best.
Newer exchanges = lower fees?
Another clear trend is that the newer exchanges emerging in today’s market tend to have lower fees, presumably as a way of attracting customers. 5-6 years ago, there were a lot fewer exchanges in the market and they could set their prices to whatever. Traders would still need to go to one of the exchanges in order to trade. Today, there are hundreds (if not even thousands) of exchanges and they need to be more consumer-friendly to get customers.
For instance, look at Bilaxy (launched in April 2018) or TOPBTC (launched in December 2016). Bilaxy charges flat trading fees of 0.10% (very low), and TOPBTC charges flat trading fees of 0.20% (quite low). One might suspect that these exchanges have set their fees to respond to market requirements. On the other side of the spectra, you have exchanges like BitcointoYou (launched in April 2012) and Mercado Bitcoin (launched in June 2013) charging 0.60% and 0.70%, respectively, as their taker fees. One might suspect that these exchanges are ignoring the market requirements and will soon be surpassed by newer exchanges in the market.
To conclude, the cryptocurrency exchange market is a tricky terrain, and being aware of the different fees charged and the industry averages of such fees is a good tool to have when getting out there.
This article is prepared by the company Cryptowisser, that compares and reviews more cryptocurrency exchanges than any other site in the world. They also compare and review, cryptocurrency wallets, cryptocurrency debit cards, cryptocurrency merchants and cryptocurrency casinos.
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