June 3, 2024
Cryptocurrency trading is thriving worldwide. The total market capitalization of all cryptocurrencies has surpassed $2.7 trillion, indicating rapidly increasing demand and adoption of digital assets.
Trading cryptocurrency involves speculating on the price movements of digital currencies, such as Bitcoin (BTC), Ethereum (ETH), and Litecoin. As such, it requires not just an astute understanding of market trends but also a keen awareness of the costs involved.
Among these, exchange fees hold a significant sway over the profitability of your trades. Whether you’re a seasoned investor or just dipping your toes in the crypto waters, understanding how exchange fees work can help optimize your trading strategy.
Below, we break down crypto exchange fees and how they compare on different crypto platforms.
Types of Fees Associated With Crypto Exchanges
Each cryptocurrency exchange has its unique pricing structure, but most fees fall under a few common categories:
Trading Fees
Every time you buy, sell, or swap a cryptocurrency on an exchange, the platform takes a small percentage of the transaction as their fee. These are called trading fees and are typically categorized into “maker” and “taker” fees.
Makers add liquidity to the market by placing orders that aren’t immediately matched with existing orders. As such, they incur lower fees than takers, who remove liquidity from the market by trading with existing orders.
Maker fees can range from 0–0.2%, while taker fees can go up to 0.5% or higher, depending on the exchange and trading volume. Some exchanges offer a fixed percentage fee for both makers and takers, while others have a tiered system where fees decrease as trading volume increases.
Withdrawal and Deposit Fees
Crypto exchanges also charge for depositing and withdrawing fiat and cryptocurrencies. You can fund your exchange account with fiat money, such as U.S. dollars or euros, from a credit card, debit card, or bank account or with cryptocurrencies from your crypto wallet.
Each transaction carries a cost, which varies based on the platform, payment method, and currency. Typically, you’ll incur higher fees for depositing and withdrawing fiat currencies compared to cryptocurrencies.
Most exchanges don’t charge for cryptocurrency deposits, but withdrawals may incur a flat fee or a percentage of the withdrawn amount. Payment methods like credit cards and wire transfers usually come with higher fees than alternative methods, such as bank transfers or cryptocurrency deposits.
Spread fees
Not all costs are transparently labeled as fees. The spread, or the difference between the buy and sell price of a cryptocurrency, can also act as a de-facto transaction fee.
A wider spread means buying at a higher price and selling at a lower one, reducing your potential profit margins. For instance, a cryptocurrency with a buy price of $10 and a sell price of $9 has a spread of $1. This means you’ll need the currency to appreciate by at least $2 to break even on your investment.
Other Fees
Besides the above-mentioned fees, some crypto exchanges may have extra costs for specific services, including:
- Account maintenance: Some exchanges charge a monthly or yearly fee for maintaining your account.
- Inactivity fees: If you don’t trade for a specific length of time, the exchange may charge an inactive account fee to cover their costs.
- Margin trading fees: If you’re into margin trading, where you can borrow funds from the exchange to increase your purchasing power, you may incur interest on the borrowed amount.
- Special trading features: Advanced trading features, such as stop-loss orders, margin calls, and limit orders, may also come at a cost on certain exchanges.
Factors Influencing Exchange Fees
Crypto exchange fees are not universal and can vary significantly between exchanges. Some factors that influence the costs you’ll incur include:
Exchange Type
There are two main types of cryptocurrency exchanges: centralized and decentralized.
Centralized exchanges, also known as traditional or custodial exchanges, are owned and operated by a third party. They act as intermediaries between buyers and sellers, handling the trades, holding users’ funds, and determining exchange fees.
On the other hand, decentralized exchanges (DEXs) operate on peer-to-peer (P2P) networks, eliminating the need for a central authority. Users trade directly with each other, and market forces determine fees.
Because centralized exchanges have more control over the trading process, they can charge higher fees to cover their operational costs and generate profits. In contrast, DEXs have lower fees since they have fewer overhead expenses.
Volume and Frequency of Trades
Typically, the higher your trading volume and frequency, the lower the fees you’ll pay. High-volume traders bring in more liquidity to the market, and exchanges want to incentivize them to continue trading on their platforms. As such, they offer lower fees to attract and retain these traders.
For instance, a crypto exchange may have maker fees of 0.25% for traders with less than $50,000 in trading volume per month, but decrease them to 0.15% for those with over $1 million in trading volume.
Market Conditions
The trading volume, liquidity, and market volatility of a particular cryptocurrency can also impact exchange fees.
When there is high demand for a cryptocurrency, trading volume increases and liquidity improves. As a result, exchanges may lower their fees to attract more traders and capitalize on the increased market activity.
Market volatility can also affect exchange fees. When there is high volatility, exchanges may increase their fees as they have to constantly adjust to changing market conditions and take on more risk.
Conversely, during periods of low volatility, exchanges may lower their fees since there is less risk involved in trading. Additionally, exchanges may also adjust their fees based on the type of cryptocurrency being traded. Some cryptocurrencies, such as stablecoins, are designed to have a stable value and, therefore, have less volatility. As such, exchanges may charge lower fees for trading these cryptocurrencies compared to more volatile ones.
User Location and Regulatory Environment
Regulatory compliance requirements can vary significantly from one region to another, impacting the fee structures of exchanges operating within those jurisdictions. In some countries, there may be strict regulations on crypto trading, which can result in higher fees for users.
For instance, in the United States, anyone who wants to start a crypto exchange must comply with stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, which can increase operational costs. To cover these expenses, exchanges may charge higher fees for users in the U.S. compared to other regions with looser regulations.
Similarly, some countries have imposed taxes on cryptocurrency trading, which can also impact exchange fees. For example, in India, cryptocurrency transactions are subject to a Goods and Services Tax (GST) of 30%, which exchanges pass on to users in the form of higher fees.
In contrast, countries like Japan, Singapore, and Switzerland have more favorable regulatory environments for crypto trading, resulting in lower fees for users.
Comparison of Fees Among Popular Crypto Exchanges
To give you a snapshot of which exchanges charge the lowest fees, let’s compare the fee structures of a few popular platforms:
| Exchange | Maker Fee | Taker Fee | Deposit Fee | Withdrawal Fee |
| Binance | 0.10% | 0.20% | Free | Varies depending on the coin/token |
| Coinbase | 0.4 – 0% | 0.6 – 0.05% | $10 for USD deposits |
|
| Kraken | 0.16 – 0% | 0.26 – 0.1% | Depends on the selected fiat currency | Dynamic |
| Gemini | 0.2 – 0.03% | 0.4 – 0.1% | 0 – 3.49% | Dynamic |
Binance
Binance is the world’s largest cryptocurrency exchange in terms of daily trading volume. Founded in 2017 by Changpeng Zhao, the exchange serves more than 180 million people in nearly 200 countries.
Binance offers traders immense liquidity levels, meaning they can buy and sell cryptocurrencies without experiencing swift price fluctuations. Binance also offers some of the lowest trading fees on the market.
Binance offers a flat taker and maker fee (0.10% and 0.20% respectively), allowing traders to avoid heightening costs as their trading volume increases.
Coinbase
Coinbase is the second largest cryptocurrency exchange in the world. It has a 24-hour trading volume of over $2 billion and supports 248 cryptocurrencies. Both beginners and experienced traders like Coinbase’s user-friendly interface, high liquidity, and strong security measures.
Unfortunately, Coinbase trading fees are among the highest. Maker fees start at 0.4% and taker fees at 0.6% for transactions up to $10,000. The percentage decreases as trading volume increases, with maker fees dropping to 0% and taker fees to 0.05% for transactions over $400 million.
Deposit and withdrawal fees also vary. Coinbase charges $10 for USD deposits and $25 for withdrawals. Crypto withdrawals incur a flat fee, with additional charges based on blockchain network fees.
Kraken
Kraken boasts a simple and accessible UI suitable for beginner traders. It offers a wide range of trading pairs for over 250 cryptocurrencies. Kraken‘s fees are mid-range compared to other exchanges.
Maker and taker fees start at 0.16–0.26% and can go as low as 0.00–0.1% for high-volume traders. Crypto deposits are free, but fiat deposits vary on the currency and method used. All withdrawals follow suit, with crypto withdrawals being relatively cheaper than fiat.
Gemini
Gemini is a popular and well-regulated U.S. trading platform. However, compared to other exchanges, Gemini’s fee structure is complicated. Exchange fees depend on whether you’re using the Gemini ActiveTrader platform, mobile app, or website.
- The website and mobile app charge a minimum 1.49% on order value.
- ActiveTrader starts at 0.2% for makers and 0.4% for takers.
Fiat deposits from a bank account are free, while debit card deposits incur a 3.49% fee. Crypto deposits are free, but crypto withdrawals incur a flat fee and dynamic network fees.
Gemini’s biggest downside is its custody fees. Holding cryptocurrencies in your Gemini account incurs fees of 0.4% or $30 per asset per month, whichever is higher. This makes Gemini less attractive for long-term holders.
How AlphaPoint Empowers Institutions to Participate in the Digital Asset Space
Exchange fees contribute to determining the overall profitability of trading on a particular platform. Each exchange has its own fee features, so it’s essential to consider these costs when choosing an exchange. Factors like trading volume, deposit/withdrawal fees, and maker/taker fees can significantly impact your trading profits.
AlphaPoint offers configurable white-label technology enabling institutions to offer attractive fee types, including enticing fee tier options for a more diverse and dynamic fee schedule based on client type, jurisdiction, or business units.
With its robust layered infrastructure, fully customizable UI/UX, and efficient matching engine, institutions can confidently manage high-volume trading while keeping fees low for users, and profitable for operators.
To explore institutional grade liquidity and its impact on fee structure and exchange profitability, email AP Global at trading@apglobal.io.
