What Fees to Expect When Trading Crypto

Whenever we are trading on any financial market there will be certain fees associated with our trading

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The fees to expect when trading Crypto come in different shapes and sizes, and they are mostly taken by brokers and exchanges as service fees. But unlike Forex and stocks where there are a bunch of fees, the crypto market is known to have fewer fees associated with trading itself, but it does not mean there are not many fees that you are expected to pay. In this guide, we will tell you about all kinds of fees you should expect when trading in the crypto market.

Deposit/Withdrawal Fees

Whenever you are joining a crypto exchange in order to trade cryptocurrencies, the first fee you will need to pay is a deposit fee, like in any other financial market. Because of this, whenever you are depositing a certain amount of money, you should expect that you will receive less on your trading balance than you deposited. These deposit fees can be charged by both exchanges themselves or the payment providers you are using for these deposits.

Whenever you are depositing money into your account, most exchanges will provide you with a list of possible deposit options available to you. These deposit options will most likely have different fees associated with them, and you can check them before making a deposit, that way you can select the one which will eat up the least amount of your money. For example, credit card deposits usually have the highest fees, around 3%-5%, while wire transfers are mostly known for not having fees at all. There are also exchanges that point out that there are no deposit fees on their platform and to some extent, these exchanges are not lying. When depositing money on these exchanges, you might not pay any fees at all, but there is a possibility that you will be charged by your payment provider instead of the exchange. Because of this, know that you will most likely get less than you deposited.

If you already have some cryptocurrencies in your personal wallet and want to send them to the exchange account for trading, there are some fees there as well. Most exchanges never take any fees on crypto deposits, but the blockchains on which these cryptocurrencies are based do ask for these fees. If you are depositing Ethereum in your exchange account, the Ethereum blockchain will charge you certain fees, often called gas fees, for completing this transaction. Most of these transaction fees are not fixed and the amount of these fees will depend on the amount you are sending and the load that the blockchain is currently under. There are also cryptocurrencies such as Solana that have fixed and very low transaction fees, meaning that, when depositing Solana, you will have to pay just a few cents in these fees.

There are also withdrawal fees that come with any exchange. Whenever you finish trading and want to take out some of the profits there will be withdrawal fees that you need to pay. Just like deposit fees, these withdrawal fees will depend on the withdrawal method you choose and also the withdrawal provider you are using. If you are not withdrawing cash, but cryptocurrencies instead, there are also fees that you need to pay there. You will need to pay blockchain fees, just like you had to do when depositing crypto, and you might also need to pay fees to the exchange. Most exchanges that charge crypto withdrawal fees have a list of all cryptocurrencies on their exchange and the fees on each token. There are also exchanges that don’t charge any withdrawal fees, and unless you are charged by the payment provider, you can withdraw funds without any fees.

Maker/Taker fees

Cryptocurrencies, unlike most other financial instruments, don’t have spreads. Spreads are the difference between buying and selling prices that are charged by brokers in order to make a profit. Since crypto exchanges don’t have these spreads, most of the exchanges started to introduce maker-and-taker fees.

Maker/taker fees depend on what type of trader you are. Makers are also called market makers and they are the ones who provide liquidity to the market. Makers use limit orders when trading and they set special market orders to buy or sell cryptocurrencies when the price reaches certain limits. For example, a maker can set a limit order to buy Bitcoin when the price hits $16,000. Then there are takers who trade using current market prices, meaning they buy and sell at exactly the market price at the time of trading. So whenever a taker places an order to sell Bitcoin and the price of Bitcoin is $16,000, the maker who previously opened a limit order to buy Bitcoin once the price hits $16,000 gets his order executed and buys Bitcoin.

In the market, makers are valued more than takers as they are the ones that make instant trades possible and provide liquidity to the market. Because of this, makers are asked to pay less in fees than takers. Whenever you visit an exchange, you can navigate to the fees page on the exchange where you can see the table of maker/taker fees for that specific exchange. Most exchanges also have decreasing maker/taker fees. What this means is that the more you trade, the less you have to pay.

Margin trading fees

Another fee that you might have to pay is the Margin trading fee, also called “margin borrow interest”. Margin trading is a style of trading where you are using borrowed funds, and you have to pay interest on these borrowed funds. Whenever you join a crypto market, there is a possibility that you don’t have large amounts of money to trade with, and the solution to increasing your trading power is to use margin trading. Whenever you are using a margin, you have to put up a small amount of money, while the majority is given to you by the exchange. So if you use Margin with a 1:10 ratio and you have $100 on your account, you can open trades worth up to $1000.

When trading with this margin, having an open position will cause you to be charged an interest rate based on your margin. These fees are usually charged once a day and increase the longer the position remains open. You should also know that this interest fee is not charged from your account, but from the open position instead. So let’s say you have an open position that currently shows a profit of $50 and you get charged an interest fee of $10, it is simply taken out from your position and you are left with $40 in profit.

FAQs on crypto trading fees

How do I reduce fees when trading crypto?

If you want to reduce your maker/taker fees there are multiple options to choose from. The most common way is to increase the amount you trade with. Most exchanges lower maker/taker fees the more funds you are trading with, and some exchanges even remove these fees altogether if you trade with very large sums of money. Another way to decrease your fees is to purchase a native token of the exchange you are trading at. Some exchanges that have their own cryptocurrencies, such as Binance’s BNB token, give traders maker/taker fee discounts if they hold a certain amount of the native token.

How do I avoid high crypto fees?

Whenever you want to purchase cryptocurrency for trading, check if the exchange allows you to make fiat deposits. If it does, always deposit fiat and only after, exchange them for crypto. Most of the time, direct fiat deposits will charge fewer fees than purchasing these tokens directly. Another great way to avoid high fees is to create a trading strategy based on limit orders as maker fees are usually lower than taker fees, and those that trade using limit orders are charged with maker fees.

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