Minimizing Cryptocurrency Trading and Exchange Fees

Getting into the cryptocurrency market brings with it certain costs, like paying crypto fees to trade or exchange it. Crypto trading fees can vary in a big way, too, from one exchange to the next, and from one crypto to the next. The timing of trades can also impact cost.

But while the details of what each exchange charges to trade different types of cryptocurrency will vary, there are a few general factors to keep in mind.

Determining Crypto Trading Fees

Most cryptocurrency exchanges design their fee schedules to incentivize bigger trades. So, fees tend to decrease as the size of trades increase — similar to getting a discount for buying in bulk. Some exchanges try to compete for the largest orders by charging no fees at all.

Exchanges also typically charge fees when an investor wants to cash out into a fiat currency, like U.S. dollars. Those fees can be much higher than the transaction costs of trading Bitcoin or altcoins with one another, which is often free of charge. This is one way that crypto exchanges encourage investors to remain on their platforms.

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Crypto exchanges don’t always play nice with each other. Even though coins that an investor owns can remain in their crypto wallet, some exchanges will charge a fee to import a new wallet with crypto purchased on another exchange. Or they may charge to port over a wallet with crypto purchased on its platform over to another exchange.

Examples of Cryptocurrency Trading Fees

Binance is one of the world’s largest crypto exchanges, and its U.S. exchange charges investors a flat fee of 0.1% of the amount of each spot trade. On top of that, it charges a 0.5% fee if the investor wants the transaction executed instantly. That may not seem like much, but on a $1,000 trade, for example, an instant trade will cost the investor $6. On $100,000, that rises to $600.

Binance.US, like other crypto exchanges, may also charge a fee to exchange crypto for a fiat currency like USD.

The 0.1% standard fee Binance.US is only available for trades using assets on the Binance.US trading platform, and is likely subject to change. Other large exchanges will likely have similar fee structures. There are some differences between exchanges, and depending on the transaction involved.

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Factoring in Spreads

Investors must understand the spread between the bid and ask prices of a crypto listed on an exchange. Spreads are not fees, strictly speaking, but they are trading costs and they act like fees by eating into the return on the investment.

Seasoned investors in the stock market know about these spreads, which tend to mean that an asset’s buyer will pay slightly more than the average price, while the seller will receive slightly less than the average price quoted on the exchange.

For less heavily traded forms of crypto, there’s also a chance that a big trade could change that crypto’s value. When trades move the market, the sale of the crypto can drive down the price, while a big purchase can drive it up. Spreads on crypto trades vary widely from currency to currency and from day to day, but can be as high as 1.5%.

Types of Crypto Fees

Crypto fees come in a number of different types, but the main two are network fees and exchange fees. Read on to learn more about each type.

Network Fees

Network fees are fees paid to a blockchain network for facilitating a transaction. These fees actually end up in the hands of the miners, or validators in the network, who do the actual heavy lifting. They may be called miner fees, accordingly.

These fees are charged every time you send crypto to another wallet or address. What you end up paying depends on a few factors, including the specific blockchain network being used, and the time of day you’re executing a trade.

Exchange Fees

Exchange fees are the fees charged by crypto exchanges for using their platform. You can think of them as similar to a commission that a brokerage may charge for executing a stock trade. These fees also vary depending on the exchange being used, and can be charged for conducting specific actions on the exchange, such as trading, making a deposit or withdrawal, or borrowing money from the exchange (margin).

Trading

Trading fees are essentially commissions paid to an exchange for executing a trade. They’re often the biggest source of revenue for exchanges, too. They may be charged in the form of the crypto being traded, or in fiat currency.

Deposits

It’s possible that an exchange will charge you a fee for making a deposit, too. This is becoming less common, as most exchanges are trying to give users a reason to use the platform, and any barrier to entry — like a deposit fee — may scare some users off.

Withdrawals

Similarly, exchanges may charge withdrawal fees. These are more common than deposit fees, and are usually levied when users try to take money off of the platform, either by transferring crypto out and into a different wallet, or by taking fiat currency out of the user’s balance.

Loans

If you want to borrow money from an exchange to trade with — commonly called margin trading — you can likely expect to incur fees for doing so. These fees usually involve an interest rate and perhaps a flat fee depending on how much you want to borrow.

5 Ways to Pay Less for Crypto Trades

While it may be tough to trade crypto without paying any fees whatsoever, there are strategies investors can use to lower the cost of their crypto trades.

1. Trade Less Often

One thing that transaction fees and bid/ask spreads have in common is that the more often you trade, the bigger an impact they’ll can have on your final return. That is, the more trades you make, the more you pay in fees.

Each trade comes with a fee, which the exchange deducts from your balance. And each trade also occurs with a spread, which leaves you with a lower return than you might expect when you look at the bid/ask price for the forms of crypto that you’re trading.

For investors who are regularly trading between their crypto accounts and their bank accounts, those transactions are even more costly. So, one simple way to drive down the fees — and the overall trading costs — is to HODL, and trade less frequently.

2. Use Lower-Cost Trade Types

Another way an investor can reduce the fees they pay for their crypto trades is to change up the types of trades they’re executing.

Limit orders, for instance, often come with lower fees. In a typical limit order, an investor agrees to buy or sell a stock at a specific price, or better. That means that a buy limit order executes at the limit price, or one that’s lower, while a sell limit order executes at the limit price, or one that’s higher.

Keep in mind though, that with limit orders, the investor has no certainty of order fulfillment. If the market moves away from the limit price, then no trade occurs.

3. Shop Around

There are a lot of platforms and exchanges out there, and they’re all jockeying for users’ money. As such, It can pay to do some comparison shopping, especially for investors who trade frequently, or for investors who expect to cash out in the near future. But do your homework, and keep security top of mind as well.

You’ll also want to think about which cryptocurrencies an exchange covers. Many exchanges might offer more popular cryptocurrencies, but not all of them may support smaller, less-popular altcoins.

4. Rewards and Promotions

Many cryptocurrency exchanges are still relatively new, and heavily competitive. There are a steady stream of new competitors offering investors low fees, or even fee-free trading in an effort to win new accounts. But being one of the first customers investing in crypto exchanges that are relatively new can be risky.

Also, be aware that those promotions usually have an expiration date. When the promotions expire, the investor has to decide whether to keep on trading at the exchange’s usual rates, or transfer their crypto assets to another exchange, which may incur additional fees.

5. Use Exchanges With Lower Fees

Finally, as mentioned, you can always shop around and start trading and investing on an exchange or platform with lower fees. Take advantage of the fact that many platforms are fighting for users by offering lower fees, and jump from one to another — just keep in mind that doing so can, again, incur additional fees.

Is It Possible to Trade Crypto With No Fees at All?

It is possible to trade crypto without fees, but the exchanges that allow you to do so typically make up for it by charging fees for actions aside from making trades. For instance, if you’re using an exchange or platform that doesn’t charge a trading fee, it may charge a deposit or withdrawal fee — whereas another exchange may charge trading fees, but no deposit fees.

Also remember that even if you’re moving money directly from one wallet to another, network fees still apply. There’s work being done on the blockchain, and at some point, someone needs to get paid to do it.

How Do ‘No Fee’ Exchanges Make Money?

Again, since exchanges that purport to be “no-fee” have to make money somehow, they generally charge other types of fees. Or, the exchange may be offering no-fee trading for a limited time, as a promotion, in order to attract new users. Then, the promotion ends, and the exchange has to wait and see how many users stick around.

Other, bigger platforms that may offer crypto trading along with other types of financial products or trading services — think of popular stock-trading apps, for instance — may offer no-fee crypto trading, and make up for it by charging users for other types of trades or services. They may also be doing some fancy footwork on the backend to funnel trade orders at the cheapest possible price.

Are There Any Downsides to No Fee Crypto Trading?

Potential downsides to a potential no-fee crypto purchase include paying higher fees for other actions or services, slower potential transaction times, and the fact that fee-free trading may only be a limited-time offering.

The fact is, all exchanges — fee-free or otherwise — will have their pros and cons, and you should do some research or homework into their fee schedules before signing up. A good rule of thumb, though, is to anticipate that you will be paying in some shape or form to use an exchange.

The Takeaway

Crypto fees are common on exchanges throughout the industry, and investors or traders should probably anticipate paying them in some shape or form. You may need to pay network fees, trading fees, and perhaps even fees for depositing money or making withdrawals — it’ll vary from platform to platform. You can minimize them, however, by reducing your trading activity, moving to a less-expensive platform, or taking advantage of promotional periods.

FAQ

Which crypto exchanges have very low fees?

Fees schedules change all the time, so it’s best to research various crypto exchanges to see what competitive fee rates are out there.

Is it possible to completely avoid crypto trading fees?

Not really. You’ll likely pay some form of fee no matter what exchange you choose. And even if you’re transferring assets between wallets, network fees will apply.

How can you minimize Bitcoin trading fees?

There are several ways to minimize your trading fees, including changing the types of trades you’re making, making fewer trades, switching to an exchange with lower fees, and taking advantage of promotions.

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Photo credit: iStock/Pekic

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First Trade Amount		Bonus Payout
Low	High
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$500	$4,999.99	$50
$5,000+		$100

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