Cryptocurrency trading has been hype for a while now. What most adverts don’t tell you, though, is that there’s no free lunch. If you’re not careful, you could easily lose money on fees and payments you never heard about.
Cryptocurrency exchanges, the popular platforms through which users perform actions like staking, buying, and selling, don’t offer free services. The following are among the different fees you’re likely to encounter when using one of them.
Maker and Taker Fees
Maker fees are charged when you put an order on the book that hasn’t been fulfilled. Generally, this means more money for the exchange because rather than taking an order off the book by purchasing it for that price, you’ve placed a new order in addition to the ones already on the books. In essence, you have added money to the crypto exchange not because you’re another person planning to buy but because you created the order instead of simply buying assets that are already up for sale.
Taker fees are charged when a person takes an order off the book. This happens when you buy an asset at a price already available on the exchange, rather than creating a new order for a price different from current market prices. The difference with a maker order is that the taker order takes liquidity off the books without providing anything new, so the net profit for the exchange is less than if you had made a new order for a price not currently available.
Some crypto exchanges don’t charge maker fees or charge less to incentivize users to put money onto the books as it’s how they make their profits.
Exchanges that don’t charge maker-taker fees could charge spread fees, determined by calculating the difference between the costs of different tokens. Depending on the tokens you’re buying or selling, spread fees refer to the amount you either paid to buy or sell the particular token. Average spread rates differ across exchanges but usually sit at around 0.5%. While it’s not very common, there are exchanges that charge maker, taker, and spread fees. Take the time to read the fine print and avoid exchanges that charge all three. Trading volume is one way to get lower fees. With the fees going down, the more your volume goes up.
Gas fees refer to the transaction fees you pay to miners on a blockchain protocol to include your transactions in the block. The “gas fee” system works on a typical supply and demand mechanism. In this regard, miners could easily charge higher fees when there’s more demand for transactions and process transactions that pay higher fees faster and more efficiently.
Different blockchains charge different amounts as gas fees. Apart from the Ethereum blockchain, others such as Avalanche and Solana also charge gas fees that are considerably lower than what you would pay at the Ethereum blockchain. As such, you want to select a blockchain that charges reasonable fees. Also, digital wallets such as MetaMask enable users to interact directly with the Ethereum network, choosing which amount of gas they wish to pay.
Deposit and Withdrawal Fees
When you buy cryptocurrency from an exchange or borrow it from a crypto lending platform or when you have accumulated a certain amount in a crypto platform, you may want to withdraw it at one time or another. Even though those are your funds, you can’t just withdraw them for free. Most crypto exchanges will charge you a fee for making a withdrawal. The amount of withdrawal fee depends on the particular coin you’re withdrawing and the size of your withdrawal.
Even though they are rare, some exchanges could charge you for making a crypto fund deposit into an account you hold with them. The fee will most likely vary depending on the type of deposit.
Also, note that some exchanges don’t charge withdrawal fees for some less popular or valuable coins. Take the time to check whether or not the coin you want to withdraw will incur a fee before moving your funds.
Staking, which involves putting up some of your funds as collateral in the Proof of Stake or Proof of Delegated Stake process, which, in turn, allows you to earn a passive income, is now a popular feature. Nonetheless, the service comes at a cost. The fees are charged from your staking rewards or earnings and not as an extra charge that you have to pay. The fees are almost always the same across the market but could vary slightly with a few exchanges like Binance that don’t charge at all.
Save your Money
Before starting the trade, any potential crypto trader or investor needs to learn carefully about the different kinds of chargeable fees. Take the time to conduct your research and save yourself a considerable amount of money by knowing which platforms offer the most user-friendly rates or nothing at all.
Tom is a freelance writer with over 10-years’ experience in content creation, blog writing, and SEO specializing in the blockchain and cryptocurrency niche. As a philosophical figurehead, he believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.