When you are starting with crypto, even though there are options to start without investing, you’ll likely have to resort to using a crypto exchange.
With so many exchanges available, each with different features, fees, and security measures, choosing the right exchange can be a daunting task. Selecting the wrong exchange can result in unnecessary fees, slow transaction times, and even the loss of your cryptocurrency holdings.
In this article, we’ll provide you a full breakdown of all kinds of fees you’re likely to meet on your adventure in the crypto world. We’ll also take a look at proven strategies to minimize your trading fees. Let’s dive in!
Types of Cryptocurrency Trading Fees
When it comes to using a cryptocurrency exchange, your route will be filled with different fees. Basically, as with any other financial institution, you’ll have to pay for everything you do.
Each crypto exchange comes with its own fee structure, which is sort of a reflection of what the exchange focuses on.
However, as the market evolves, the fees do not remain the same. The market might crash, cutting down the company’s profits, and as a result, they raise fees. So if you’re trading cryptocurrency, you should check the fee schedule of your exchange regularly.
There are two types of crypto fees that are tied to standard cryptocurrency trading. On top of that, there is a large number of extra services that might be charged as well. Let’s take a look.
Exchange Fees
First, we have internal fees of the given exchange. The exchange facilitates the trades and other services, and you pay for it, usually as a percentage of the total transaction amount.
The fees vary depending on the exchange, but in most cases, this means charging fees for everyday transactions such as:
- Trading
- Closing and Opening Fees
- Deposits and Withdrawals
On top of that, trading fees are usually divided into two groups; into maker and taker fees. If you want to learn more about the difference between those two fees, check out our in-depth article on Maker vs Taker Fee.
Network Fees
Cryptocurrencies are not hosted by any centralized power. You can actually think of a blockchain as a huge network of computers that spreads around the globe.
When a trader sends crypto from one wallet to another, the computer network needs to record the transaction. And that costs processing power.
So by paying network fees (commonly called gas fees), you are essentially paying compensation for the resources needed to validate your transaction.
This fee varies based on the network you are using. Some blockchain networks are designed to process transactions more cheaply, whereas others focus on other aspects.
Other Exchange Fees
You’ll usually meet both fees mentioned above on every cryptocurrency exchange. The first one is essential for the exchange to keep running, and without the network fee, the blockchain wouldn’t be working.
But there are other types of exchange fees you can meet. These are usually tied to premium or advanced features.
Borrow Daily Interest Rate
Borrow interest rate will be a crucial parameter if you decide to trade with leverage.
This is the fee that you pay for borrowing funds and is typically charged per hour. Thus, for every hour you keep your position open, you’ll pay a percentage of the amount borrowed.
This fee varies a lot depending on the exchange and the crypto token you borrowed. If you are curious about the best crypto exchanges for trading with margin, check out our Ultimate comparison of Leverage Trading on Top Crypto Exchanges.
Management fees
Management fees are much more common in stocks than in crypto.
It’s a fee that can be charged for various services, like keeping your leveraged position open or for all kinds of managed and auto-invest accounts.
Opening and Closing Fees for Contracts
Although it’s also not as common as in stocks, you could encounter opening and closing fees for contracts.
If you’re trading cryptocurrency futures or other derivatives, you might be charged an additional fee by the exchange for opening or closing the contract.
How to Minimize Crypto Trading Fees
A difference of even a tenth of a percent in charged fees can highly impact the investor’s wallet.
That’s because cryptocurrency trading is often characterized by high frequency. A day trader can make hundreds of small transactions every minute, and a fee is charged for every one of these.
But there are a few strategies you can use to minimize crypto trading fees.
Use an Exchange With Low Fees
First, you can shop around for exchanges that offer lower fees.
Different exchanges have different fee structures. Some exchanges might charge a lower fee for makers, but what’s that up for if there is a high spread or your advanced trading strategy is not supported?
So it’s worth doing your research to find the ones that offer the lowest fees for the types of trades you’re interested in. We have made that easier for you by comparing fees for margin trading on different exchanges, and you might want to check it out.
Tip: Check the biggest crypto exchanges on CoinMarketCap. Select a few from the list and the CoinMarketCap page includes direct link to the fee structure of the given exchange.
Watch Transaction Amounts
As crypto skyrocketed in popularity in recent years, many non-crypto-focused companies implemented crypto in their apps. And these are usually the ones that might charge you differently based on the size of the transaction.
For cryptocurrency exchanges, the situation is usually exactly the opposite. Exchanges like Binance or KuCoin will lower your fees the more you trade.
Use the Right Transaction Type
Another great strategy is to use limit orders instead of market orders. It comes with two benefits.
Firstly, with a limit order, you specify the lowest price you are willing to sell or the highest price you are willing to buy a cryptocurrency. With a market order, you are buying or selling at the current market price.
This is typically not an issue when trading a coin with a high trading volume, where thousands of transactions are filled every minute.
However, be careful with smaller coins and tokens. It may happen that the order book will empty out for a few seconds, and you could be matched with a really disadvantageous offer.
And secondly, market orders take the liquidity from the market by taking an existing order from the order book, they are charged by a higher fee, a so-called taker fee.
Use a Cheap Network for Withdrawing
Although you might rarely withdraw your cryptocurrency from an exchange, when you do, it’s important to choose the right network.
In addition to selecting a network with lower fees, it may also be worth considering the time of day when withdrawing your cryptocurrency. If you send your transaction during peak hours, you’ll need to pay more to get your transaction through, or it’ll get stuck in the mempool.
Here’s a simple table that shows the average transaction fee for different networks from our article about the cheapest stablecoins.
| Withdrawal Network | Average Transaction Fee |
|---|---|
| Ethereum Network | $0.65 |
| Binance Smart Chain | $0.21 |
| Polygon | $0.018 |
| Solana | $0.000025 |
Buy Cryptocurrency With Coins instead of Fiat
When purchasing cryptocurrency on an exchange, you’ll typically have the option to buy using either fiat currency (such as USD or EUR) or other cryptocurrencies.
If you already have cryptocurrency holdings, you can use them directly to make purchases on the exchange rather than having to convert them to fiat first.
Exchanges often charge higher fees for transactions involving fiat currency. Not to mention that you’ll likely have to pay additional fees when depositing fiat.
Take Advantage of Promotions Run by the Exchange
Almost every cryptocurrency exchange we know offers some sign-up bonus or runs periodical promotions.
For instance, you a lot of exchanges offer Learn & Earn courses and quizzes with free crypto as a reward, which you can use to pay for your fees.
Binance offers a trading fee rebate when users sign-up with the creator’s link. And we happen to be part of that promotion; you can use our link below to get 5% back of all fees paid.
Which Crypto Exchange has the Lowest Fees?
It’s great to know that there is a long list of fees you’ll likely have to pay at some point in your trading career. But which crypto exchange has the lowest fees right now? Let’s take a look.
| Exchange | Maker/Taker Fee | Borrow Interest Rate | Contract Fee |
|---|---|---|---|
| Binance | 0.1%/0.1% | Average of 0.05% | 0.02% |
| Coinbase | 0.4%/0.6% | Doesn’t offer a margin. | NaN |
| Kraken | 0.16%/0.26% | 0.02% | 0.05% |
| KuCoin | 0.1%/0.1% | 0.02% | 0.06% |
| Gate.io | 0.2%/0.2% | 0.02% | 0.05% |
Please note that the table above presents the base rates for maker and taker fees. The rates that everyone will get once they sign up for an account. The vast majority of exchanges offer some kind of VIP program that will lower all your fees the more you trade.
As you can see, it all depends on your preferences and on your trading strategy, but usually, all exchanges offer similar fee rates.
Crypto Fees FAQ
Although it’s not possible to completely avoid crypto fees, you can highly minimize them.
Choose the right crypto exchange, use a cheap network for your withdrawals, and don’t forget to take advantage of all promotions run by the exchange.
Yes, there is a fee for withdrawing crypto. These fees are known as network fees and are charged by the blockchain network that processes the transaction. The amount of the fee can vary depending on the network, the amount being withdrawn, and the time of day.
Crypto gas fees are typically lowest during off-peak hours, such as an early morning or late at night. The exact timing can vary depending on the network, so it’s worth doing some research to find out when gas fees are likely to be the lowest.
There are many crypto exchanges available, and the fees charged can vary widely between them. Some exchanges may offer lower fees for certain types of transactions, so it also depends on your trading strategy.
You can check the table on this page that compares fees across different exchanges.
Conclusion
There are a number of fees connected to cryptocurrency trading, as well as a number of strategies you can employ to minimize them.
It’s important to remember that while fees are an inevitable part of cryptocurrency trading, they don’t have to eat into your earnings. By using smart strategies, you can keep more of your hard-earned money and achieve greater success.
Keep these tips in mind, share them with others, and happy trading!