The financial industry presents many forms of fees. You pay fees when exchanging funds, when opening a new position, to maintain an account, withdraw assets, and so on. You will also find fees in the crypto space. But because the crypto space is vastly different from TradFi, you might not know how all the different fees work.
Today’s article tackles common crypto trading fees, the types of fees you’ll encounter, and how trading fees differ on some of the most popular exchanges. But before you unveil the mystery behind maker/taker fees, funding fees, gas fees, and many others, you will first have to learn about the basics of crypto trading fees.
What Are Crypto Trading Fees and How Do They Work?
Exchanges collect fees from traders in order to fund their operations and services. You have to pay a small fee every time you trade crypto, open a trading position, or use any other type of financial service. Paying fees means supporting your exchange of choice and granting them ability to upgrade their services or deliver new features.
Trading fees create a ton of competition between exchanges. When comparing centralized exchanges, you might notice that fees vary on each exchange. Exchanges typically have pages with their fee schedule where you can see fee rates for various types of services and users.
The reason why fees are different everywhere is that exchanges are incentivized to compete with other exchanges for liquidity. For example, an exchange might offer lower fees in hopes of attracting more liquidity. The additional liquidity will fill the gap left by lower fees and even bring additional profits into the business.
Some exchanges might decide to not charge any fees at all. For example, Binance recently decided to remove all fees on Bitcoin BUSD spot trading pairs. The exchange decided to do so for multiple reasons, like attracting liquidity, bringing more liquidity into BUSD reserves, and increasing their user retention rate.
You might also notice that users pay different fees depending on their trading volume. Exchanges seek to reward traders who consistently bring liquidity or pay fees. That’s why you have fee tiers where traders with a higher monthly trade volume pay lower fees. This also pushes a trader to keep trading on the same exchange to reap the rewards from better tiers.
Types of Crypto Trading Fees
Various types of trading and non-trading fees exist in the crypto markets. To make things easier for you, I will explain each type of fee individually.
Maker and Taker Fees
Maker and taker fees are the two main trading fees you’ll be paying when training cryptocurrencies. But before I explain these two types of fees, I’ll have to quickly explain to you what an order book is and how it works
An order book is basically a digital list of orders, ranked by factors such as price level and volume. For example, when I set an order that will sell 10 Bitcoin at $25,000, my order will appear on the order book – specifically on the sell side.
Exchanges and market makers are incentivized to push for as much liquidity as possible. The more liquid a market is, the more efficient it will be. That’s why exchanges charge you higher or lower fees depending on how you interact with the order book’s liquidity.
The maker and taker fee names stem from the fact that a trader either contributes or takes liquidity from an order book. Maker fees are always cheaper because you provide liquidity to the exchange rather than simply taking what you want. And in order to get maker fees, you’ll have to place a limit order that deviates from the current market price.
The exchange charges you taker fees when you take liquidity from the order book. A classic example would be creating a market order that sells 5 ETH at the current market price. You’re instantly taking liquidity from the exchange, damaging their liquidity, which means you’ll have to pay a higher fee.
Certain exchanges might even reward makers. They might enforce ‘negative’ maker fees, which basically means that you earn money every time you place an order and the market later fills it. But negative maker fees typically only take place with high-volume orders.
Funding round fees are common in futures markets where a trading pair has a perpetual contract. Perpetual contracts don’t expire like traditional futures contracts do. To support perpetual contracts, exchanges charge a funding round fee. The funding round takes place every 8 hours. The exact fee depends on the ratio between short and long positions.
A negative funding fee means that long positions pay fees to short positions. The opposite is true for positive funding fees. You can know whether the funding fee is positive or negative based on the asset’s price. If the price of the perpetual contract is higher than the spot trading pair, the funding rate will be positive.
Funding fees can sometimes get extremely high in either direction. It’s important to monitor the funding rate because you don’t want to get into an overcrowded trade. You’ll have to pay exorbitant amounts of capital to keep your trade afloat – which isn’t always worth it. But this also means that you might make money from the funding fee alone if you’re on the right side of the trade.
So to summarize, you can treat funding fees as something you have to pay, something you can arbitrage trade, or something you can use to receive fees from other traders. No matter which you choose, make sure to monitor the funding fee while your position is open.
Withdrawal and Deposit Fees
You have to pay fees whenever you withdraw or deposit assets to your exchange account. These fees are necessary because your transactions are processed on the blockchain, and transactions require fees for someone to process them. The amount you pay depends largely on the network processing your transaction.
Sometimes you can withdraw an asset via multiple networks. For example, you can withdraw Tether (USDT) through SOL, ETH, TRON, and so on. It may be wiser to withdraw assets on certain networks because they offer cheaper fees. Or because these networks have faster transaction times.
Transaction fees are dynamic and largely depend on how congested a network is. You can pay fees before issuing a deposit or withdrawal by checking the network’s blockchain explorer. I recommend using the following websites for checking gas fees:
Be sure that you withdraw and deposit your funds through the correct network. Using the wrong network can lead to a permanent loss of funds.
Like mentioned in the previous section, all blockchain transactions charge fees. That means that any time you issue a transaction that’s on the blockchain, and not on some centralized ledger, you have to pay gas fees.
So if you were to execute a trade on Binance you’d only pay a trade fee, and not a gas fee, because you’re not making any blockchain transactions. But if you trade on a decentralized exchange, which uses smart contracts to execute your trades, you’ll definitely have to pay both a trade fee plus a gas fee.
You’ll also encounter gas fees whenever you interact with dApps, stake tokens, or do anything else that’s on the blockchain. The exact gas fees you’ll pay depend on the network, and the state of the network. You have to pay higher fees when a network is more congested. If you’re worried about overpaying, I suggest waiting for a better time.
Spot Margin Trading Fees
Margin trading involves borrowing funds from other users or the exchange itself. Margin positions charge an initial fee for opening your position, as well as a rollover fee for maintaining the position. Each asset has its daily interest rate for borrowing funds, which also varies depending on your tier fee.
Margin trading is similar to futures markets, except that you’re trading on the spot market and have access to much lower leverage. The funding fee is also replaced by the rollover fee which takes place much more frequently during the day, but charges comparatively less compared to standard funding rates.
The image above is an example of Binance’s margin trading fees for a few altcoins. Margin fees average at daily interest rate of 0.02%. Bitcoin and Ethereum have much smaller fees at 0.005% per day each.
Here is the margin fee schedule for a few altcoins on Kraken. You can see that you have to pay an average fee of 0.02% for opening a margin position. And then you have to pay an additional rollover fee for maintaining the position each 4 hours.
NFT Trading Fees
NFTs have two major fees: minting fees and royalties.
Minting a NFT from a new collection requires you to pay a simple transaction fee. The size of this fee depends on the network you’re minting on. The fee is paid directly to miners verifying your transaction.
Royalties are fees paid mostly by buyers. The creator of each collection reserves the right to charge a fee every time an NFT changes hands. Because royalties aren’t enforced on the level of smart contracts, authors have to apply royalties on NFT marketplaces.
In the example of Magic Eden, a non-fungible token marketplace on Solana, the platform gives you the option to pay royalties. You may skip out on royalties, but may be sanctioned by the author by losing access to certain features, products, and services. Royalties typically range from 2% to 15% per token.
Some marketplaces might also have listing and delisting fees. This is the fee you pay for listing a single token on the marketplace. The fee must be paid because listing a token is an action conducted on the blockchain, requiring a fee to be paid to miners.
Comparing Crypto Fees Between Exchanges
The profits you gain from a good trade will outweigh any fees you have to pay. But once you start trading with size, you’ll slowly realize that fees have a great impact on your trading experience. Why lose $2,000 simply for opening a big position when you can considerably downsize that?
The following sections provide you with an overview of some of the most popular exchanges and their respective fee systems.
Keep in mind that the fees shown below are updated as of December 2022. The term regular user is further defined as someone with the minimum amount of trading volume necessary for the first fee tier. Presented percentages are ordered as maker and taker fees.
Here are the fees for Binance, Coinbase, Kraken, and Kucoin.
Binance is the world’s largest crypto exchange. As such, Binance tries to maintain a competitive edge by offering lower, or non-existent fees, for certain trading pairs.
Binance offers 0% fees on selected fiat and stable coin Bitcoin spot trading pairs. You can also trade with 0% maker fees with all BUSD spot trading fees. Those holding a certain amount of BNB have up to 25% off spot trading fees and 10% off futures trading fees.
The following numbers are for regular users with no BNB.
Spot trading: 0.1%/0.1%
Margin trading: 0.005% per day (BTC/ETH)
Futures trading: 0.02%/0.04%
Options trading: 0.02%/0.02%
Coinbase represents one of the safest and most regulated crypto exchanges. However, Coinbase also features one of the highest fees in the entire industry. It would take a considerably high monthly trading volume to reduce Coinbase fees to the level seen on exchanges such as Binance, Kraken, and Kucoin.
Spot and futures trading fees are the same on Coinbase: 0.4%/0.6%.
Kraken is a crypto exchange with extremely high quality security, great access to a diverse set of crypto assets, and a commendable UX. Although not the best, Kraken offers a good variety of fees for both standard users and whales.
Spot trading: 0.16%/0.26%
Stablecoins, pegged tokens, and FX pairs: 0.2%/0.2%
Margin trading: 0.01%/0.02% (BTC & ETH)
Futures trading: 0.02% 0.05%
Kucoin categorizes its tradable assets into three unique categories: Class A, Class B, and Class C. The assets in each class are distinguished by their liquidity and market cap. Class A has some of the most popular assets (e.g. AAVE, FTM, and ADA), while Class C has assets with the lowest market cap.
It’s noticeable that Kucoin offers competitive fees for its Class A assets. However, the same can’t be said for Class A and C, whose assets have more than double the fees.
Class A assets have the following trading fee schedule:
Spot trading: 0.1%/0.1%
Futures Trading: 0.02%/0.06%
Class B assets have the following trading fee schedule:
Spot trading: 0.2%/0.2%
Futures Trading: 0.02%/0.06%
Class C assets have the following trading fee schedule:
Spot trading: 0.3%/0.3%
Futures Trading: 0.02%/0.06%
Crypto trading fees are essential for supporting your exchange of choice and enabling them to continue upgrading their products, features, and services. Trading fees are commonly charged when trading spot markets, futures markets, margin, and options markets. Although spot and options markets have a one-time fee, futures and margin trading have a funding fee.
You will also spot various fees outside exchanges. You will have to pay transaction fees whenever you interact with blockchains, smart contracts, dApps, etc. Gas fees are what you pay to miners for verifying your transaction and their cost depends on the network you use.
Exchanges themselves compete for liquidity by offering good trading fees. What they lose with lower fees, they gain with the new liquidity and trading volume they attract. However, not all exchanges offer good trading fees, so make sure to check their fee schedules before trading.
Want to learn more about trading? I recommend reading the following articles:
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.