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Initially a niche market avoided by traders and investors, cryptocurrency has grown into a popular class. If you’re interested in taking part in this exploding sector, you’ll need to use a cryptocurrency exchange to gain exposure.
Cryptocurrency trading is similar to trading on a stock exchange; however, you’re limited to trading on cryptocurrency exchanges. Most cryptocurrency exchanges calculate fees in one way: a tiered-level structure that charges a percentage of your 30-day trading volume. Learn more about the fees you’ll pay when you trade cryptocurrency so that you can develop strategies to keep them from eating away at your profits.
Key Takeaways
- Cryptocurrency trading and investing have become increasingly popular since Bitcoin first debuted in 2009.
- Hundreds of online exchanges now exist that let you buy, sell, and trade digital currencies.
- Typical costs might include fund transfer fees to/from your bank account, maker/taker fees, set transaction fees, or tiered transaction fees based on trading volume.
Cryptocurrency Exchange Considerations
There are three important factors that traders must consider when thinking about buying or selling cryptocurrencies from an exchange:
- Fee schedules: You might encounter wire fees (to transfer funds to and from your bank account), mining fees, account fees, spot fees, and tiered transaction fees
- Location: Many exchanges are unregulated, and some are only available to those that live in certain geographic areas
- Availability: Not all cryptocurrencies are available on every exchange
Fee Schedules
The most popular fee schedule used by cryptocurrency exchanges uses a tiered “maker” and “taker” scheme. It uses trading volume to create tiers and charges maker and taker fees based on your trading volume.
A maker is a party that creates a market on the exchange by selling cryptocurrency, and the taker is the party that takes it off the market by purchasing it. Each party pays fees for the transaction, but makers generally pay less.
Fee schedules at cryptocurrency exchanges are designed to encourage frequent trading in large transaction amounts worth thousands of dollars. Fees often decrease as a trader’s 30-day cumulative trade volume increases.
For example, trading at Coinbase with a trading volume of less than $10,000 incurs maker and taker fees of 0.50%, while trade volumes of more than $10,000 decrease in tiers based on your trade volume.
The first four pricing tiers listed on Coinbase are:
| Pricing Tier | Taker Fee | Maker Fee |
|---|---|---|
| Under $10,000 | 0.50% | 0.50% |
| $10,000 – $50,000 | 0.35% | 0.35% |
| $50,000 – $100,000 | 0.25% | 0.15% |
| $100,000 — $1 Million | 0.20% | 0.10% |
You also pay less in the higher tiers as a maker because makers increase the market’s liquidity, which allows the exchanges to continue trading.
Some exchanges might still charge a per-transaction fee, but for the most part, they have transitioned to a combination fee schedule similar to the one used by Coinbase. As such, small and infrequent trades are not cost-efficient at cryptocurrency exchanges, unless you’re only looking to buy a cryptocurrency. If that’s the case, most exchanges charge a spot trading fee to buy and take possession of a digital coin.
Location
Cryptocurrency exchanges are unregulated in many countries. Most regulators around the world have taken a hands-off approach to cryptocurrency regulation in some of its biggest trading markets. However, cryptocurrency exchanges in the U.S. must register with the Financial Crimes Enforcement Network. This means that U.S.-based exchanges are regulated and may not offer the same services as exchanges based outside of the U.S.
Availability
Most well-known cryptocurrency exchanges do not offer access to all coins. Some only provide a few dozen, while others might offer hundreds. You might need to use different exchanges to get access to the cryptocurrencies you’re interested in.
Top 3 Cryptocurrency Exchanges
Here is a brief comparison of trading fees for cryptocurrency at three of the more popular exchanges. The CoinMarketCap Spot Exchange Score is used to gauge exchange popularity. This score accounts for each exchange’s web traffic, volume, average liquidity, and confidence.
Binance
Founded in 2017, it only took Binance a few years to get to the top of the list of cryptocurrency exchanges. In 2021, the exchange was out-trading all other cryptocurrency exchanges.
Cryptocurrency fans can choose from hundreds of cryptocurrencies on Binance; however, U.S. fans can only select from a little more than 70 cryptocurrencies on Binance.US due to regulations. Internationally, Binance lets users trade the cryptocurrency futures markets, buy currency, earn cryptocurrency, create non-fungible tokens, and learn about all things cryptocurrency through the Binance Academy.
You can access all of the material on Binance’s website, such as the academy and other resources; the U.S. only restricts buying, selling, and trading on the international platform to protect investors.
Depending on how you use Binance, you’ll be charged fees and have withdrawal limits. Through VIP ratings based on your trading volume, you’ll see a 0.1% spot trading fees and fees based on your 30-day trading volume. Traders with volumes under $50,000 are charged 0.1%/0.1% maker/taker fees—the fees decrease in tiers from there. If you use Binance’s cryptocurrency BNB, you recieve a 25% discount off any fees. There is also a 0.5% fee for buying and selling cryptocurrency.
In the U.S., you can trade cryptocurrencies and tether (USDT) pairs, cryptocurrency pairs, and cryptocurrency to U.S. dollar pairs, but your choices are limited. In addition, you can make advanced trades on the price movements of these pairs or trade them over the counter.
Coinbase
Coinbase was formed in 2012 with the goal of granting everyone access to a cryptocurrency financial system. The exchange became publicly traded after an initial public offering and listing on Nasdaq in April 2021. The exchange offers access to hundreds of cryptocurrencies.
Fees for using Coinbase’s services depend upon the size of your transaction, how you pay, and the market conditions—this includes the maker and taker fees discussed earlier. Coinbase also charges for network transactions fees, such as Ethereum gas, which is the fee for ether transactions.
FTX
FTX is another cryptocurrency exchange only available internationally unless you use U.S.-based exchange services. The U.S. exchange has more than 30 cryptocurrencies available, while the international exchange has access to several dozen more.
FTX uses a tiered fee structure that rewards you for more trading. The higher your trading volume, the less you pay in maker/taker fees. Spot market fees are charged according to whether you’re a maker or taker. You also might pay wire transfer and automated clearing house (ACH) fees for transferring money in and out of the exchange.