Ultimate Guide to Crypto Exchange Fees: Everything you need to know

What does Crypto Exchange Fees mean?

Crypto exchange fees generally refers to the charges which users pay to the platform for buying, selling, or trading cryptocurrencies. These fees can vary widely depending on the exchange and type of transaction being done. Common types of fees include trading fees, which are charged per transaction, withdrawal fees for transferring funds out of the exchange platform, and deposit fees for adding funds to the exchange.

These fees are essential for the regular operations of the exchange platforms as they cover multiple costs such as security, maintenance, and development of the platform.

Types of Crypto Exchange Fees

Crypto exchanges do charge certain fees associated with their platform to sustain in the market and offer various services to the users as well. Let’s discuss about some of the main types of crypto exchange fees:

1. Trading Fees

Trading fees are generally referred to as transaction fees on the platform which gets executed when you buy, sell, or swap cryptocurrencies. These fees are further divided into multiple ways:

a) Maker and Taker Fees

Makers and takers are two types of traders on crypto exchanges. Makers add liquidity to the market by placing limit orders, which don’t execute immediately and stay open on the order book until someone matches them. Takers, on the other hand, remove liquidity by executing spot traders, buying, or selling at the current market price.

Makers usually pay lower fees because their orders help build the market’s order book, making the exchange more attractive to other traders. Takers pay higher fees since they execute trades immediately, using up the liquidity that the maker provides.

b) Flat Percentage Fees

For every trade, there is a certain platform which charges fixed percentage fees, ranging from 0.1 to 1%. These flat charges are charged for each trade, regardless of the order type or services. This fee is being taken by the platform to conduct a transaction and execute it safely on the exchange platform for the users.

c) Spread Fees

Spread fees are the difference between the buy and sell prices of a cryptocurrency. Instead of charging a direct commission on trades, some exchanges make money through the spread.

When you buy a cryptocurrency, you pay a higher price (ask price) than what you would get if you sold (bid price) it at the same moment. The exchange marks the differences between these two prices as its profit.

2. Deposit and Withdrawal Fees

These charges are associated with the traders only when they deposit or withdraw a certain amount of currency from the exchange. Most of the crypto exchanges do not charge any fees for deposit, but do incur fees over the direct deposits done through bank transfers or credit cards.

The withdrawal has a certain fixed fee or commission to be paid on the platform such as trading fee for the maker on OKX platform is 0.08% and for taker it’s 0.10%. Same way, for every trade it may include fees paid for the transfer like Gas fees on Ethereum or Polygon. Therefore, it depends on the network used for withdrawal to have efficient and less withdrawal fees.

3. Staking Fees

Some exchanges allow you to stake your crypto, but they might charge a fee for their service. Staking involves locking up your cryptocurrency with the exchange to support the operation of its Proof of Stake blockchain. In exchange for the staking, you earn rewards in terms of Annual Percentage Yield (APY).

4. Network and Gas Fees

Network fees generally cover the whole cost of processing transactions on a blockchain network. These are not being charged directly by the exchanges but depend on the user and are paid directly to the miners. For every transfer, the data of this transaction needs to be added to the blockchain, and miners do their required work.

Bitcoin Network Fees: Depending on the network demand, the transaction fees on the Bitcoin network fluctuates a lot.

Ethereum Gas Fees: There is a common standard called “gas” which is used by Ethereum to measure computational efforts required for the transactions.

5. Inactivity Fees

This fee gets charged by some exchanges on accounts that have been inactive for a specific period of time. If you do not log in your account or do not make trades for a longer period of time, it’ll be considered as inactive and the exchange may deduct a small fee from your balance.

6. Leverage Fees

Leverage fees are the charges associated with borrowing funds to trade on margin. When you trade with leverage trading platforms, you are primarily using borrowed money to increase your potential return. However, exchanges do charge a small fee for providing this borrowed capital. These fees can be a fixed percentage or based on the amount borrowed with the duration of the loan.

7. Funding Rates for Perpetual Futures

Funding rates are referred to as periodic payments exchanged between traders holding long and short positions in perpetual futures contracts. These rates ensure that the price of the perpetual contract remains close to the spot price of the underlying asset. As per its working, if the funding rate is positive, traders in long positions pay those in short positions, and vice versa if the rate is negative.

These payments occur at regular intervals, occasionally after every eight hours. It helps in balancing the demand between long and short positions, preventing significant price fluctuations from the spot market.

Factors Impacting Crypto Exchange Fees

There are various factors which affects the crypto exchange fees on the platform, some of them are:

1. Exchange Type

The crypto exchange fees depend on the type of exchange, i.e. either centralized or decentralized. Because centralized platforms may have lower trading charges due to high liquidity, while decentralized exchanges have multiple other charges including gas fees, margin fees, etc.

2. Trading Volume

Due to extreme competition and economies of scale, the high-volume exchanges charge less fees as compared to lower volume ones.

3. Cryptocurrency

The selection of cryptocurrency in which you are going to invest also decides the network fees due to their increased demand or network congestion. This also affects the overall deposit and withdrawal costs.

4. Type of Transaction

Depending on your location and the method used for doing the transaction over the exchange platform also plays an important role. If anyone opts for fiat deposits through bank transfer or credit cards, they may get charged higher.

5. Trading Discounts

For the promotional purposes, there are multiple crypto exchange platforms available in the market which offer additional discounts on trades. This improves their trust among the users and helps them to build a strong community. Even the big traders who deal with high volume trading get discounts or offers too.

Tips for Reducing Crypto Exchange Fees

People trade in crypto with the motive to make higher returns or rewards, so for that purpose it becomes essential to reduce the crypto exchange fees associated with the platforms. Some of the effective methods to reduce crypto exchange fees are:

• Most of the exchanges offer a maker/taker model, where makers have to pay less fees as compared to taker, due to their facility of limiting orders. So, you should opt for limiting orders wherever possible.
• Always select centralized exchanges that are very cost effective for the regular traders, because of the small fee structure.
• Always try to trade in higher volumes, so as to reduce the tiered fee structure for transactions.
• Check for any kind of hidden charges being associated with any exchange platform.
• Properly keep a track of network congestion and current market trends to optimize your timings for the transactions. In the lower activity period, there can be  good savings on your withdrawal and network fees.
• Check out multiple offers and promotions to get a discount for the purpose of buying, selling, or staking crypto tokens.