Crypto trading fees can be steep, depending on the platform you use. Expect to pay various fees, such as spot fees, spread, margin rate, withdrawal fees, etc. This article will show you how to reduce your fees as much as possible when trading cryptocurrency.
What Is Crypto Trading?
It refers to buying and selling cryptocurrencies to make a profit. You can create an account on an exchange and speculate on the price movements of various digital tokens. Many people earn significant profits from this speculation, but it carries risks like every type of trading.
Types Of Crypto Trading Fees
- Trading Fees: This fee is what your exchange collects for executing your trades on its platform. It can be a maker fee (for adding liquidity to the exchange’s order book) or a taker fee (for removing liquidity from the order book).
- Deposit: Some exchanges charge users each time they deposit fiat currency or digital tokens into their accounts.
- Withdrawal: Exchanges usually charge money for withdrawing assets to a bank account or crypto wallet.
- Margin rate: The amount a trader pays to borrow money from an exchange to buy assets.
- Spread: A small addition to the exchange rate that your platform keeps for itself when you execute trades.
- Management fees: Some platforms may charge additional money to store users’ tokens or offer advanced features.
How To Reduce Commissions
1- Use A Commission-Free Exchange
Some crypto exchanges don’t charge commissions for spot trades. For example, Robinhood charges 0% commissions for crypto trades on its platform. The platforms charging 0% commission usually do it to lure and retain customers. They make money from other methods, such as charging spread fees on trades or subscription fees to access advanced features.
Some commission-free platforms also make money from “payment for order flow,” which involves routing customer orders to wholesale brokers.
2- Find Exchanges With Lower Commissions
Different crypto exchanges charge different sums to facilitate trades. You can shop for an exchange that charges low fees to its users. For instance, Binance, the world’s most popular crypto trading platform, charges a flat 0.1% for spot trades. Some other platforms charge 1% or more on spot trades, so you’ll pay much more.
Traders should read crypto news reports and reviews to see which platforms offer the best commissions. These reports and reviews should guide your decisions as you try to trade with the lowest possible commissions.
3- Trade With Higher Volumes
Most trading platforms offer tiered commissions. Traders with small volumes pay higher percentage commissions, while traders with high volumes pay small percentages. Some platforms even waive commissions entirely once you trade above a certain amount.
High-volume trading is a tried and tested method of reducing the commissions you’ll pay.
4- Stake Your Exchange’s Native Token
Many crypto exchanges have created native tokens since the explosion of altcoins in 2017. Examples include
- Binance – BNB coin
- Crypto.com – CRO
- KuCoin – KCS
- Gate.io – GateToken (GT)
- Huobi – Huobi Token (HT)
Exchanges usually offer lower commissions to users that buy and stake native tokens. They do this to drum up demand for native tokens, and you can take advantage of such promos to trade with lower fees.
5- Trade High-Liquidity Pairs
You should trade popular token pairs with high liquidity, and you’ll enjoy lower commissions. For example, BTC / USDT, BTC / USD, and XRP / USDT are popular trading pairs. They usually incur lower fees because there’s enough liquidity to cover trades. In contrast, low-liquidity pairs incur high fees because it’s difficult to gather the liquidity to execute them.
6- Use Decentralized Exchanges
Decentralised platforms aren’t controlled by a third party, unlike centralised ones. Users trade directly with each other, and the exchange doesn’t hold custody of user funds.
Decentralised platforms charge lower commissions because they require less overhead to run. However, the trade-off is that they’re more difficult to use, have minimal customer support, and don’t support fiat deposits or withdrawals due to regulations.
We have explained the proven ways to reduce commissions when trading cryptocurrencies. Follow our tips to save significantly more on your trading commissions.