Transaction Fees: What is the Full Price of a Cryptocurrency Trade
What is the final amount you will pay for buying or selling cryptocurrencies, beyond the average exchange rate.
When you look at exchange rates for cryptocurrencies, the story is not so simple. Sometimes, the real amount of money paid may differ, due to fees, surcharges and other additional expenses.
Fees related to cryptocurrency purchase may include:
- Exchange fees or commissions, usually a percentage of every trade. These are usually represented in fiat currency.
- Fees related to the payment method- some forms of transactions have processing fees attached.
- Fees for withdrawing cryptocoins and moving them to a different wallet off the exchange. These fees are usually denominated in coins and are relatively small.
- The transaction fees of the network itself, to pay miners' fees and include the transaction in a block faster. These vary between cryptocurrencies. Bitcoin is a high-priced coin and fees have run upward, making it much more expensive to move out of the exchange platform. Other coins move with micro-fees.
Who is Affected by the Transaction Fees?
Fees will apply to all new entrants into the cryptocurrency market. Buyers and investors will incur various fees for every purchase. And joining a marketplace as a trader will come with its own set of fees, which should be included in the rationale for making a trade. Any path in and out of cryptocurrency position has its set of fees and commissions- learn how to find information about them and find ways to avoid unnecessary fees.
Simple Buying vs. Trading Fees
Simply buying tokens to hold in your wallet has a very different set of fees compared to fee schedules for regular traders. Fees for active traders vary depending on volume and whether a trader puts liquidity into the market or decreases liquidity.
What is a Market Maker
You are a market maker if you place orders that will satisfy the demand of other traders. For instance, you are selling a token at the right price. The opposite is to be a "market taker," or a trader who merely grabs the available orders. Fees for market makers are sometimes smaller and there may even be rebates.
So depending on your style of trades, you will have different fees as a percentage of trading volume. Here is the sample fee schedule of Kraken:
And here is the schedule for Poloniex:
This means that for a newbie trader who takes and fulfills an already existing order, fees may be up to 0.25% per trade. Roughly, you would pay $20 to move one Bitcoin at the current market prices.
Have a careful look at the exchange tool you are using. For beginner buyers, there is no need to worry about fees on every order. You will most probably pay one-time fees when you exchange your USD or EUR for Bitcoin, Litecoin or others. The service you choose will then have to worry about trading fees, which will then be included in your final bill.
For simpler services like Shapeshift or Changelly, the fees are usually displayed outright and depend on the tokens that you want to exchange. Here is a sample exchange between Litecoin and Dogecoin. The fees appear in the currency you want to buy. They are much higher than you would see if you placed an order yourself on one of the markets like Kraken or Bitstamp.
Fees on Shapeshift
Once you have moved to cryptocurrencies, Shapeshift offers a selection of tokens to change between. Shapeshift is not a replacement for trading, but it is a form of investment buying. Shapeshift is transparent and includes only the miners' fees when it performs transactions. Shapeshift is not an exchange, but a service with daily volume and order size limitations- it is not a replacement for trading. But for short-term movements between tokens, it may be the cheapest option.
So to move one Bitcoin through Changelly would cost around $9, more convenient compared to Poloniex.
Fees Related to Payment Methods
As you can easily see, the fees for using cryptocurrencies are getting lower. But spending your cash on BitPanda to buy a coin may mean paying up to 2% of the order price for fees on debit or credit cards or SEPA transactions. Skrill transactions will include a higher fee of 3.77%.
Zero Fees: A Thing of the Past
At the beginning of 2017, several zero-fee exchanges started working in China. OKCoin, Huobi, and BTCC invited an influx of funds. But only months later, regulators forced the exchanges to impose a flat 0.2% trading fee.
Until a few days ago, Binance was one of the last zero-fee exchanges. Its token, Binance Coin, even had a wild bull run, tripling in price to above $2. But at the end of August, even this exchange service started incurring fees of 0.1% per trade. And part of the popularity of the Binance token (BNB) is that it can be used to get a 50% discount on fees, getting them down to 0.05% per trade. Fees for withdrawal are higher but still competitive.
Moving Bitcoin through Binance would cost 0.005 BTC or around $22, which is comparable to other exchanges, but scales to a lower percentage if more tokens are moved out. Still, Binance is in no way a zero-fee exchange.
Paying with PayPal: What to Expect?
If you are looking for the most expensive way to buy cryptocurrencies, going through VirWox would be it. Firstly, you are incurring PayPal fees for funding your account, which may run up to 0.35EUR plus 3.4% of the transaction sum. Then, you would have to buy Linden dollars, which comes with commissions ranging from 3.9% to 0.78%.
And to move your Bitcoin out of the exchange, you would pay 0.001 Bitcoin, or around $5.
Fees vary depending on the path you choose to buy or sell cryptocurrencies. Going through Tether (USDT) (link to article on Tether by Hristina) may have its own set of funding, cash transaction and withdrawal fees. The final account may also depend on the chosen tokens, as some tokens have very low movement fees. Bitcoin is more expensive to move, but also compensates with price growth potential. But still, when you consider the size and frequency of orders, it is best to choose the most friction-free path to achieve your goal, whether it is trading for short-term gains or buying to hold.
And if you are just a learner, use Dogecoin to acquire cryptocurrency technique before moving to more expensive tokens and pairs.