Cryptocurrency has initially grown into a popular class, that was avoided by traders and investors. If you want to be involved in this sector, you’ll need to use a cryptocurrency exchange for exposure.
Trading cryptocurrency is comparable to trading on a stock market, but you’re limited to cryptocurrency exchanges. The majority of cryptocurrency exchanges use a tiered-level structure that charges a percent of your 30-day trading volume as a fee. Find out more about the expenses you’ll face when you trade cryptocurrencies so that you can construct strategies to prevent them from detracting from your gains.
When it comes to purchasing or selling cryptocurrencies from an exchange, there are three crucial elements that traders must consider:
Fee schedules: Wire fees, mining charges, account costs, spot costs, and tiered transaction costs are all possible.
Location: A lot of exchanges lack regulation, and some are limited to crypto-users living in specific parts of the world.
Availability: Some cryptocurrencies can only be found on specific exchanges.
The most popular fee structure employed by cryptocurrency exchanges is a tiered “maker” and “taker” system. It creates tiers based on trading volume and charges maker and taker fees depending on your trading volume.
A maker is one who sells cryptocurrency on the exchange, whereas a taker is the one who removes it from circulation by buying. Each of these individuals pays fees for the procedure, but makers typically pay less.
The convenience fee structure of cryptocurrency exchanges is intended to encourage big transactions worth thousands of dollars on a frequent basis. Fees are generally reduced as a trader’s 30-day cumulative trade volume rises.
For example, if you’re trading at Coinbase with a volume under $10,000, you’ll incur 0.50% in maker and taker fees. However, if your trade volume is over $10,000 , the amount of fees will decrease according to your totaltrade volume.
You save money in the higher tiers as a maker since you improve market liquidity, allowing exchanges to continue operating.
Although some exchanges might charge a per-transaction fee, most have adopted a combined fee schedule similar to Coinbase. Consequently, if you don’t plan on frequently trading cryptocurrencies, it’s not worth your time or money to do so at an exchange. However, if you’re only looking to purchase a cryptocurrency, almost all exchanges will charge a spot trading fee.
Though most world regulators have taken a lax approach to cryptocurrency regulation, exchanges in the U.S. must register with the Financial Crimes Enforcement Network.
Exchanges based in the United States are regulated, which may limit the services they offer compared to foreign exchanges.
While most exchanges limit the number of coins accessible to users, some only offer a few dozen while others offer hundreds. As a result, you might need to use different exchanges to trade the cryptocurrencies you’re interested in.