Fees are an unavoidable part of cryptocurrency trading- or are they? Charged by cryptocurrency exchanges on each trade or transaction on their platform, these fees can add up to quite a substantial amount, especially during the bull market when people are actively trading. Therefore, people are eager to find any way to save money on cryptocurrency trading fees, and to maintain competitiveness, many exchanges do offer discounts or perks for their loyal customers. In this article, we take a look at some of the ways in which you can lower or even have no trading fees, and the discounts offered by some cryptocurrency exchanges.
What are crypto exchange fees?
Cryptocurrency exchanges charge customers fees for transactions or trades done on their exchange. Some types of crypto exchange fees include:
Exchanges are basically a platform for customers to trade cryptocurrencies, so they would need to deposit or withdraw cryptocurrency to the exchange platform in order to use it. Exchanges charge a fee when customers deposit or withdraw cryptocurrencies onto or from their platform.
This is charged by exchanges whenever cryptocurrencies are converted to other cryptocurrencies or fiat, and vice versa.
Most popular exchanges such as FTX or Binance charge trading fees based on a maker/taker structure with taker fees being higher than maker fees. Takers are when the user places an order that is able to trade immediately (whether partially or fully) before it enters the order books. They are known as “takers” because they “take” volume from the order books. On the other hand, maker fees are charged when the user places an order that goes onto the order book (whether fully or partially) i.e. “making” the market.
These fees are charged when users are involved in margin trading i.e. borrowing funds to increase your position. The amount of these fees usually depends on the amount borrowed on margin together with an interest rate. Margin trading however is very risky, and one of the reasons for this is because if the trade does not go your way you would become liquidated. When this happens exchanges also charge a liquidation fee.
Exchanges usually offer exchange fee discounts for their frequent users. This is usually based on a VIP tier structure where frequent users (based on their trading volume over 30 days) can qualify for higher VIP tiers which entitle them to cheaper fees. The requirements for the VIP tiers and discounts offered differ between exchanges.
Binance’s VIP program requires users to have a certain trade volume over 30 days and have a specified balance of their native token known as Binance Coin (BNB). For the first VIP tier, users must have a trading volume of 50 BTC or more and hold 50 BNB or more. Check here for more details.
FTX Exchange’s VIP program is geared towards professional or high-volume users. To qualify for the first VIP lever, users must trade an amount equal to or over 0.5% of all of FTX’s trading volume over 30 days. Check here for more details.
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Coinbase does not have a VIP program. However, Coinbase charges a fee for withdrawing from their platform and for transactions. The fees are calculated based on several factors such as the payment method, size of order and market conditions etc. The amount of such fees will be disclosed at the time of the transaction. Learn more about Coinbase fees and how you can avoid them.
Exchange token discounts
Many exchanges have their own native token, and holding their token entitles users to discounts.
FTX exchange’s native token is FTT. FTT token holders can enjoy rebates on trading fees and discounts when using their OTC services. The more FTT held, the greater the rebates and discounts. Larger holders can also automatically be promoted to VIP status on the exchange which gives them even lower trading fees as seen above.
In addition, FTT holders can also receive airdrops of the Serum ecosystem token (SRM). Users will receive 3 locked (1-7 years) SRM for every 500 unlocked FTT held on the exchange with no upper limit. Check here for more details.
Binance Token (BNB) is Binance’s native token. Binance allows users to pay for trading fees using BNB, and by doing so users can get 25% off both trading and margin trading fees, and 10% off futures trading fees.
Woo X for instance also has their native WOO token. Users can enjoy discounts on maker/taker fees by holding as little as 300 WOO tokens, and only 1,800 WOO tokens are required to reach 0% maker and taker fees. The WOO token can also be used for yield farming and as collateral for borrowing and lending on various DeFi platforms. Click here for more details.
Both Coinbase and Kraken do not have their own native token.
Discounts for staking exchange tokens
Some exchanges allow users to stake the native token i.e. to lock the token up for a specified period in return for additional rewards. Some rewards include fee discounts, additional tokens (i.e. yields), increased airdrop rewards and the ability to participate in the exchange’s initial exchange offerings (IEOs).
At FTX, staking FTT token entitles users to maker fee rebates, additional votes, increased SRM airdrops, limited free withdrawals and tickets to participate in their IEOs. The benefits offered increase with more FTT staked.
Binance also allows users to stake their BNB in their Vault in return for BNB yields. Whilst there are no direct perks for staking BNB, as mentioned previously Binance users get 25% off trading fees when they pay with BNB.
WOO X users are required to stake their WOO tokens in order to enjoy the trading fee discounts mentioned in the previous section. Other rewards for staking include eligibility for airdrops.
Neither Coinbase or Kraken offers staking in their exchange token.
Cryptocurrency exchange fees can add up especially when you are a heavy user. With the many exchanges out there, competition is fierce to attract users since they make money on each transaction you do. One of the major ways to do this is to offer discounts on fees for using the exchange. Most, if not all cryptocurrency exchanges offer discounts simply for frequent or high volume users with tiered VIP programs. Other exchanges such as FTX and Binance are more creative, utilising their native token or having staking programs which boost users’ rewards. At the end of the day, the rewards offered is only one aspect to consider when deciding which exchange to choose, other factors include the number of cryptocurrencies supported and security etc. Intended users, especially those from the US, should also check carefully as some exchanges may have features that are not avaialble to US citizens.
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