
Cryptocurrency is always in the limelight for various reasons. Some cryptocurrency traders make millions of dollars from the trade, while others count losses. Without a clear understanding of this kind of trading, you might fall into the latter category. However, with enough research, especially regarding the transaction and related fees, you’re more likely to benefit from it.
Bitcoin, on its own, experiences over 10,400 transactions every hour. Contrary to the stock exchange, the cryptocurrency market is active 24 hours a day. That said, transaction costs can quickly add up to a considerable amount.
With the round-the-clock market, like cryptocurrency trading, trading fees are often unpredictable. For instance, in 2019, the daily average Bitcoin transaction cost ranged between USD$1.17 to USD$10.65, before hiking to US$63 in April 2021. With that in mind, traders should understand what to expect and develop measures to enter and exit the cryptocurrency market to preserve their capital.
This article will discuss ways to reduce crypto trading fees to help you make more money than losses.
What are different types of cryptocurrency trading fees?
A cryptocurrency trader can experience price shifts depending on the exchange. Each crypto comes with its cost structure. As earlier stated, cryptocurrency transaction fees can increase or decrease unpredictably. Therefore, it’s vital to check transaction fees every now and then. As far as cryptocurrency trading fees are concerned, there are two types. They are:
- Exchange fees: For crypto traders to make a profit, the cryptocurrency must attach to several financial strengths. This often means examining fees for everyday transactions, like trading, loans, liquidations, withdrawals, and deposits incurred when transferring crypto to online storage.
- Network fees: Cryptocurrency is a digital service that individuals or governments don’t control. The trade takes place on networks and computers between buyers and sellers around the globe, without needing a third party. Since transactions don’t require records, the network fee is used as payment for resources used to validate and record transactions on the public blockchain.
How to minimize crypto trading fees
Cryptocurrency trading fees can vary depending on various factors and within a short period. For instance, on 1st May 2022, the average transaction fee on Ethereum experienced a hike of USD$196.68. Two days later, the fees dropped to USD$16.27, and are currently between USD$5 and 10. Therefore, the timing and strategy significantly impact trading fees.
Here are some tips to minimize crypto fees.
1. Be keen on transaction types
If you want to exit a particular cryptocurrency investment, you should ask yourself if you require fiat currency from it. If you don’t, you can exit the holding with lower fees by exchanging it with another cryptocurrency investment. Nevertheless, you’ll incur fees on each deposit into your digital wallet, and conversion fees for trading cryptocurrency to fiat currency.
2. Purchase cryptocurrency with coins
When cryptocurrency is liquidated into fiat, chances are you’ll pay fees linked to the withdrawal and deposits to your digital wallet. However, using coins to trade can be free. Therefore, if you’re looking to minimizing crypto trading fees, you should use coins when purchasing cryptocurrency.
3. Use an exchange with commission-free trading
Commission-free platforms that don’t charge stock trade greatly eliminate trading commissions. Some investments that don’t charge cryptocurrency trades include Shakepay, BlockFi, Robinhood, and Uphold.
Other exchanges like Luno and Coinbase don’t charge makers, but they do with takers. While you’re more likely to pay for some services, you can always minimize the fees.
4. Be cautious of transaction amount
Most cryptocurrency exchanges charge depending on the percentage traded. Often, the fee stands at around 0.1%. That said, if your trade involves USD$10,000, you’re likely to attract a USD$10 fee. However, there’s always a flat fee, but the bigger the transaction, the more fees you attract.
5. Take advantage of promotions
Some cryptocurrency exchanges provide sign-up offers to allow investors to gain free cryptocurrency, lowering fees’ effect on their accounts. Examples include:
- You can get USD$50 for signing up with Celsius.
- Get USD$50 after a friend you referred signs up with Voyager and makes a minimum trade.
- Get over USD$6 in Bitcoin after signing up with Coinbase and purchasing cryptocurrency.
- Get USD$30 after a friend you referred to eToro makes a minimum purchase.
As a cryptocurrency investor, it’s always important to understand the market, especially since it runs 24/7. You should always be ready to invest at any minute, hence, the need to understand the exchange fees. Ensure you have buying, selling, and storing strategies, and check on them regularly as changes can happen at any time.
Disclaimer: This content is for informational purposes only. This should not be taken as financial advice to buy, trade, or sell cryptocurrency or use any specific exchange. This is not intended for use as investment, financial or legal advice as each individuals need will vary. This story may include affiliate links with Marketplacefairness.org partners who may provide compensation to Marketplacefairness.org. ACM advises readers consider their own circumstances and obtain their own advice. You should also verify the nature of any product or service, and consult with the relevant regulators’ website before making any decision.
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