Introduction to Fees
There is a lot to unpack when it comes to fees, so let’s break them down before we dive in.
A Broad View
The fees currently in use by cryptocurrency trading platforms (AKA cryptocurrency brokers, cryptocurrency exchanges) are a bit all over the place. Honestly, there is no other way to put it.
A lack of industry standard and regulation due to the crypto trading market being so new has left us in a pretty confusing place when it comes to what traders are being charged.
The majority of brokers are using a fee structure that is unique to them. This can make it extremely difficult for traders to find the best broker for their trading needs.
That’s where we want to help!
We have created this guide on crypto trading platform fees to help you understand exactly what you are being charged and how to make the best decisions for your trading. By the end of this guide, you’ll be able to look at a platform’s fees and assess whether or not they fulfill your needs.
To start things off, we have created some groupings of fees and the different names that brokers use for them. This should help you in remembering what these terms actually mean.
Make sure to bookmark this page so you can refer back to the list below – it can get confusing quite quickly!
- Entry fee – Maker/Taker, Spread, Fixed Spread, Variable Spread, Margin fee, Open fee.
- Active trade fee – Overnight fees, Perpetual Contracts, Overnight Funding, Overnight Interest, Margin Open, Rollover fee, Swap/Swap Rate.
- Account fee – Withdrawal & Deposit fees, Inactivity fees, Blockchain fee (crypto only).
Brokers will combine all three fee types to create a different fee structure.
So that broker you saw which offered no charges on your entry cost? They may be charging you extra on your open trade costs!
Understanding what your broker is doing you will help make you much more profitable!
These are fees you will take on whenever you enter a trade.
In the cryptocurrency trading space, the two entry fees you will likely come across are spreads and maker taker fees, though some may use different names for them.
It’s important to know how much your entry fee is because it will impact your stop loss, target, risk-to-reward ratio, and profitability.
Maker Taker Fees
This is one of the most common fee structures in the cryptocurrency trading market today. The maker and taker fee structure originates from the stock market and we categorize it as an entry fee.
It’s related to whether a trader is adding or removing liquidity to the market.
Liquidity means the availability of assets, stocks, or trades in the market. It essentially shows you how active traders are in a certain market.
The taker fees are applied instantly. Whereas a maker fee will be applied later once your order has been filled.
You will see some exchanges charge zero fees for market makers to encourage traders to use the exchange. Both sellers and buyers can be makers or takers.
When applied to the stock market it seems sensible to use the maker or taker fee structure. Traders are actually buying and selling stocks so there’s an incentive to being a maker.
With CFDs it seems a bit strange to follow this structure as with most exchanges you aren’t really buying or selling anything.
In this case, you will find that new cryptobrokers may use this as an opportunity to charge another entry fee, commonly known as a Margin fee or Open fee. This amount will typically be added on top of your maker taker fees so be sure to check exactly how much your entry fees are going to be.
However, some brokers do allow you to actually buy and sell the cryptocurrency so make sure you find out with your broker of choice.
You’ll find that the cryptocurrency brokers who follow a maker/taker fee structure are brokers that only deal with cryptocurrencies. This is because they want more liquidity on their platform.
However, established forex brokers who have expanded to the cryptocurrency market typically do not follow this structure.
This fee structure can seem quite complicated at first, so head on over to this article where we cover the maker and taker fee structure in more detail.
Active Trade Fees
These fees are ones that you will be charged for having an active trade.
There are a whole host of different names that brokers use for this so it is important you find out exactly what you are being charged.
A lot of brokers will purposefully create confusion over your active trade fees so it is vital that you navigate these the best way you can.
You can see a list of these different names in our groupings at the top of this article.
Overnight fees are an interest fee for having an open, active trade. There are many different names given to this fee as well as varying rules depending on your cryptocurrency broker.
Brokers that are already established in other tradeable markets will typically stick to charging traders once per day for any open trades.
Newer, crypto-specific brokers have a wide range of models with no clear industry standard. All of these brokers are still charging you for any open trades you may have though.
Some trading platforms charge every 4 hours, 8 hours, or 12 hours. However, it is important to note that these are fees that you take on at specific times.
Let’s say my broker charges me every 8 hours, at 04:00, 12:00, and 20:00. You can actually avoid getting charged by not having any open trades at these times.
So you do have a degree of control over these fees.
But there’s more good news.
These fees aren’t just a one way street in which you are losing money.
Some brokers actually pay you interest for having an open trade. You will typically see this when going short, but it can vary depending on the pair.
You can take a look at a more thorough break down of these fees here if you are interested in knowing more.
Overnight fees are an aspect of cryptocurrency trading you need to be aware of. If you can navigate around them whilst also finding low fee rates, you will see the results in your profitability.
Account fees are linked to your trading account and relate to your withdrawals, deposits, and activity. These fees are not applied when trading and their names give away when you can expect to see these fees.
You may also be charged a blockchain fee, read on to find out more on this.
Note that demo accounts are free to use, with no applicable account fees!
Every cryptocurrency trading platform will charge you some sort of account fee, but the amount they charge will vary. These will come in the form of deposit fees, withdrawal fees, and inactivity fees.
They are all straight forward and you’ll often be able to find this information from your broker very easily.
However, with cryptocurrency trading you also have a blockchain fee to think about.
This fee only applies to you if you are actively buying and selling cryptocurrencies. If you are trading CFDs then you can ignore this fee.
If you are with a broker already, you should double check whether you will incur a blockchain fee or not.
For more information on these fees, check out this article.
So if it isn’t clear by now, there is currently no industry standard on how to charge crypto traders. There are a variety of options available to brokers and they are all taking different approaches, creating a confused state of affairs.
Juggling Different Fees
Back in the introduction, we showed you the three areas where crypto trading platforms charge fees. They may not have fees for all three, but don’t let that influence your decision right away.
It’s likely that they charge higher fees in another area to compensate.
Here are those fees again:
Entry fee – Maker Taker, Spread, Fixed Spread, Variable Spread, Margin fee.
Active Trade fee – Overnight fees, Perpetual Contracts, Overnight Funding, Overnight Interest, Margin Open, Rollover fee, Swap/Swap Rate.
Account fee – Withdrawal & Deposit fees, Inactivity fees, blockchain fee (crypto only).
Brokers will use different combinations of these fees in order to seem like they are charging you less. This is why we created this guide – so you can know for yourself what you are being charged.
Newer, crypto-specific exchanges are largely using the maker-taker fee structure. However, their rollover fees are not consistent and neither are the maker-taker fee amounts.
For instance, some exchanges don’t charge you anything if you are a market maker. Seeing that is going to draw a lot of traders in.
But what they won’t realise is that the open trade fees are higher or more frequent than their competitors. The amount that they are charged is likely going to be higher because of this (if they don’t know what they’re doing).
So where one platform may not charge as much for your entry cost, it could be charging you double on your open trade costs.
These crypto-specific platforms are the trickiest in regards to figuring out exactly what the fees are. Please don’t blindly choose a broker because they have one low fee!
Regulation in the crypto trading space is lacking which can leave you financially vulnerable and exposed to events that are out of your control.
So is cryptocurrency trading regulated? The short answer is no.
The long answer gets a bit more complicated. Read on to find out more about regulation, how it impacts you as a trader, and your own financial security.
What Regulation Means
There are regulations in place when brokers are handling your money, but for the most part they have free reign in this emerging market.
Forex brokers, on the other hand, are strongly regulated. There are limits in place for leverages, how they promote their business, etc. These limits apply to forex brokers who also offer cryptocurrency trading. However, the limits on cryptocurrencies do not apply to cryptocurrency-only brokers.
So, how does this affect cryptocurrency brokers and what does it have to do with fees?
Well, no regulation means brokers can charge you for any amount whenever they want. As mentioned earlier, there are no limits in place for margin trading/leveraged trading.
They take advantage of this market being new and unregulated, and a lot of them prioritise making the most profit rather than creating a safe place for traders.
Some of the cryptobrokers also make it intentionally difficult to calculate and understand their fees. They hide their fees page, use complicated terminology or have calculators that mysteriously don’t work. It makes the entire process more complicated than it should be.
Take the maker taker fee structure for example. This fee structure doesn’t really make sense when you are trading CFDs, but cryptobrokers who trade solely in CFDs are still using that fee structure.
Of course, there’s nothing inherently wrong with that. But it shows there is a degree of deception happening in cryptobroker’s practices.
Trusted Regulatory Bodies
If they are regulated by a regulatory body like the Financial Conduct Authority (FCA) in the UK, they will have their number listed and it shouldn’t be hidden away. You can double check that this number coincides with the registered number on the FCA website.
Other trusted regulatory bodies are :
Canada: Investment Industry Regulatory Organization of Canada (IIROC)
United States: Securities & Exchange Commission (SEC)
Switzerland: Swiss Financial market Supervisory Authority (FINMA)
Australia: Australian Securities and Investments Commission (ASIC)
Japan: Securities and Exchange Surveillance Commission (SESC)
We strongly advise traders to stay away from trading platforms that are regulated in Cyprus. Cyprus regulations are notorious for not really protecting traders. If you have decided to go with a Cyprus regulated broker, please be careful.
Some brokers will also claim they are regulated, when they aren’t. Always double check that this regulation they are talking about really is a regulatory body and not just an agreement of some sort between different exchanges.
Brokers might also have an address or a phone number in a country that has a trusted regulatory body. This does not mean they are regulated within that country. It just means they have an address or phone number there. Always double check with the regulatory bodies to see if the broker is in fact regulated with them.
Forex Brokers Vs. New Crypto Brokers
So we come to one of the most important questions when it comes to choosing your cryptocurrency trading platform.
Do you go for the old or the new?
Well, we lay out the pros and cons of both so you can make the best decision for your trading needs.
Ultimately, this will come down to preference on your end, whether it be a trading platform that you prefer or restrictions based off of where you live.
However, we can compare the two and see what advantages and disadvantages both offer.
Forex Brokers’ Advantages
- Regulated, safer
- They have been around longer
- Clear and understandable fees
- Competitive spreads leading toward lower entry fees
- More likely to have a demo account
Forex Brokers’ Disadvantages
- Less crypto pairs to trade
- Spread slippage issues
- At the mercy of regulatory changes
New Crypto Broker Advantages
- Access to most crypto pairs
- Maker-Taker allows for potential of lower entry fees
- Not at the mercy of regulatory changes
New Crypto Broker Disadvantages
- No regulation means no financial safety net
- Fees will be more complex
- Higher risk of being targeted by cyber attacks
- Additional “margin” fees for CFD trading