Understanding Exchange Fees: Maker Versus Taker, Withdrawal, and More

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Exchange Fees-Maker Versus Taker, Withdrawal

If you want to get the best deal and pay the least amount of fees on a new investment, it’s important to understand the fee structure of your exchange. Lower fees can certainly make it worth shopping around.

Maker Versus Taker Fees

Maker Fees are for orders that are below the current buying price or above the current selling price; in other words, for orders that will not fill immediately and will instead be posted on the order book. Market makers create liquidity in a market, showing others how much of an asset can be sold for a particular price. In return for creating liquidity, maker fees are usually less than taker fees.

Taker Fees are for orders that fill immediately; for orders that match up with, or take, an order already existing on the order book. Because takers remove liquidity from the market, taker fees are usually higher than maker fees.

Since maker fees are lower than taker fees, market participants are encouraged to place orders on the books, creating liquidity in the market.

Take GDAX, Coinbase’s exchange. GDAX’s base fee structure is a 0.0% maker fee and a 0.3% taker fee, which incentivizes investors to place an order on the books and helps ensure sufficient liquidity.

Volume & Other Discounts

Some exchanges will offer volume discounts, which reduce the percentage of maker/taker fees as your trading volume increases. However, large amounts of trading volume are generally needed to receive volume discounts. As an example, notice how the reduction of fees at Poloniex only begins once an investor trades over $500K within 30 days:

Poloniex Fee StructureSource: Poloniex.com.

Other exchanges offer native token discounts if you pay trading fees with the exchange’s native token. For example, Binance exchange has a standard 0.1% for both its maker and taker fees. But, if you pay your exchange fees using Binance Token (BNB), exchange fees are discounted for your first four years with the exchange:

Binance BNB Discount ScheduleSource: Binance.com.

So if you use BNB, your first year maker/taker fees would be 0.05% and your second year fees would be 0.075%. Discounts like these can be especially valuable to investors who don’t have the capital to hit volume discounts.

Kucoin exchange also has a native token discount, but it isn’t as lucrative as Binance’s discount. Kucoin’s normal maker/taker fees are both 0.1%, but in order to receive the maximum discount for 0.07% fees, you would need to hold 30,000 Kucoin Shares (KCS). At over $3 per KCS, you’d need a sizeable chunk of trading volume for the investment in KCS to be worth it.

Purchase Fees From Direct-Buy Websites

Some websites, such as Coinbase, allow you to buy Bitcoin and other cryptocurrencies without using an exchange. These websites will often charge you higher fees, so it may be worth your time to look at fee structures. Coinbase, for one, charges US customers between 1.49% and 3.99% on cryptocurrency purchases and sales. However, if you use Coinbase’s exchange, GDAX, you would only be charged 0.0% maker and 0.3% taker fees. Why the fee difference, you might ask? For convenience, and because GDAX’s interface is slightly more complicated since a basic understanding of buy and sell orders is needed.

Withdrawal Fees

Withdrawal fees vary by exchange, and as cryptocurrency prices fluctuate over time, withdrawal fees can fluctuate, too. And be forewarned: it’s not uncommon to see $5-10 withdrawal fees per asset you’d like to withdraw (though many are lower).

Most exchanges do not have one set price for all withdrawals. Instead, the withdrawal fee will be listed in the asset you want to withdraw. At Binance it currently costs 0.0005 BTC to withdraw bitcoin, 0.01 ETH to withdraw ether, or 0.01 LTC to withdraw litecoin:

Binance Withdrawal Fee Examples

Source: Binance.com.

Fees vary because different assets run on different networks, and each network has it’s own capabilities and costs. If you examine the chart above, you’ll see that it costs 0 NEO to make a withdrawal; this is because the NEO network does not currently charge transaction fees.

A good tip to know is that GDAX does NOT have withdrawal fees. Though it currently offers a small selection of cryptocurrencies, it is one of the only exchanges where you can withdraw your cryptocurrency for for free.

Closing

Each exchange has different characteristics – different asset availability, exchange fee structure, customer base, withdrawal fees, customer service reputation, etc. It’s always a good idea to do a little research and understand what you’re getting into before depositing money at any new exchange.