Initially, a niche market avoided by traders and investors, cryptocurrency has grown into a popular class. If you're interested in taking part in this exploding sector, you'll need to use a cryptocurrency exchange to gain exposure.
Cryptocurrency trading is similar to trading on a stock exchange; however, you're limited to trading on cryptocurrency exchanges. Most cryptocurrency exchanges calculate fees in one way: a tiered-level structure that charges a percentage of your 30-day trading volume. Learn more about the fees you'll pay when you trade cryptocurrency so that you can develop strategies to keep them from eating away at your profits.
- Cryptocurrency trading and investing have become increasingly popular since Bitcoin first debuted in 2009.
- Hundreds of online exchanges now exist that let you buy, sell, and trade digital currencies.
- Typical costs might include fund transfer fees to/from your bank account, maker/taker fees, set transaction fees, or tiered transaction fees based on trading volume.
Cryptocurrency Exchange Considerations
There are three important factors that traders must consider when thinking about buying or selling cryptocurrencies from an exchange:
- Fee schedules: You might encounter wire fees (to transfer funds to and from your bank account), mining fees, account fees, spot fees, and tiered transaction fees
- Location: Many exchanges are unregulated, and some are only available to those that live in certain geographic areas
- Availability: Not all cryptocurrencies are available on every exchange
The most popular fee schedule used by cryptocurrency exchanges uses a tiered "maker" and "taker" scheme. It uses trading volume to create tiers and charges maker and taker fees based on your trading volume.
A maker is a party that creates a market on the exchange by selling cryptocurrency, and the taker is the party that takes it off the market by purchasing it. Each party pays fees for the transaction, but makers generally pay less.
Fee schedules at cryptocurrency exchanges are designed to encourage frequent trading in large transaction amounts worth thousands of dollars. Fees often decrease as a trader's 30-day cumulative trade volume increases.
For example, trading at Coinbase with a trading volume of less than $10,000 incurs maker and taker fees of 0.50%, while trade volumes of more than $10,000 decrease in tiers based on your trade volume.
The first four pricing tiers listed on Coinbase are:
|Pricing Tier||Taker Fee||Maker Fee|
|$10,000 – $50,000||0.40%||0.25%|
|$50,000 – $100,000||0.25%||0.15%|
|$100,000 — $1 Million||0.20%||0.10%|
You also pay less in the higher tiers as a maker because makers increase the market's liquidity, which allows the exchanges to continue trading.
Some exchanges might still charge a per-transaction fee, but for the most part, they have transitioned to a combination fee schedule similar to the one used by Coinbase. As such, small and infrequent trades are not cost-efficient at cryptocurrency exchanges, unless you're only looking to buy a cryptocurrency. If that's the case, most exchanges charge a spot trading fee to buy and take possession of a digital coin.
Cryptocurrency exchanges are unregulated in many countries. Most regulators around the world have taken a hands-off approach to cryptocurrency regulation in some of its biggest trading markets. However, cryptocurrency exchanges in the U.S. must register with the Financial Crimes Enforcement Network. This means that U.S.-based exchanges are regulated and may not offer the same services as exchanges based outside of the U.S.
Most well-known cryptocurrency exchanges do not offer access to all coins. Some only provide a few dozen, while others might offer hundreds. You might need to use different exchanges to get access to the cryptocurrencies you're interested in.
Top 3 Cryptocurrency Exchanges
Here is a brief comparison of trading fees for cryptocurrency at three of the more popular exchanges. The CoinMarketCap Spot Exchange Score is used to gauge exchange popularity. This score accounts for each exchange's web traffic, volume, average liquidity, and confidence.
Originally founded in 2017 and registered in the Cayman Islands, Binance established a U.S. version in 2019 with headquarters in California. By 2022, Binance is at the top of the list and out-trading all other cryptocurrency exchanges.
Cryptocurrency fans can choose from over 600 cryptocurrencies on Binance; however, U.S. customers can only select from a little more than 100 cryptocurrencies on Binance.US due to regulations. Internationally, Binance lets users trade the cryptocurrency futures markets, buy currency, earn cryptocurrency, create non-fungible tokens, and learn about all things cryptocurrency through the Binance Academy.
You can access all of the material on Binance's website, such as the academy and other resources; the U.S. only restricts buying, selling, and trading on the international platform to protect investors.
Most people who use Binance.US will be charged fees and have withdrawal limits. Fees are based on your 30-day trading volume, and in general, you'll see 0.1% spot trading fees as well as a 0.5% fee when you buy or sell cryptocurrency. If you use Binance's cryptocurrency BNB, you receive a 25% discount on any fees. Traders with volumes over $10 million (and at least 1500 BNB) are no longer charged maker fees while the taker fees decrease in tiers from there.
In the U.S., you can trade cryptocurrencies and tether (USDT) pairs, cryptocurrency pairs, and cryptocurrency to U.S. dollar pairs, but your choices are limited. In addition, you can make advanced trades on the price movements of these pairs or trade them over the counter.
Coinbase was formed in 2012 with the goal of granting everyone access to a cryptocurrency financial system. The exchange became publicly traded after an initial public offering and listing on Nasdaq in April 2021. The exchange offers access to thousands of cryptocurrencies.
The maker/taker fees for using Coinbase's services are based on the current pricing tier when the order was placed, not on the post-trade tier. Also, Coinbase recalculates the pricing tier hourly and bases it on the total trading volume. While there are no account fees, Coinbase does charge miner fees.
FTX.US is another U.S.-based exchange "built from the ground-up" that has more than 30 cryptocurrencies available.
FTX.US uses a tiered fee structure that rewards you for more trading. The higher your trading volume, the less you pay in maker/taker fees. If you are the maker, your spot market fees will be charged in the target currency and if you are the taker, then the fee will be charged in the quote currency. You also might pay wire transfer and automated clearing house (ACH) fees for transferring money in and out of the exchange.
Is a Cryptocurrency Exchange Illegal?
Whether cryptocurrency is legal or not depends on the country you live in. There are several countries where all cryptocurrency transactions are forbidden, but many more where there are certain restrictions or no restrictions at all.
Can Cryptocurrency be Converted to Cash?
You can use most cryptocurrency exchanges to convert cryptocurrency to cash, or convert cash to cryptocurrency.
What Is the Best Site to Buy Cryptocurrency?
You can buy cryptocurrency from several exchanges. Which is best for you depends on your preferences for the fees you'll incur and the country you're in. Many cryptocurrency customers use Coinbase, Kraken, KuCoin, FTX and Binance.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own cryptocurrency.
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U.S. Department of Treasury, Financial Crimes Enforcement Network. "FIN-2013-G001: Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies," Pages 1-3.
CoinMarketCap. "Top Cryptocurrency Spot Exchanges."
Binance.US. "About Us."
Dun and Bradstreet. "Binance Holdings Limited."
Binance Academy. "Home Page."
Binance. "Home Page."
Binance.US. "Fee Structure."
Binance.US. "Advanced Trading."
Binance.US. "OTC Trading Portal."
Coinbase. "About Coinbase."
Coinbase. "Browse Assets."
FTX.US. "About Us."