When trading in cryptocurrency, it’s common to overlook fees. Whether you’re buying the dip, investing in the future or sending some coin to another wallet you have, fees can eat significantly into the value of a portfolio. For regular crypto traders, making sure fees stay as low as possible is a simple and effective way to maximise profits and gain a better long-term return.
To help you understand how to minimise your fees while trading, we have a short guide that makes sure to protect you from paying more than necessary with crypto.
Types of Fees
When trading in crypto, there are two kinds of fees that you should be aware of.
Due to the fact that blockchains are hosted on decentralised networks of computers, those running it do so in return for rewards. These rewards are occasionally handed out by the network itself, for networks like Bitcoin, but for networks like Ethereum, the users themselves pay the fee. This is known as the gas fee and carries depending on the blockchains’ current congestion level and the value of the native token.
In order for centralised crypto exchanges to turn a profit and keep their operation running, they charge users a small percentage of each transaction as a fee. This percentage is usually 1% or less and is often incurred when performing actions such as withdrawing, buying, sending and receiving.
How to Minimise Fees:
When it comes to minimising fees overall, here are a few of our favourite tips and tricks.
The simplest way to keep fees low is to use an exchange that charges less per transaction. Amongst the cheapest exchanges on our radar are Binance with 0.1%, Kraken with 0.26%, and Swyftx at 0.6%. These exchanges all have different cryptocurrencies available but feature the most popular options, but their features, company philosophies and financial backing differ.
A great example of a popular platform with high fees is CoinBase, it has 3.99% fees, and appeals to new crypto users, who will largely be unaware of how fees work.
Check the Fine Print
Crypto exchanges are always drawing in new customers and covering the costs of regulatory compliance by changing pricing models. This means fees are always changing over time. Loyalty to a single exchange is often financially unsound. Users should check fees regularly and then see if there’s a better option elsewhere.
Gas Fee Limits
When you use a software wallet such as MetaMask, you can set a hard limit on how much you’re willing to spend on the transaction. When you set a lower limit, this means the transaction will take longer to complete, and can possibly fail. For those in no rush, this can save considerable money in fees.
When it comes to gas fees, you can save a lot of money by simply waiting until the network is quiet. When demand is low, network mining rewards are also lowered. The quietest time of the week for Ethereum, for example, is Sundays between 2-3 am.
Trade with Cryptocurrencies
When trading out of a crypto position, you may not always need to exchange back to flat. Converting an ERC-20 cryptocurrency to a compatible stable coin, for example, can eliminate your exposure and reduce fees.
Spread is the difference in price between the moment of buying and selling an asset. This can often far exceed the exchange fee. The spread is something many traders neglect to observe and can take huge chunks out of a portfolio over time.
Different exchanges have different spread policies, so it’s important to take this into consideration also. For example, Binance has a spread fee of 0.5%, while Swyftx has a fee of 0.45%.
Fees are an inevitable aspect of trading crypto, and with this in mind, it’s important to keep a close eye on the details that can save you money in the long run. Keeping aware of aspects such as your preferred exchange’s fees and regularly auditing your processes will keep these costs low, and your profits overall consistently high.
This can be done easily when you Trade Ethereum on Swyftx, as fees are lower than on other platforms.