In the last several years, the process of buying Bitcoin has gone through an evolution of sorts, as exchange platforms look to make the process both easier and cheaper than ever before.
Now, instead of Bitcoin mining, most investors first get their hands on BTC by purchasing it from an exchange.
With that said, depending on both how you trade, and where you trade, you will need to pay some sort of fee—on top of the price of the Bitcoin itself.
Three things to know about Bitcoin exchange fees
Although a fee is inevitable, exactly how much you pay typically depends on the quantity of Bitcoin you purchase, and the exchange platform you use.
This fee will typically be higher when purchasing Bitcoin with a bank account, debit or credit card, and usually much lower if buying Bitcoin with another cryptocurrency—known simply as exchanging. Buying Bitcoin with another cryptocurrency is usually the preferred method for those that want to avoid forking over their personal information as part of the purchase process.
With that said, there are several things you will want to be aware of when it comes to exchange fees.
Ability to reduce fees
Although you will need to pay a fee regardless of where you buy your Bitcoin, a good fraction of cryptocurrency exchanges offer ways to minimize this amount.
One of the most common ways exchange platforms allow traders to reduce their fees is through volume-based fee discounts. These discounts are provided to what the platform considers to be “high-volume traders,”—those that trade above a particular volume threshold.
For example, Bitfinex begins offering fee discounts to anybody trading in excess of $500,000 worth of digital currency per 30 days. Likewise, Bitstamp provides at least a 50% discount for anybody trading more than $10,000 worth of cryptocurrency per 30 day period.
Beyond this, some platforms also have their own utility token which can be held to reduce fees, including Huobi Global with its Huobi Token (HT). As it stands, HT holders can receive a discount of between 10 to 65% depending on the total number of tokens held.
Similarly, platforms like Binance employ a combination of both methods, providing a fee discount for higher volume traders that hold its native utility token—the Binance Coin (BNB).
Different fees for different order types
As we previously touched on, the fee you are charged when purchasing Bitcoin can differ based on the payment method you use or the order type you use. Typically, the most expensive way to purchase Bitcoin is with a bank account, debit card or credit card, since this often incurs additional fees—potentially including deposit and wire processing fees.
For those looking to purchase Bitcoin using another cryptocurrency on the spot markets, you will be charged a maker fee if you add liquidity to the market, or a taker fee if you take liquidity from the market. In essence, trades that are immediately executed and filled are subject to a taker fee, whereas those that are added to the order book (e.g. limit orders) to be filled later are subject to a maker fee.
The taker fee is higher than the maker fee on most exchange platforms, including Binance and Kraken, whereas Bitstamp charges a flat fee irrespective of the order type. Conversely, a handful of platforms provide a small rebate to market makers to help encourage traders to provide liquidity. For example, both BitMEX and Deribit provide market makers with an up to 0.025% rebate for each trade.
Multiple commission models
Before selecting the platform you will use to buy Bitcoin, you will likely want to familiarize yourself with the different commission models different exchanges use.
In most cases, Bitcoin exchanges will charge a fixed percentage fee, which relates to the current Bitcoin price at the time of purchase. This tends to be in the range of 1 to 5%, but can be more or less depending on the platform. For example, if you are looking to purchase one Bitcoin at a price of $10,000, and the exchange charges a 5% fee, then the transaction will cost $50.
Other exchanges, like Coinbase and many Bitcoin ATMs instead charge a fixed dollar fee, which usually increases with the amount of Bitcoin purchased. This makes calculating your fees a much simpler task, but can also be more expensive—particularly for those buying a small amount of Bitcoin.
Comparison of trading fees on popular Bitcoin exchanges
|Coinbase||0.50% spread + $1 flat fee|
Launched in 2017 following a sell-out ICO, Binance quickly rose to become by far the most dominant Bitcoin spot exchange platform. Owed to its user-friendly interface, extreme liquidity, and low fees, Binance is one of the most popular exchange choices for those looking to buy Bitcoins.
When it comes to trading fees, Binance employs a volume-based fee schedule which starts at a 0.1% maker and 0.1% taker fee, but reduces to as low as 0.02% maker and 0.04% taker fees for the highest volume traders (VIP 9). As it stands, volume-based discounts start for anybody trading more than 50 BTC per 30-day period.
Beyond this, Binance was also among the first platforms to introduce its own utility token that can be held to provide further discounts. BNB holders can receive a further 25% fee discount, but each VIP tier needs to hold more than the previous tier to benefit from a fee reduction.
Widely regarded as one of the simplest Bitcoin exchange platforms, Coinbase has grown to become a prominent name in the cryptocurrency industry since its launch in 2012. The platform is now one of the most popular on-ramps for those buying Bitcoin for the first time, while its mobile Bitcoin wallet is suitable for those first getting to grips with Bitcoin and other cryptocurrencies.
For buy/sell transactions on the Coinbase platform, customers are charged a spread of 0.5% of the order price. In addition to this, customers are charged a ‘Coinbase fee‘ which is either a flat fee or a variable percentage set by region. The flat fee can be as low as $0.99 or as high as $2.99 depending on the order amount.
The variable fee depends on the region and payment method used. For example, credit card and debit card buys in most countries incurs a 3.99% fee, whereas bank transfer buys are mostly free. Customers are charged whichever fee is higher out of the flat fee and variable fees.
If you’re considering to use Coinbase, make sure to check out our list of Coinbase alternatives first.
Bitstamp is one of the oldest names in the cryptocurrency exchange industry and is also one of the most well-reputed platforms around. The exchange features a highly liquid spot trading platform and allows users to buy cryptocurrencies with several different payment methods.
Part of the reason Bitstamp is so popular is due to its extremely simple fee schedule. Currently, most trades made via the Bitstamp trading platform are subject to a flat 0.50% fee. However, users that trade more than $10,000 worth of Bitcoin or any other cryptocurrency per 30 days will pay a lower fee.
The trading fee reduces to 0.25% for the first discount tier and can go to as low as 0% for traders achieving more than $10 billion in 30-day trade volume. As such, Bitstamp is one of the most attractive exchanges for high volume traders.
However, those looking to buy Bitcoin using a credit card will be subject to a flat 5% fee.
As one of the three largest cryptocurrency exchanges by trade volume, Bitfinex is practically a household name in the industry. This success can be attributed to its extraordinary resilience, clever business model and impressive liquidity.
Bitfinex fees start at a 0.1% maker and 0.2% taker fee for the lowest volume traders. However, those trading more than $500,000 worth of cryptocurrency per 30 days will receive a fee discount. This cuts fees to as low as 0.08% and 0.2% respectively for makers and takers the first discount bracket, down to as little as 0% and 0.055% for those trading more than $30 billion per 30 days.
Beyond this, like Binance, Bitfinex allows traders to further reduce their trading fees by holding its native utility token—Unus Sed LEO (LEO). Currently, anybody holding at least 1 LEO will receive a 15% taker fee discount, but this can be reduced to up to 25% + 0.06% for those holding in excess of 10,000 LEO.
Currently regarded as the second-largest exchange by trading activity and the largest exchange for euro/crypto trading pairs, Kraken is nothing short of a behemoth. The platform features only a restricted range of assets, ensuring excellent liquidity and freedom from market manipulation.
Those looking to trade Bitcoin on Kraken will need to be aware of its volume-based maker/taker fee structure. At the highest end of the scale, those trading between $0 to $50,000 worth of Bitcoin or any other cryptocurrency will be subject to a 0.16% maker and 0.26% taker fee.
For those trading in excess of $50,000 per 30-days, Kraken charges a lower fee, starting at a 0.14% maker and 0.24% taker fee, but reducing to as low as a 0% maker and 0.10% fee for those exceeding $10 million in 30-day trade volume.
Pascal Thellmann is an investor and marketer focused on the intersection of cryptocurrency and the legacy financial system. He co-founded Bounty0x, which at the time was the largest crypto freelance platform. Now Pascal dedicates his time to CoinDiligent and trading. You can get in touch with Pascal Thellmann on LinkedIn.