Crypto trading fees: Are you paying too much?

Trading fees may escape your attention if you’re eager to dive into the crypto market and just want to get started. But fees are a guaranteed expense, so why not reduce the costs as much as possible to increase your net gains? We’ll explain the different kinds of fees—including the ones that aren’t so obvious—and how you can save money by choosing your trading platform carefully.

How trading fees affect your crypto purchases

Fees may have a bigger impact on your trading activities than you think. Let’s say a crypto trading platform advertises a fee of 1%—if you buy $100 worth of bitcoin or another cryptocurrency, you’ll get $99 worth of crypto.

Sounds straightforward—but that may not be the only cost. Crypto trading platforms use varying terms to describe their fees. For example, that 1% fee might be called a trading fee or a trading commission; others apply a spread on the buy and sell price; and others may charge both. Before you trade, it’s best to find out the total price, not just the fee advertised.

Types of crypto fees: trading, deposit, withdrawal, staking and network fees

Here are the different types of crypto trading fees to be aware of:

1. Trading fee, commission or spread

The trading fee is the total you pay to buy and sell cryptocurrencies using Canadian dollars. This fee varies from about 0.10% to over 4% per transaction, depending on several factors—most importantly the platform’s fee structure and your payment method. Credit and debit card purchases tend to be more expensive, while purchases funded by e-transfers and wire transfers tend to be free or have low additional costs.

Some platforms charge a standard percentage of each buy or sell transaction, while others may apply a spread to the bid and ask prices, a quick-buy fee or some other markup cost. A spread is expressed in basis points (bps), with 100 bps equalling 1 percentage point. So, if your trading platform applies a spread of, say, 125 bps, it means you’ll pay a fee of $1.25 on a $100 transaction (1.25%). This may not seem significant for a $100 purchase, but it translates to a fee of $125 on a $10,000 purchase.

What about platforms that say they don’t charge a commission—does that mean trading is free? Likely not. Instead of taking a commission, these platforms might charge a spread or a quick-buy fee, as explained above. Do your due diligence and find out if your platform has markups by reading the fine print in your account signup agreement and the fees section of your platform’s website.

2. Deposit and withdrawal fees

The deposit fee is what you’ll pay to transfer dollars from your bank account into your trading account, and the withdrawal fee is what you’ll pay to transfer dollars from your trading account to your bank account. To encourage the use of their platform, crypto exchanges typically don’t charge a deposit fee; however, for dollar withdrawals to your bank account, you may be charged a flat fee or a percentage.

3. Network and gas fees

Probably the least understood type of crypto fee, network fees (also known as gas fees in the Ethereum ecosystem) are charged by blockchain networks to verify and facilitate transactions. Network fees kick in when you transfer crypto from one wallet to another, make cryptocurrency payments for goods and services, or convert one cryptocurrency to another. So, before you make any of these transactions, check the blockchain’s network fees. This information is usually displayed on the screen before customers click “confirm” on a crypto transaction, and it’s often available in the “crypto withdrawal fees” section of your trading platform’s website.

Network fees aren’t determined by crypto exchanges or trading platforms, but by blockchain networks. The fee varies widely from chain to chain, and it rises and falls depending on the number of transactions being processed—the higher the transaction load, the higher the network fee. As an example, the average ethereum transaction fee over the last three months has ranged from a high of USD$14.10 to a low of about USD$0.57.

For transactions that include a network fee, the trading platform should display the amount during the payment process.

4. Staking fees

Staking is a way of earning additional coins by pledging the coins you already own and helping to validate transactions—a key part of how blockchains operate. Retail investors can stake certain crypto coins, either on the exchange or platform where they bought the coins or with an external wallet.

Crypto trading platforms may run stake pools that customers can join. While some platforms offer staking free of charge, others charge a fee, typically a percentage of the reward received, ranging from 10% to 25%.

If you’re thinking about staking crypto, make sure you understand the risks. For one thing, your coins may be locked while they’re staked, meaning you can’t spend or trade them. If the price of a coin plummets while it’s staked, you may not be able to sell if you want to.

How to minimize crypto fees

You can’t do away with crypto fees entirely, but here’s how you can reduce what you pay:

• Choose a crypto trading platform with competitive, transparent fees and high liquidity. High liquidity in a trading platform means more buyers and sellers. When liquidity is high, the gap between buyers’ bid prices and sellers’ ask prices is lower, and it’s more likely that your order will be filled quickly and without price slippage (a gap between what you expect to pay and what you actually pay).
• Avoid buying cryptocurrencies using a credit or debit card, as platforms charge higher transaction fees for these payment methods. (Note that your credit card issuer may consider a crypto purchase a cash advance and charge interest accordingly.)
• Avoid excessive trading or churning of your crypto portfolio.
• Limit the number of transfers from your crypto account to your bank account.
• While transferring crypto, choose blockchains with relatively low network fees.
• If you trade large amounts, see if your platform offers discounts.

Understand the risks of crypto investing

Cryptocurrencies are still an emerging asset class, and their prices can be very volatile. If you want to invest, research your options and consider whether crypto fits with your overall investment strategy, risk profile and investment goals.

Read more about crypto:

• Best crypto platforms and apps
• How to talk to your parents about crypto
• Should you consider ETFs that include crypto?
• Crypto marketing: What can be said—and not said—in Canada?
• Mission digital: How Coinbase is reshaping Canada’s crypto landscape

About Aditya Nain

Aditya Nain is an author, speaker and educator who writes about Canadian investments, personal finance and crypto. He has co-authored two books and taught at universities for 12 years.

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