We all know there are costs associated with all transactions that we perform daily. The number of transactions that take place all around the world shows that the platform that serves us takes up their charges, which is their right. As we are availing ourselves of their services, they have the right to charge us. To a point this seems valid and non-controversial, but what would you do if you bear witness to the charges, that are not present or mentioned, and yet you bear the brunt? We all know there is no free lunch, and so do we know that the world of crypto trading, has inherent fees present, the one mentioned and some as hidden.
What are those fees, and how can you get to know them before you enter the new trade or ascertain hidden fees? We will break down the list of certain charges that you may face, that are hidden and might rip you off.
Crypto and Its Many Fees
Trading fees, whether explicit or hidden, have been around for decades, but traders, especially the newer ones, are more prone to face loss. Their lack of knowledge or staying unaware makes them prone to face those sets of fees that they were not aware of in the first place. As a result, once their trade is settled down, they must pay the hidden fees that they did not expect.
This impacts their future trading and stays more cautious, or else moves to other low-cost, more transparent, and articulate platforms. Most of the time, we ignore the mentioned fees, written before carrying out even a cash transaction, and that gets deducted from what we realize or pay for. There is yet jugglery as there exists no such platform in the world that does not charge any fee. From broker’s commission to exchange fees, platform fees, spread, or maker-taker fees, the list is endless. Let us chunk down some fees that you can face, while executing any trade and how they may affect you.
Network Fees
Unlike forex or stock trading, the operative mechanism for crypto fees is slightly different. As crypto is created on a blockchain, there is a fee associated with its network that must be paid by the users. Even if you transact a certain amount of crypto from address to address or wallet to wallet, you will bear the network fees and costs. The busier the network is the higher would be the costs such as BTC or ETH. The average fee as per YCHARTS is $1.36 as of Oct 27, 2022. The higher costs indicate the growing network congestion the higher the fees are. For Ethereum, the average network fee is around $0.67 as of Oct 27, 2022. Although the fee differs as per platforms and exchanges.
These exchanges vary their fees as per a range of factors. Those factors involve the payment methods and blockchain on which it takes place. Coinbase charges a fee of 0.5 % to a range of 4.5% based on the amount that is transacted. Whereas crypto.com charges fees from 0% to 2.99% respectively. In the case of NFTs (Non-Fungible Tokens), Open Sea charges 2.5% per transaction. Also giving a chance to the creators to charge an extra 10% royalty fee. In short, by network fee, we mean to pay a higher amount if we wish to have our transaction executed fast. Paying high means that you want your transaction to be fast and placed as a priority.
Wallet Fees
In case you are trading on an exchange, there must be a wallet for dominant currencies, coins, and tokens. While some exchanges do not charge if you are interchanging your currency at a certain rate and that too in your wallets that are associated with your account. But in the case of a separate dedicated wallet such as Trust Wallet or Metamask, there are devoted addresses assigned to it. No matter how much funds or worth of crypto is present in your wallet, and you aim to transfer it elsewhere, a certain price and fee would be charged to make that happen.
Though the fee is small and puny, it does take a certain sum out of what you wish to transact. Although certain wallets do not charge any transaction fees, such as Bitcoin Core and MyEtherWallet are made exclusively for these coins.
0% Commission Fees
As many exchanges in the past were charging a certain amount of commission on every trade, many exchanges these days claim to be charging no fees at all. The lucrative number of 0 gives the impression that there is no hidden fee linked, but there are certain charges associated. While you place an order, you are charged a spread over the price difference of any order.
Now, a spread is a difference in price while you place an order. For example, you place a market order to buy a particular asset for $10. But the nearest sell order is $12. A difference of $2 is marked as a difference and therefore considered as a “Spread”. Many exchanges earn from this spread. This is another method to earn behind the garb of a 0% commission fee.
Exchange Fees
Many exchanges are not only taking the benefit of earning through the spread but also, taking a cut from each deposit and withdrawal made. Opening an exchange is a profitable business and therefore some of the famous exchanges such as Binance are making handsome money from this mechanism.
There are several fees associated with crypto trading and finalization dealing. Whether you are an entrant, expert, or just started trading, make sure you keep all these charges applied to your trades
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