Navigating Crypto Exchange Fees

My original intent for this article was to create a step-by-step guide showing you how to open an account and trade crypto on the Kraken cryptocurrency exchange. Kraken has much lower trading fees than Coinbase Pro, but, as I learned, it also has several miscellaneous fees, such as a deposit fee and a withdrawal fee. Although it is not possible to avoid exchange fees completely, this article will show you how to take advantage of different fee structures and choose the right exchange for your trading style.

The most basic fee that exchanges charge is known as the trading fee. This is the fee required to actually trade one cryptocurrency for another. For example, if I trade $1,000 of Bitcoin for ETH, the exchange might charge a .5% trading fee and would take $5. On the other hand, an exchange that charges a .25% trading fee would only take $2.50. Other things being equal, it's best to find an exchange that has the lowest trading fee so you can keep more of your crypto.

However, trading fees are only one of many different types of fees that exchanges charge. For example, Kraken charges an address creation fee, deposit fee, and withdrawal fee for transactions with the Basic Attention Token (BAT). When deciding which exchange to use for your crypto transaction, it is important to consider all the different types of fees. You can save money by choosing the right crypto exchange for the right transaction. Let me present two examples that show that the "best" exchange really depends on the situation.

Example 1

In this first example, we are making a $10 transaction with BAT. I have created this table using the official fee schedule from Kraken and the fee schedule from Coinbase Pro. Even though Coinbase Pro has a higher trading fee, it still has a lower overall cost because we don't have to pay the account creation fee, deposit fee, or withdrawal fee. As of the time of writing, the price of BAT is about 25 Cents.

Example 2

In the second example, we are making a $5,000 transaction with BAT. We still have to pay the account creation fee, deposit fee, and withdrawal fee, but we saved so much money on the lower trading fee that Kraken actually charges less fees than Coinbase Pro.

So, which of these is the better choice? Is Kraken better than Coinbase Pro? Fortunately, the answer is both! For smaller transactions, Coinbase Pro has the advantage because the user avoids the fixed deposit, withdraw, and address creation fees. With larger transactions, Kraken is the best choice. Even though Kraken users must pay these fixed fees, the lower trading fee outweighs these disadvantages when we are dealing with larger sums of money.

Conclusion

In summary, different exchanges charge different fees for different parts of the trading process. Coinbase Pro and Kraken are only two of the many different exchanges that you might want to use. You may find that one exchange has lower fees for small transactions with BAT while another exchange has lower fees for large transactions with Bitcoin.There is nothing wrong with having different accounts at different exchanges. Wise investors keep their options open and choose the right tool for the job.

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