Crypto Exchanges Charge Up to 250x More Than Stock Exchanges

Alex Krüger has a bone to pick with cryptocurrency exchange fees.

According to the economist and trader, most crypto exchanges are charging their customers significantly more than what most stock exchanges charge their traders. (And by ‘significantly more,’ we mean as much as 250 times more.)

In a series of tweets posted on Thursday, March 28th, Krüger compared the fee structures of a number of the most widely-used crypto trading platforms with fees charged by traditional exchanges and brokers. He found that cryptocurrency exchanges charge an average of 0.33 percent for the lowest trading volume tier, where most of their users lie.

Krüger noted that while it is true that trading fees are generally higher in more volatile markets, cryptocurrency trading prices were high even when this was taken into account. “In the last 2.5 years, BTC has been 12x more volatile than the euro and 7x more volatile than the S&P 500,” he wrote. “Crypto fees are generally high even after adjusting by relative Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.”

1/ Are crypto exchanges overcharging customers?

The average "Maker Fee + Taker Fee" in crypto SPOT exchanges (excluding Gemini) for the lowest volume tier (where most users fall into) stands at 0.33%. pic.twitter.com/tZOmGSsAzO — Alex Krüger (@krugermacro) March 28, 2019

At first glance, it may not seem like much. However, compared with a company like the Boston-based Fidelity Investments, the amount is staggering. Fidelity charges a flat fee of $4.95 per trade, whether that trade is worth $500 or $50,000.

However, a $50,000 trade on an exchange that charged a 0.33 percent commission would cost $165; you would pay $4.95 for a trade worth just $2,900.

Krüger also called out Coinbase specifically. The popular crypto exchange charges 0.50 percent for getting in and out of a position. Comparatively, a trader using Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term exchange company Oanda’s platforms would be charged just 0.008 percent for a similar trade--a 6250 percent difference in trade size. A similar trade on Bitmex would cost 600 percent more than it would on Oanda.

The most expensive exchange by far, however, is Gemini. Krüger chose not to include Winklevoss twins’ exchange in the equation that revealed a 0.33 percent average charge, presumably because its prices are so high, even compared with other cryptocurrency exchanges. Gemini charges 2 percent for getting in and out of a position--400 percent more than what Coinbase charges and 377 percent more than what Kraken charges.

This means that compared with Oanda's 0.008 percent fee, Gemini's fees are 250 times higher.

Exchanges With Fewer Options Charge Higher Fees

According to a report by NewsBTC, however, the higher fees may be correlative to lower overall trading volumes than those on traditional exchanges.

Even compared with one another, exchanges with lower trading volumes and fewer trading options had relatively higher fees. For example, Binance, which offers 155 coins on its platform charges 0.2 percent; Coinbase Pro’s 16-coin platform charges 0.4 percent. Gemini, which offers only five coins, charges its whopping two percent fee.

Therefore, if the cryptocurrency market continues to grow, and these exchanges gain more volume and offer more options, lower fees could be on the table in the future.