In Australia, more people are trading, investing, and even using digital currencies to pay for goods and services than ever before. Some experts suggest that as many as 4.6 million Aussies currently own or have owned some form of crypto, with thousands more taking their first steps into crypto trading every week.
If you are considering doing so yourself, it’s important to understand one of the main things that can quietly eat into your profits: Exchange fees.
These fees might look small at first glance. But over time, they can quickly add up. Therefore, knowing how they work and how to compare them can make a big difference in your overall returns.
Here is our take on what traders should know before signing up to an exchange.
What Are Crypto Exchange Fees and How Do They Work?
When you buy or sell cryptocurrency on an exchange, you will have to pay a fee for the transaction. Essentially, this is how exchanges make money and keep their platforms running. However, fees do vary depending on the platform. So, by understanding how they are accrued, you can avoid unnecessary costs.
Australia is home to several crypto exchanges. Each one has its own pricing model. But most charge fees in a few common ways. Typically, these take the form of trading, deposit, withdrawal, and spread fees.
Common Types of Fees on Australian Crypto Exchanges
Trading fees are the most common type of fees you'll experience on any exchange. That is because every time you buy or sell crypto, you'll pay a small percentage of the total amount. This usually ranges between 0.1% and 1%, depending on the platform. However, deposit and withdrawal fees may also apply when moving money in or out of your account, as determined by the method used.
Spread fees are another important cost you will need to get your head around if you want to trade in crypto. This is the difference between the buying and selling prices. Some exchanges show it as a separate charge, while others build it into the total cost. In addition, network fees also apply when transferring crypto to an external wallet. They are charged by the blockchain network itself.
Maker and Taker Fees Explained for Beginners
Most exchanges use a maker-taker model when imposing their fees. A "maker" adds liquidity to the market by placing a limit order that doesn't execute right away. Conversely, a "taker" removes liquidity by accepting an existing order. Generally speaking, makers usually pay lower fees as they help the market stay active.
For this reason, understanding whether you're a maker or a taker can help you choose an exchange that fits your trading style. For example, if you would prefer to set prices and wait for a match, then a maker-friendly exchange can save you money in the long run.