Bitcoin appeared as a response to the traditional financial system that had become overloaded with bureaucratic red tape and high costs. Over time, cryptocurrencies have demonstrated their decentralized power, but ironically, it was centralized companies that became the major players in the crypto business.
If you’re a potential crypto-to-be investor, this means that each activity you do on a crypto trading platform involves the standard set of verification procedures and, more importantly, the same-old e-commerce fees.
The problem is not always the accumulated amount of commission or exchange fees but the fact that the blockchain has its own payroll system covered under the name of transaction or network fees.
These unsynchronized fee schedules make crypto trade fees a bit cumbersome for someone without on-chain experience. However, it doesn’t necessarily mean that you’ll be ripped off every time you try to buy crypto or cash out some bitcoins. All you need is a little insight into the types of fees that apply in the crypto ecosystem, which will teach you how to choose a fee-competitive marketplace.
For that reason, we’ll provide you with a set of instructions on crypto trade fees and other fee-relevant factors you should consider before landing on a certain crypto exchange.
Let’s put aside cryptocurrency exchanges for a moment. The blockchain charges transaction fees every time cryptos get transferred from one digital wallet to another. That’s because processing transactions on the blockchain requires time and effort on behalf of the miners, who get paid with transaction fees for validating transactions. For that reason, transaction fees are also called mining fees.
The original purpose of transaction fees was to protect the blockchain against scammers with the malicious intention of overloading the network. To ensure such a secure transaction flow, the Bitcoin blockchain utilizes Proof-of-Work (PoW). This hash cash mechanism is also used by a range of other prominent cryptocurrency networks, such as Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Dogecoin (DOGE), ZCash (ZEC), XRP, Monero (XMR), and many more.
However, each blockchain charges individually-set transaction fees, which are highly dynamic depending on the current network congestion and the blockchain capacity for processing transactions.
For Bitcoin, for example, there was a source code rule that the minimum transaction fee would never go below 0.01 BTC. Interestingly, this threshold was set in 2012, when the Bitcoin exchange rate was below 100 USD, which didn’t seem to attach any significance to the transaction outcome at that point. However, this would have caused a serious Bitcoin crisis today if developers hadn’t increased the block size through the SegWit2x update, which drastically lowered the BTC transaction fee.
Other altcoins charge much lower transaction fees, except for Ethereum, which has been the busiest blockchain so far because of the exhaustive utility in the diverse DeFi system. Stablecoins like Tether (USDT), Dai (DAI), or Gemini Dollar (GUSD) also charge relatively low per transaction. For example, you won’t pay more than 1 U.S. dollar when sending USDT to another wallet.
Finally, remember that some crypto wallets feature flexible payments — a possibility for you to offer higher transaction fees so that miners prioritize your pending transaction. This option is never possible on cryptocurrency exchanges.
Exchange Fees on Centralized Crypto Exchanges
However, crypto investments usually function on a more institutionalized level, so apart from transaction fees in the back, you’ll need to pay a trading fee to the platform that facilitates your transaction. Before discussing all types of fees, you should know that there is a drastic difference in the size of the trading fee depending on whether the exchange runs as a brokerage service or a traditional trading platform.
Similar to the stock market, a crypto brokerage service is a virtual company that has the role of an intermediary for those who want to buy or sell crypto in return for fiat money or another digital currency at the exchange rate that the company offers.
User interfaces differ from one brokerage service to another, but in general, they’re all intuitive and aesthetically pleasing enough to encourage you to make your first crypto transaction with confidence. On that account, crypto brokerages charge a generous percentage of the total amount of your transactions, which can reach up to 10%.
On the other hand, traditional trading platforms deliver an online pit for buyers and sellers to trade fiat-to-crypto or crypto-to-crypto trading pairs with each other. In this case, the exchange is only a facilitator of the transaction letting the participants manipulate the market price of the crypto asset by placing market or limit orders or speculating on the price movement. With an industry standard of 0.2%, trading fee rates on these exchanges are considerably lower than what you can expect on instant-purchase markets.
Overall, the current trend of crypto exchanges promotes retailer-like services with an option for a separate pro-version platform.
Maker vs Taker Fees
The differentiation between makers and takers applies only on regular trading platforms that operate on an order-based model.
By definition, makers are traders who place an order on the exchange order book, while takers are those who respond to that order. For example, you want to buy some ETH in exchange for BTC, so you’re placing that order to the ETH/BTC market, and that makes you a maker. The trader who’ll accept your order is a taker, according to the trader position rules. As a maker, you contribute to the exchange’s liquidity, which gives you a privileged status. Hence, makers typically enjoy lower fees.
On the other hand, some crypto exchanges prefer a flat fee structure and charge you equally regardless of your position.
Finally, in both flat and taker-vs-maker fee policies, the fee amount can either stay fixed irrespective of your trading volume or go down as the size of your trades rises.
Deposit and Withdrawal Fees
Regardless of whether you’re depositing or withdrawing crypto funds, you’ll be exposed to transaction fees that we covered in one of our previous sections. However, crypto exchanges almost never charge any additional crypto deposit or withdrawal fees.
Transferring fiat, on the other hand, can be somewhat tricky. When it comes to deposit fees, it all depends on the payment method you prefer and the payment options the exchange supports. An international exchange, for example, might not accept your native fiat currency and this will expose you to an additional conversion fee.
However, the majority of global brands have adjusted their payment options to the payment habits of investors in the countries where they operate. More or less, crypto exchanges try not to charge anything extra on deposits to keep a competitive edge. However, these costs are inevitable in some cases because of the fiat transmitter (SEPA, SWIFT, PayPal, etc.).
Sometimes, the exchange will allow you to buy crypto directly with fiat instead of the regular path of depositing the fiat in your exchange account. This convenience is usually conveyed through the use of debit and credit cards, but plastic payments (together with Bitcoin ATMs) are the most expensive funding method without an expedition.
As for fiat withdrawals, they are extremely variable depending on multiple factors, including your geographical location, type of currency, and the amount being withdrawn. For example, transfers from a locally-based exchange don’t usually incur any additional withdrawal fee.
Margin Trading Fees
When you enter a bit deeper into the world of cryptocurrency trading, you’ll be able to explore new markets beyond standard spot trading. So far, you may have noticed the margin trading option on some crypto platforms, which is a long-lasting trading practice inherited from the traditional stock and ETFs market.
Margin or leveraged trading allows users to enhance their position by borrowing digital assets from the platform (or peer traders) with a possibility for much higher returns. This extremely risky business can cost quite an amount as there is a margin interest rate and margin fees that are calculated based on the total value of the leveraged amount, including your collateral (your initial capital).
Advanced crypto platforms also offer crypto futures and other crypto derivatives like EFTs and CFDs. Certainly, you should be aware that they all come with their own fee packages and loss risks.
Fees on the Best Cryptocurrency Exchanges in Canada
Now let’s see what numbers say about the most popular crypto exchanges available in Canada:
|Cryptocurrency Exchange||Trading Fees||Deposit Fees||Withdrawal Fees|
|Bitbuy||0.20% instant market, 0.10%-0.20% pro-market||Interac e-Transfer: 1.5%, Wire transfer: 0.5%||Bank account 1%|
|NDAX.io||Crypto trades 0.20%CAD-to-fiat trades: free||free||4.99 CAD|
|Newton||Spread 0.50 – 0.70%||free||free|
|Coinbase||3.99% debit card 0.60% (Coinbase Pro)||No direct funding options — instant buy only||1% via PayPal only|
|Binance||0.10%-0.25 if you use BNB||n/a||n/a|
|Kraken||Up to 3.8% on the instant marketUp to 0.26% on the spot market||0-0,5%||0.25% – CAD 30|
A Few Words Before You Go…
You must accept that there is no such thing as trading crypto for free. As we can see, zero-fee promotors always come along with a new type of commission fee or spread behind your back. For that reason, it’s worth doing a little bit of math before putting your money on a certain exchange and faint to see that balance. We hope that this article will help you make a good starting point in the hunt for Canada’s most affordable crypto marketplace.