If you have traded cryptocurrencies then you have probably had to pay a significant sum in fees. From maker fees to high gas costs there are several expenses to account for.
That is why in this article I will be going over 8 ways of minimizing crypto trading fees. Ultimately, this will help you become a more profitable trader. So without further ado, let’s jump right in.
TL;DR:
Investors can minimize trading fees by utilizing low-cost exchanges while trading less often. Moreover, when it comes to reducing gas fees it is best to avoid peak hours and transact using low-cost blockchains such as Solana.
5 Ways to reduce crypto trading fees
Use low-fee exchanges
The amount of commission charged by each exchange varies. On the high end, you have exchanges such as Coinbase charging 1% on the lower end you have Binance offering commission-free trading for spot Bitcoin.
Therefore, it’s imperative to compare the fees between exchanges and pick the right option for you.
Utilize maker trading
In most instances, the trading fees for makers are lower. Simply put, maker trades are filled at a later time therefore you are providing liquidity to the platform.
In return exchanges reward participants. For instance, for Coinbase the trading fees for makers are between 0.00% and 0.40% whereas for takers it is between 0.05% and 0.60%.
Trade less often
The frequency of trading is the number 1 factor that determines the trading cost. The more trades you make the greater the fees. Therefore, by trading less often you can reduce the overall cost considerably.
This can be via swing trading or by just buying and holding, there are several trading tactics to choose from.
Discounts and promotions
Due to the competitive nature of cryptocurrency trading, many exchanges offer discounts and promotions to attract customers to their platforms.
For instance, both Gemini and Voyager offer a 50-dollar sign-up bonus. Moreover, Binance offers a 25% reduction in trading fees when using BNB and reduced costs for VIP investors.
Opt for decentralized exchanges
Simply put, decentralized exchanges offer peer-to-peer trading conducted on the blockchain. The main benefit of this medium of exchange is that no intermediary is taking a cut.
As a result, the fees are often lower. That being said, slippage is usually higher as there is less liquidity, and gas fees have to be paid.
The most notable decentralized exchanges are Uniswap and PancakeSwap which charge 0.3% and 0.25%, accordingly.
3 ways of reducing gas fees
Gas fees are blockchain charges that are paid out to validators for securing the network. If you trade on decentralized exchanges or transfer on the blockchain then you are required to pay them. Here are 3 ways to reduce them:
Avoid peak times
All in all, off-peak trading is significantly cheaper than peak trading regarding gas fees. In essence, blockchains can become congested and users bid up the gas fees when demand is high.
Therefore, you can use gas trackers to determine the most cost-effective time of day to trade. Ethereum gas station is a great application to track Ethereum transaction fees.
Utilize cheaper blockchains
If you want cheap transaction fees it’s best to choose the cheaper blockchains. These include Solana and avalanche to name a few.
Moreover, if you want to use Ethereum then you can use various scaling solutions to avoid high gas fees. These act as sidechains with much cheaper transaction costs. The most notable example is Polygon.
Set a gas limit
At the end of the day, users can set a hard limit on the transaction cost. The drawback to this option is that it can take some time to process.
FAQ
Is it possible to trade cryptocurrencies without trading fees?
It is certainly possible. However, these exchanges charge in other respects. For instance, this could be a withdrawal or deposit fee.
Which cryptocurrencies have the highest fees?
Both Bitcoin and Ethereum have the highest fees. Overall, fees can run over $5 during peak times. Moreover, as they are the two largest platforms they have the highest demand and therefore the highest congestion.
If you want to view the article in video format, check out the video below:
Conclusion
Although crypto trading can be expensive there are several tips shown in this article to help reduce the overall cost. From utilizing low-fee exchanges to avoiding peak hours there is an option for everyone.
Moreover, as the space continues to develop cheaper alternatives will pop up. I hope you found this article useful and thanks for reading it.
Want to learn everything about crypto gas fees? Click here to read my previous article.
