Trading on BitMEX 6X and 48X on Coinbase More Expensive than the Traditional Market
“Are crypto exchanges overcharging customers?”
this is the question economist and crypto analyst Alex Kruger took to Twitter to answer.
According to the data shared by Kruger, the combined maker and taker fee on the lower tiered volume on Gemini that only has 5 cryptos listed is the highest of 2 percent followed by Bitstamp and Bittrex at 0.50 percent. But while Bitstamp has five cryptos listed on its exchange, Bittrex has 242.
Kraken charges combined 0.42 percent fee that has 20 cryptos for trading. With 16 coins, Coinbase Pro charges 0.40 percent fee while Binance charges 0.20 percent and has 155 coins listed.
“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%.”
Comparing it with the traditional stocks market, he found that broker like Fidelity charges a flat fee of $4.95 per trade. This, he explains, means 0.02 percent of “maker fee + taker fee” for a $50,000 trade. While for a $2,900 trade, this flat fee will put the “maker fee + taker fee” at 0.33 percent.
“Traders can lower fees by using brokers that charge per share rather than per trade (e.g. IB).”
He further compares it with foreign exchanges, where the difference is even greater reaching as high as 48 times more expensive on crypto exchanges.
“An FX trader at Oanda would pay 0.008% for a round trip (i.e. in and out of a position) => trading on Coinbase is 48x more expensive, while trading on Bitmex is 6x more expensive.”
Given the fact that cryptocurrency markets are much more volatile than the traditional ones, as he puts it, cryptos are 12x more volatile than euro and 7x more than the S&P 500. This makes sense that crypto trading asset costs analysis should account for spreads and relative volatility but even then, he found crypto fees “generally high even.”
Volume & Fees Inversely Correlated
If we take a look at the average commission per share on NYSE over the years one thing is clear, volume and fees are inversely correlated.
As can be seen in this chart, as the volume starts increasing, the fees started declining. Now, cryptocurrency space is still a nascent industry and the volumes aren’t significant. As space progresses and more participants enter, we would see an increase in its volume which in the future means we can expect the prices to take a dip as well, just like in the stock market.
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