How Does Zero Fee Crypto Trading Really Work?

Zero fee crypto trading often refers to ‘zero commission’ trading, where the exchange entity does not directly charge you, the user, for the transaction.

This new value proposition is changing the cryptocurrency exchange business caral, as the exchange’s new upstarts aim to dethrone its commission-charging competitors from their thrones.

Legacy platforms like Coinbase, Binance, and Gemini may have captured most of the entry-level cryptocurrency traders, but a shift started in late 2020.

New platforms began trying to subvert traditional exchanges with promises of ‘zero fee’ trading, a business caral in which exchanges do not charge traders a commission, but instead seek to make their money in another way.

re is no such thing as a free lunch, so what does zero-fee trading entail?

Is Zero Fee Cryptocurrency Trading Legit?

So what is the catch?

cryptocurrency exchange caral can be remarkably profitable at scale – small fees on each trade can add up to billions. For example, the top-earning cryptocurrency exchange in 2018 was Binance, and it was making around $ 3.48 million per day. During the same year, the top twenty exchanges averaged around $ 1 million per day in profit.

Exchanges usually generate money in several ways:

  • Deposit fees.
  • Withdrawal charges.
  • bid / ask spread. Exchanges can benefit by exploiting the differences in prices that buyers and sellers expect to pay through market making.
  • Commercial commissions. This is the most common monetization method for exchanges, crypto, and stocks. Think of a trade commission as a service fee to negotiate trade between a buyer and a seller.
  • Commission list. Fees paid for coins to quote on the exchange.

For those curious about the mechanics of cryptocurrency exchanges, check out Coinbase’s S1 2020 Statement. Coinbase, now a publicly traded company, had to disclose its main income-generating activities.

zero-fee invasion is a double threat to this caral.

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First, DeFi. Users can maintain custody of their private keys and exchange assets using similar blockchains. only fees paid are generally network fees, which have been nothing to scoff at if you’ve been using the Ethereum DeFi ecosystem.

Second, Zero Fee CeFi. exchange takes custody of your private keys and runs the exchange, similar to Coinbase, but does its bread in a different way. Voyager, StormGain, and Robinhood are two companies that have embraced this caral at the forefront of their value proposition.

Llos StormGain trade Mechanics are also billed as zero fee. re is no commission on trading, but rather, you only get a 10% profit share from profitable trades.

For example, suppose you bought BTC at $ 30k on StormGain. Now it costs $ 50k and you want to exchange it for USDC. Your profit would be $ 20k, and StormGain would take a 10% ($ 2,000) haircut from this trade.

A snapshot of the Stormgain platform

Alternatively, if BTC fell to any amount below $ 29.99k after you bought it at $ 30k and decided to withdraw it for USDC, StormGain would comply with the exchange at no cost.

This type of caral is attractive to someone who trades at a loss, but it can be tremendously expensive when you factor in a significant profit margin.

Viajero claims to route its clients’ crypto transactions to various exchanges to find the best possible rate; You advertise that you only make money from your business if it saves you money. According to Voyager, you will not pay anything above the trading price of a trade; if Voyager finds a better trade-in price, it takes a portion of the price difference below its quote and you keep the rest.

However, Voyager is the party that sets the initially quoted rate. Disgruntled users have claimed that this practice does not necessarily make Voyager a “zero fee,” as its commission disguises itself as an artificial bid-ask spread.

Final Thoughts: Is Zero Fee Cryptocurrency Trading Friend Or Foe?

cryptocurrency spirit in general is in love with the disintermediating advantages of decentralized currency. For some of the staunch proponents of cryptocurrencies, centralized exchanges that charge commissions or earn a single dollar on their trades could very well be the Sith.

re is nothing inherently unfair about an exchange charging a fee to use infrastructure that it has potentially invested millions or billions to build.

zero-fee trading caral, although used primarily by centralized exchanges, is one step closer to aligning the interests of traders and exchanges. “we only make money if you do it” has appeal, especially for those more frequent traders who spend thousands of dollars a year on simple trades.

To keep these interests aligned, zero-fee crypto trading platforms must be completely transparent as to how their profits are generated.

Intentionally quoting a merchant at a higher price so that he can make money with a higher buy-sell margin is similar to shopping center outlets raising their prices before executing a steep ‘discount’ to attract customers. .

More frequent traders would do well to study in depth how an exchange charges its fees and how it performs against other competing exchanges. DeFi platforms like Uniswap or Aave tend to establish a pretty good base for the true cost of a trade.


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