What is commission-free trading, when it is coming and what does it mean for the average crypto trader?
The majority of crypto exchanges operate on volume-based commission structures, in short… the more you trade the less you pay per transaction. This works well for traders with simple buy-and-hold strategies. However, a number of trading strategies involve rapid, algorithmic trading. Profits are small but add up with high volume.
Being a profitable high-frequency trader often involves making thousands of trades per day, profits can easily be eaten up by exchange fees. Aspiring traders looking to employ these strategies run into a “chicken and egg” issue and in the end, small high-frequency traders are priced out of the market.
A commission-free or subscription-based exchange encourages a different type of trading activity where smaller trades can be placed (without fees eating into profits), resulting in much more trading activity and a healthier more equal market, and more participation from smaller traders!
Crypto giant Binance can attribute much of its success to relatively low trading fees, which over the course of several years has helped attract millions of users, and catapulted Binance to the top spot and multi-billion dollar valuation.
It’s clear the average crypto trader is attracted by low fees and with the volume on Binance being substantially higher than its competitors, it is somewhat safe to make the conclusion that low trading fees help promote a healthy liquid market.
So, who is offering commission-free trading at the moment?
Most notably, Coinbase has launched a beta program called Coinbase One. In short, Coinbase One (available to a limited audience) allows users to trade with zero-fees as well as benefit from other perks for a flat monthly fee.
Then you have the likes of Robinhood offering 0% commissions but at what price? After a quick search online we found an interesting start-up called Eve Exchange whose subscription-based platform will launch in the coming months, for now, they have a number of enticing pre-launch offers including a lifetime subscription. Eve claims to offer traders the best in market pricing by working directly with the world’s largest liquidity providers.
In conclusion, it seems commission-free trading will become more common over the next several years as slowly but surely more exchanges take a different approach to how they charge customers and subsequently make their money.
And what this means for you is simple. Pay less and HODL more!
If you are trading $50,000 per month on one of the top 5 exchanges, you are likely to be paying over $100 in fees each month. $100 dollars which could become part of your portfolio and grow into thousands if you make the right choices of 1) where to trade, and 2) where to invest your gains.
Whether or not Binance will lose its top spot to an exchange offering a more cost-efficient trading experience is yet to be determined. Nonetheless, here at CryptoDaily, we are excited to see how user behaviour shifts with the introduction of more venues offering subscription-based commission-free trading.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
