Self-proclaimed market analyst Alex Krüger has drawn the attention of the crypto community to a rather bizarre comparison between cryptocurrency exchanges and traditional stock markets, claiming “maker fee + taker fee” for crypto exchanges could be far more expensive at higher volume tier trading.
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
Krüger queried the fees levied on crypto traders as he explains in a series of Tweets how legacy financial institutions often have a flat rate cut per trade, while a typical fee cut by cryptocurrency exchanges only remains fair for lowest volume tier, and according to him, this is where most users fall into. He illustrated how brokers like Fidelity charge a flat rate of USD 4.95 flat per trade, putting the sum maker and taker fee at 0.02% for a USD 50,000 trade, and at 0.33% for a USD 2,900 trade, which can further be reduced should a trader consider brokers who charge per share rather than per trade.
According to the data he shared, Gemini exchange stands out with a sum maker and taker fee set at an exorbitant 2.00%, followed by Bittrex and Bitstamp with 0.5%, whereas Bitmex being a derivative market only charges 0.05%. Meanwhile, major US cryptocurrency exchange Coinbase Pro takes 0.40%.
In a comparison with foreign exchange markets, Krüger further cited how “an FX trader at Oanda would pay 0.008% for a round trip (in and out of a position)”, concluding that:
“Trading on Coinbase is 48x more expensive, while trading on Bitmex is 6x more expensive.”
Moreover, Krüger opined: “A cross-asset trading costs analysis should also account for spreads and relative volatility,” which invariably should impact fees levied, however, “crypto fees are generally high even after adjusting by relative volatility”.
In recent times, institutional investors have been targeted with offshoot market solutions to further attract this class of investors to the burgeoning digital asset industry. However, considering Krüger’s analyses, crypto exchanges second to huge volatility index of cryptocurrency markets may indeed be a huge deterrent for currency traders from the traditional market.
In February, Marketing consultancy Edelman published a report noting an unwavering millennials’ support for cryptocurrency exchanges, further corroborating eToro’s findings of a generational shift in trust suggesting a concrete trust in cryptocurrency market exchanges as well as a fading faith in the traditional stock market exchanges. However, while cryptocurrency trading appears to be more rewarding due to high volatility, the practical aspects of trading come with hidden fees that make it a trying first-experience for newcomers into the industry.
Blockchain technology may appear to solve certain constraints in legacy financial institutions and reduce the cost of transactions between clients, however, cryptocurrency exchanges may end up constituting a clog to the furtherance of the decentralized ecosystem as it reinvents the centralized systems obtainable in the traditional markets.
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