You know the phrase “death by a thousand cuts”? In the crypto trading world, the “cuts” are transactions fees. There is a fee for moving your crypto to an exchange. There is a fee for selling your crypto. There is a fee for buying crypto. Given time, someone is sure to discover a way to charge a fee for paying your other fees.
“A fee for fees? I like it!”
New traders caught up in the excitement of crypto often sabotage themselves by recklessly racking up too many fees. They tend to focus on trading quickly and don’t bother reading the details governing transaction charges. This is a mistake, as the most convenient and obvious ways to transact are often the most expensive.
This article will offer both new and seasoned crypto traders some suggestions on reducing or eliminating fees. The cryptocurrency space is fast paced, so the useful shelf life of these tips may vary. However, once the reasoning behind each technique is understood you should be able to find new ways to implement them in an evolving market.
Tip #1 – Move Money Wisely
There are a number of ways to move funds from a bank into a crypto exchange, but I’ve found only one that works without fees. Since I live in a US state that severely limits access to crypto exchanges most of these tips will use Coinbase as an example. On Coinbase Pro the ACH, or Automated Clearing House Network transfer, is a free way to fund your account.
(Coinbase Pro is one exchange that does not charge for ACH transfers)
The ACH transfer can take a few days to a week to complete, but offers the advantage of keeping funds entirely intact. Credit card transfers generally carry a 3% to 3.9% fee depending on the provider and receiver. This means your credit card crypto purchase may need to make significant gains before you see a cent of profit. Wire transfers are fast, but considerably more expensive as they can incur charges from both the exchange and your bank.
Tip #2 Buy Smart, Not Fast
Logging into a cryptocurrency exchange, selecting a crypto, and hitting “buy” is an easy but expensive way to make purchases. Some brokerage sites charge a flat fee depending on the trade amount. These fees are significantly higher than the rates charged on trading exchanges for identical transactions:
Searching each crypto exchange for its current rates can be a time-consuming task, but tools like cryptofeesaver make the job easier. This site allows a trader to search for the lowest fees by entering a coin type, amount, and destination coin.
Checking a potential transaction on cryptofeesaver or similar website before trading can save you crypto in the long run.
Tip #3 Limit Crypto Movement
Moving crypto incurs fees, not just to and from exchanges, but also between wallets. Whether driven by bitcoin miners or ETH gas, someone has to be paid to process and verify the update to the blockchain. Knowing beforehand which wallet will ultimately hold your crypto can save you from making unnecessary and expensive moves.
Suppose you have a crypto wallet on your computer and a hardware wallet. You buy some BTC on an exchange. Perhaps you have some vague plan to split the BTC between long-term savings and trading for alt coins. Since leaving your BTC on the exchange is irresponsible, you quickly send it to your desktop wallet without giving the matter much thought. This transfer invokes the first fee. Later, you decide to save 70% of the BTC, so you send it to your hardware wallet, invoking the second fee. Ouch! This moment of carelessness has doubled the fees you could have paid.
You could have sent 30% of your BTC to your desktop wallet and 70% to your hardware wallet directly from the exchange. This accomplishes the same goal without some of your crypto paying fees twice. By knowing where your crypto is going from the outset you can cut down on excess transfer fees.
Tip #4 Trade Big, Not Small
Since each crypto trade incurs a fee it is often better to do one large crypto transaction rather than several smaller ones. If you are saving $50 a week for crypto trading remember that you will pay fewer fees by doing a single $200 transaction a month. Weekly transactions will result in paying a fee four times instead of once.
Tip #5 No Rush On ETH
When sending ETH tokens you will often get to choose how much “gas” to spend. Using more gas will get your transaction processed faster. Some sites will set the transfer default to maximum speed, resulting in the largest fee. Executing transactions using the slowest and most inexpensive option is a great way to save money.
Bonus Tip: Find Loopholes
Savvy crypto traders often discover clever workarounds for reducing or avoiding fees. Watching a wide variety of YouTube crypto trading channels can introduce you to new fee-saving techniques. One recent example comes from YouTuber denome, who saves on ETH gas fees by using WETH in Uniswap.
Crypto trading is difficult enough without having your profits ravaged by a swarm of fees. If you know some excellent fee-saving tips I’ve overlooked please share them in the comments. To paraphrase Benjamin Franklin “We crypto traders must all hang together, or, most assuredly we will all hang separately”. Happy trading.