What are Fee Tiers?

Fee tiers are the fee structure used to determine how much investors are charged for depositing and withdrawing assets, as well as trading on cryptocurrency exchange platforms. Every exchange platform may have its own fee structure based on trade volume and types.

Crypto exchange platforms may offer a number of ways to deposit fiat currency, such as direct bank transfers, PayPal, or credit cards. These transfer methods may incur fees at around 2–5%.

Trading fees depend on various criteria, such as the amount spent and which tool is used. Fees for swapping, conversions, or trading may vary. Although some exchanges offer convenient swapping or conversion options for newcomers in the trading world, these companies tend to be more expensive.

It’s important for investors to analyze the charges to minimize the potential expenses. Investors may be charged flat, percentage, maker, taker, or withdrawal fees.

The value of the flat fee may fluctuate depending on whether the trade value is above or below a certain threshold. For example, trades below $50 may be charged $1, which increases a chance for bigger transactions.

Using the “maker-taker” model, the fees are calculated as a percentage of the total trade. Customers must be notified that they are charged as the transaction is being executed, not when creating the trade order.

On some crypto exchange platforms, percentage fees may be reduced by paying with the utility token set up by the platform. This can lead to the platforms charging lower percentage rates with higher volumes and frequency of trading. Some exchange platforms offer VIP fee tiers that grant customers special discounts as an incentive.

If a trade order is not instantly matched with a corresponding buyer or seller’s order on the order book, a maker fee will be applied. Such trades are then added to the order book, which increases liquidity. Maker fees often apply to limit orders as the minimum and maximum price thresholds are marked by the trader and they might not be instantly fulfilled.

Taker fees apply if the trader order is immediately matched with a corresponding order on the order book. These fees often apply to market orders, which are set at the market price, as they are typically wholly fulfilled.

Users may be charged withdrawal fees if they withdraw their digital assets and convert them into fiat currencies or move their crypto assets between platforms.

The incurrence of different fees can lead to customers acting more calculatedly and avoiding impulsive trading decisions. This also minimizes the odds of the exchange platform receiving an influx of trade requests while keeping the revenue and funds intact.

The various fees are used to further develop the exchange platforms. In the case of decentralized crypto exchanges (DEXs), fees are distributed into yield farming and liquidity mining programs, thus acting as a return of investment (ROI) for liquidity providers.