Competition among crypto exchanges to attract traders has driven down trading fees over time.
A surprising result of this trend is that Coinmate, a European exchange with a five-year record, has offered to pay their high-volume traders, as standard.
The exchange has implemented negative fees for those who pass a monthly volume of €3,000,000 (three million euros). Traders will automatically be paid 0.05 percent on further trades if they are on the ‘market maker’ side of the transaction.
This might seem like a loss maker until you take the counterparty of the transaction into account.
Olga Bersheva, communications director at Coinmate, explains:
“At first glance, the economics of negative fees would seem contradictory for a crypto exchange.
But we justify paying customers to trade because we want to reward those who trade more and drive the market forward.
The exchange, of course, still gets paid by the ‘market taker’ side of the transaction, although those fees are on the very low end of the scale and also decrease with volume.”
‘Market maker’ transactions have lower fees across all exchanges generally, because they breathe life into the market and improve an asset’s liquidity. It is in the interests of the exchange to stimulate as much trading activity as possible and to attract as many traders as they can.
Roman Valihrach, CEO of Coinmate, says:
“Crypto trading markets are growing massively and big players have realised they need to step in or miss out. With negative fees we hope to attract more high-volume institutional traders to our platform.”
But the number of crypto exchanges is also growing massively – numbering over 500 if you include regional variations. That number is still well over 200 if you count only the ones that operate across borders.
With competition heating up, how far can trading fees really fall?