When going into digital asset trading, most people consider the transaction fee, best cryptocurrency exchange, wallet, and other factors. While trading Bitcoin with the expectation of making a profit, you also consider that there are some fees attached to each transaction.
In the Bitcoin network, the transaction fee is the amount you are charged when a miner processes your transaction, and it is confirmed. With every transaction, there is a Bitcoin network fee attached. When your transaction is being mined and confirmed in the Bitcoin blockchain, there will be fees attached. These fees will be deducted from your Bitcoin wallet.
What are the types of Bitcoin fees?
Some transactions in Bitcoin trading attract some fees. The most common types of fees you will need to pay are trading fees, margin fees, deposit fees, trading spread, and withdrawal fees. The average Bitcoin transaction fee is currently pegged at 6.084.
The average transaction fee for Bitcoin is slightly higher than you might have to pay for some other coins. But it is due to several factors. We have discussed these factors below.
What determines Bitcoin transaction fees?
Some factors will determine your fees at different exchanges. Things like whether it is a SegWit transaction or not can play a part in the market fee. But more than the different fees that transactions attract, there are some common factors to consider.
Your payment method
The payment method you choose to work with will determine the transaction fees that will accrue to you. But, of course, everyone wants exchanges that will let them buy and sell Bitcoin at low fees. Therefore, you have to be familiar with the payment method and the different charges that go for each.
There are several payment methods involved in Bitcoin transactions. You may choose to pay with fiat currency from your bank account using debit or credit card, Netteller, Skrill, or other options available. You may also choose to pay with bank wire including, ACH, SWIFT, etc.
Generally, a bank wire payment system is considered the cheapest transaction method. So, when choosing an exchange, you want to get one that supports payment with a bank wire system such as SEPA, SWIFT, etc. Next, in the order of charges, exchanges with alternative payment methods are considered cheap as well, but not compared to bank wire payment methods.
The most expensive payment method involves those you do while using PayPal, credit card, and debit card. The explanation for their expensive charges is that PayPal and credit card companies have high-security services. Here, they offer buyer protection by providing a platform for chargebacks, unlike other options where you cannot reverse Bitcoin transactions.
The rate of transactions
When the network is congested with several transactions, it can lead to a hike in fees. When there are several investors and traders making business, the fees will go up. This happened in 2017 when the transaction was booming, and everyone was making transactions. The transaction fee ran up to $60.
Over the years, Bitcoin has increased in value. Its value now is a far cry from what it was when it made its entrance into the world of digital currencies. As expected, the number of people who trade Bitcoin cash now is more than those who cared to give it a second look when it came on board.
In the same vein, the rate of Bitcoin transactions is more than those done some years ago. This factor has played a part in the digital currency conversion cost as the computing power has not increased. Therefore, the mining fee is more than what was obtainable in the past.
In fact, Bitcoin transactions cost 0.8895 one year ago. Today, it charges up to 4.542. The transaction cost is not stable because Bitcoin mining has become more expensive than it was. The block reward given to a Bitcoin miner is more to cover costs which reflects in the exchange rate.
It fluctuates and may be higher or lesser tomorrow. The point is that the rate at which people make transactions in cryptocurrency trading, the higher the transaction will cost.
The size of the transaction
The transaction size determines the fees involved. The larger the transaction, the higher the taker fee involved. The Blockchain.com wallet uses a custom fee. Therefore, your fees will be calculated for you. A larger transaction fee may call for additional fees compared to some smaller transactions. When you resend an unconfirmed transaction, they will attract a higher fee.
Median transaction size may require a lesser fee than a large one. More transactions will require more fees. You can put things in place to ensure you get a low fee. The exchanges you use also play a role.
What do exchanges charge?
Each Bitcoin exchange has its policy which also covers the fees they charge. Some exchanges charge a high fee, while some have minimal charges. While it is advisable to go for an exchange with a reasonable trading fee, it is also advisable to look out for the right exchange for you. Note that when making transactions, your situation is unique.
Therefore, you have to consider the exchange that has a policy surrounding Bitcoin transaction fees that is beneficial to you. Exchanges that support Bitcoin payments with a bank wire system are generally considered cheap compared to those with other payment methods. By comparison, exchanges with alternative payment methods also have lower fees.
Binance is known to be one of the best exchanges around, along with Coinbase Pro. They support transactions in not only Bitcoin but also Ethereum and hundreds of other crypto assets. Also, they support transactions with several fiat currencies. Another exciting thing about Binance is that you can make payments with several options, including debit card, credit card, bank wire, and several other payment methods.
At Binance, you also get the option of staking coins on the blockchain network, which affords you the chance to earn interest on your deposit. With every crypto you deposit on Binance, you can earn interest on it. If you are after a smooth ride and a sweet experience, Binance is one of the platforms you will want to consider.
One thing you have to consider when trying to save cost is to get exchanges that charge very low for a transaction. There are several exchanges with low transaction fees, and Binance is at the top of the list in the Bitcoin community. They charge 0.1% for your transactions. And if you are trading with the Binance coin, BNB, the charges get cheaper.
This is another exchange that can afford a smooth experience in crypto trading. It is easy for newbies to understand. Their services are smooth, and you would not have to roam around before finding your way with any function. If you are looking to save some extra bucks on transaction fees, then this is the right place to start.
Cex.io does not charge for deposits and withdrawals. This means that you do not have to slash a part of your bucks when you make deposits or make withdrawals. Compared to a number of exchanges out there, this is one of the best places to look. If you are buying Bitcoin using your credit card, the charges go up to 7%. The instant transaction completion can compensate for this cost.
If you are using a bank wire system, you are not charged for deposits. However, the transaction may take between 3-5 days to complete if you are running an international transfer.
Kraken is an exchange that has been in the crypto business for quite a while. It is one of the best options for bank wire transaction methods. Their charges are low, and they have a margin trading option.
If you are making EUR SEPA, USD, and CAD transactions, there is no transaction fee attached. Within a day or two, your transaction will reflect in your account.
This exchange is reputable for a smooth P2P system. You can make transactions with other traders with a flat fee as low as 0%. Several transactions may attract several withdrawal fee ranges.
Bitcoin transactions do come with fees, but how much is that fee? You must know how much a transaction will cost you. The average Bitcoin transaction fees are 66.084 but may change within a short time.
Some exchanges charge higher transaction fees than others. You may pick exchanges with higher fees if it suits you in other aspects. Having an idea of the average fee, miner fee, and other fees on different exchanges will make you decide well when picking a platform.