Coinbase Hikes Fees for Low Volume Traders

North America’s biggest cryptocurrency exchange Coinbase will be hiking fees for low-volume cryptocurrency traders on its Coinbase Pro platform, starting Monday. The Coinbase Pro platform is meant for traders but retail investors can also create accounts on it.

The exchange currently charges a flat 0.25% fee for takers (or traders who take only one side of a trade) and 0.15% as fee for market makers (or traders who take both sides of a trade) of the trading volume. The volume is calculated based on the trailing 30-day volume of the account.  

Monday onwards, the exchange will introduce a fee schedule that decreases with the volume being traded. Those trading amounts less than $10,000 are the hardest hit with fees of 0.50% as both maker and taker fees. For amounts greater than $10,000 and less than $50,000, traders will have to pay 0.35% of the total volume. Essentially, the smaller the amount the greater the fee on Coinbase Pro.

In a post on its site, the exchange explained away the changes as a “slight increase” in fees and stated that the new fee structure will increase depth and liquidity of our markets.

That may be true. High-volume customers, such as institutional investors, bring heft and liquidity to trading markets. Such customers will witness a decrease in their trading fees on Coinbase Pro. For example, maker fees for amounts greater than $50 million are zero and the taker fees for trading volume amounts greater than $1 billion is a mere 0.04%.

A Market for Binance?

According to crypto trader Joe McCann, Coinbase’s fee hike is a bid to mop up revenues from low trading volumes. Whether that may or may not be the case, the move is bound to end up in defection of low-volume traders to other exchanges.

It is interesting to note that Coinbase came into the spotlight as an exchange for retail investors. Its ease-of-use and fiat conversion capabilities is a contrast to the complex and convoluted onboarding system at other exchanges. At the height of crypto mania, towards the end of 2017, reports claimed that the exchange had more customers than brokerage giant Charles Schwab. (Though it is a moot point whether those accounts are actively trading currently).

The exchange’s latest move to hike fees penalizes the same retail investors and rewards institutional investors who are beginning to make their presence felt in crypto markets.

It also carves out a market niche for Binance, the world’s biggest cryptocurrency exchange by trading volume. Binance US is taking registrations currently and has zero trading fees until Nov 1. After that date, it intends to charge a flat fee of 0.1% per trade. The Malta-based exchange has not divulged its plan for high-volume traders, restricting itself to stating that it plans to charge an “adjusted fee schedule” based on their trading volume.