Uncovering the Hidden Costs of Cryptocurrency Exchanges: A Study on Fees and Spread Impact

With the rise of the cryptocurrency market, it’s becoming increasingly important for traders to understand the true costs associated with their trades. With fees and spreads being just the tip of the iceberg, it can be hard to know exactly how much your trades are costing you. That’s why we at Comtrax decided to take a closer look at the hidden costs of trading on six popular cryptocurrency exchanges.

To conduct this research, we performed a backtesting simulation of daily recurring investments of 10 USDT in Bitcoin every day from January 1st, 2017 until February 6th, 2023. The backtesting data was gathered using the ccxt library on February 7th, 2023 at 10:22:43.141605 CET.

We used USDT as the currency for investment in this study, as some of the exchanges do not offer the option to invest with fiat currency. This made it necessary for us to use a stable coin such as USDT, which was available on all the exchanges, to eliminate the impact of market fluctuations and allow for a fair comparison between the different exchanges.

The six exchanges that were included in our study were Bybit, KuCoin, Huobi, Crypto.com, Lykke, and Coinbase Pro. The aim of our study was to emphasize the importance of tracking the fee structure when investing in cryptocurrency, as well as to show that there are hidden costs, such as spread, that can also have a significant impact on your portfolio.

This table shows the pricing information for various exchanges during the time of our study. It displays the ask and bid prices in USDT for Bitcoin, the spread, taker fee, and the total cost incurred. The data highlights the differences in the fees and spread between the exchanges, with Coinbase Pro having the highest total cost at 0.613907% and Bybit having the lowest at 0.077180%.

We generated three figures to illustrate the results of our study. In Figure 1, we can see the performance of our portfolio on each of the six exchanges. At first glance, it may seem like the lines for the performance based on different exchanges are almost the same. However, with a closer look, we can see that the lines are not exactly the same, and there are some differences between them.

Figure 1: This figure showcases the performance of daily recurring investments in Bitcoin across 6 popular cryptocurrency exchanges. The lines represent the growth of an investment of 1 USDT per day over a period of 6 years.

In Figure 2, we see the difference in absolute values between each exchange and the hypothetical exchange with 0 fees and 0 spreads. It’s important to note that no such exchange exists in reality, and the results should be interpreted with this in mind. This figure allows us to see how much each exchange is charging in terms of fees and spread.

Figure 2: This figure displays the fees incurred during the daily recurring investments in Bitcoin across the 6 exchanges. The line graph highlights the total fees incurred in USDT over the 6-year period.

Finally, in Figure 3, we see the comparison of each exchange in relative terms, based on portfolio performance. This figure allows us to see the impact of fees and spread on our portfolio in percentage terms. Here, we can see that the impact can be significant, with certain exchanges having a disadvantage exceeding -8 percentage points.

Percentage points (pp) measure change in a percentage. They show the difference between two percent values. For example, if something goes from 10% to 12%, that’s a change of 2 percentage points. Understanding percentage points helps us better understand changes in financial and economic information.

Figure 3: Illustrating the effect of fees and spread on daily recurring Bitcoin Investments. The line graph displays the deviation in portfolio performance, shown as percentage points, compared to a hypothetical scenario with no fees or spread.

It’s crucial to keep in mind that the effect of fees and spread can vary widely among exchanges. As seen in our research, Coinbase Pro showed the largest impact with a disadvantage of -2.24 percentage points at the end of the backtesting period, while Bybit had the smallest impact with a disadvantage of -0.28 percentage points. However, it’s worth noting that even at its worst performance, Coinbase Pro had a disadvantage of -8.26 percentage points, making it the exchange with the most significant impact regarding fees and spread.

In conclusion, our study highlights the importance of understanding the true costs associated with cryptocurrency trading. While fees and spreads are certainly important to consider, they only scratch the surface of the hidden costs that can have a significant impact on your portfolio. Other factors such as deposit and withdrawal fees and other expenses were not included in this study, which should be noted as a limitation. By tracking these costs and making informed decisions, you can ensure that your investments are as profitable as possible.

We hope that our study will help traders make more informed decisions when it comes to their cryptocurrency investments. This information is especially relevant for users of our platform, Comtrax, and its product, Recurrtrax, which allows users to add subwallets of any of these six exchanges and start Dollar Cost Averaging (DCA) based on their configuration.

As always, it’s important to do your own research and to consult with a financial advisor before making any investment decisions.

Discover a world of investment possibilities with Comtrax. Our user-friendly and secure platform make investing easy and hassle-free. Sign up now at www.comtrax.ch.

Subscribe For Latest Updates

We don’t spam! Read our privacy policy for more info.