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What is ‘Spread’ on Crypto Exchanges?

By Evan Jones01/12/2024

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Spreads are the difference between the highest price that a buyer will pay for an asset and the lowest price that a seller is willing to accept. Spreads are similar to maker or taker trading fees except spreads are often marketed as not being a fee. Most platforms that are “commission free” are generally charging a spread. It’s often referred to as a bid-ask spread. 

Cryptocurrency exchanges, trading platforms, and traditional finance iterations of the same all can use spreads.

While spread isn’t technically a trading fee, being charged a spread means you’re still paying something extra for the transaction. The way a bid-ask spread works often means you’re actually paying somewhere between 1-2% in fees. The spread is often built into the price you see, making it less obvious that there’s an extra percentage in cost. 

A fee of 1-2% is much higher than a maker or taker fee that’s often 0.25% or less. Maker and taker fees are the fees charged by platforms when you use their order book trading interface, which is often referred to as “Pro” by many exchanges in 2024 even though it’s not overly difficult to learn.

When Do You Typically Pay Spreads?

Normally a spread is the fee for placing an instant buy/sell at market price on a trading platform. These options are convenient but often incur fees that are at a minimum, exponentially higher than maker and taker fees. They’re even higher if you use a credit card as they often charge at least 3% as a cash advance fee. 

In contrast, making a maker or taker trade on an exchange such as Binance only incurs a 0.1% fee. Even a taker trade at current market price will incur a lower fee than using the instant sell options. However, it’s not like Binance doesn’t charge spreads.

To clarify, the instant buy and sell options are generally those found when you click the big “Buy Crypto” or “Sell Crypto” option right on an exchange homepage such as the one on Binance’s. Almost all exchanges offer this option now, and it makes sense that they would, as they’re able to charge a spread this way to make as much in fees as possible.

It’s also worth keeping in mind that with a spread, there can be almost no fee if both buyers and sellers are meeting at the same price level, because there is minimal spread between those prices.

Should I Avoid Buying Crypto Through Platforms that Charge a Spread?

The answer to the above varies depending on your personal situation, namely, what country you live in and currency you get paid in. 

USD and US Residents

If you live in the US, or get paid in USD, then yes, you should avoid buying crypto through platforms that charge a spread. The reason for this is that you can easily convert USD into USD stablecoins such as USDT, USDC, and TUSD with little effort. 

After you convert USD fiat into USD stablecoins such as USDT you can then use the USDT on an exchange’s trading interface to trade for Bitcoin or another asset, rather than using the “Buy Crypto” option that almost all exchanges have nowadays.

Other Fiat Currencies and Residents

If you get paid in Euros or Great British Pounds, there are also stablecoin options for you, but you’re also on the right side of a foreign currency exchange if you do choose to buy a USD stablecoin with your fiat.

However, if you live outside the US and get paid in a fiat that’s weaker than USD, it gets more complicated. Depending on the platform and fiat you get paid in, there are a variety of fees you might end up paying if you want to do what USD users can do very easily. 

This is because you’ll have to convert your fiat for USD or USD stablecoins, which will cost some sort of fee, and then you’ll have to pay trading fees on top of that forex fee.

If you’re using a platform that lets you buy digital assets in your native currency, even at a spread, this may actually end up being about the same cost as if you paid to convert it to USD stablecoins and then made a maker or taker trade. 

This is something that is hard to determine without knowing your specific situation, but you can figure out which way costs you the least in advance by checking exchanges’ fees for various types of transactions. 

Article tags

cryptocurrency
Exchanges
Fees
Evan Jones

Author

Evan entered the crypto scene in 2017, attracted to the many disruptive possibilities that blockchain could have on current world systems. He has a keen interest in decentralized services, payment processing, and viable NFT use cases such as event ticketing. He spends his days writing with his dog Kobe under his feet, if not on his lap.

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