If you have traded crypto before, you might have heard of the Maker and Taker Fee model. It’s a principle that most crypto exchanges use, but how does it work, and will it affect the profitability when trading?
In short, taker and maker fees are implemented to help differentiate fees between orders. It gives a better balance on the market, unlike standard stock or bonds trading, where fees are usually high and unfavorable no matter when and how you sell assets.
The maker-and-taker model helps combat the issue that the centralized financial markets have been dealing with for ages. It’s one of the reasons why active trading in crypto can be more efficient and profitable for users.
But how does it work? Let’s dive right into it.
In cryptocurrency trading, the terms “maker” and “taker” refer to the roles played by traders in executing transactions. A maker is a trader who creates a new order that is added to the order book, while a taker is a trader who fills an existing order from the order book.
Makers provide liquidity to the market by placing new buy or sell orders at a specific price that they are willing to trade. These orders add depth to the order book and help to create a more stable market. Makers are typically charged lower transaction fees because they are providing liquidity to the market.
Takers, on the other hand, remove liquidity from the market by filling an existing order from the order book. They are executing a trade that has already been placed, and they are willing to pay the market price for the asset they are trading. Takers are typically charged higher transaction fees because they are taking advantage of the liquidity provided by makers.
The maker and taker model divide into two sections. You can be either a maker or a taker, and whichever you are will determine the type of fee you will have to pay when trading a cryptocurrency.
You are a maker when you place an order that doesn’t execute immediately. This means an order that will sit in the order book of the exchange you trade on and thus add liquidity to the market. When a trade like this happens, you are considered a maker and will have to pay a maker fee.
On the other hand, a taker is when you put up an order that executes immediately. In a case like this, you are a taker as you “take” liquidity out of the market, unlike the makers.
You can think of it this way. Makers help “make” the market by adding an order to the order book for buyers to purchase and adding liquidity to the market. Takers take the quick route and place an order that instantly matches existing orders, this trading immediately.
Makers tend to be rewarded with lower fees as they add value to the market with the respective order. An example is the BingX platform, where makers in the market have to pay a lower fee than the takers. It’s only natural that takers have a higher fee as they remove liquidity from the market.
As you start to understand the maker and taker model, you will also realize that being a taker is the “easy” way in the market. This is also why you might experience being a taker in most cases, as any regular market order will result in you being a taker.
For example, if you trade a Bitcoin when the BTC/USD price is at $20,000 and create a market order for exactly 1 BTC, then the trade will be executed immediately. This makes the order a “taker.”
The same goes if you make a trade that you want to clear instantly. In many cases, traders won’t have the patience to sell at the most profitable price, as it can take time for the right buyer to show up. Instead, selling to the exact market price or a bit below will clear the trade fast and allow you to move on to the next trade.
Being a maker takes a little extra patience and confidence. There is no guarantee that a maker order will be executed, but the profit will be better when it does.
We already briefly discussed how makers pay a smaller fee than takers. This is the first noticeable impact that the model has on profitability in crypto.
Fees will always take a cut of the profitability in crypto, and the same goes for any other market. Whether it’s crypto or stocks, fees will be there to take a piece of the pie. With that said, the beneficial thing about crypto is that fees are usually much lower and sometimes even non-existent if you trade with significant volumes.
If we dive deeper, all crypto profitability actually connects to the makers and takers. Everyone who trades on crypto exchanges relies on makers to “create” the market by putting up orders that reflect recent market prices to add liquidity.
Meanwhile, we also rely on takers to put up orders that take advantage of the liquidity created by the makers. Because of this cycle, takers can make quick and instant profits based on the market makers have created.
Without any liquidity on the market, it simply wouldn’t be possible to trade and be profitable while doing so.
The Maker and Taker Fee model is extremely common in crypto, and it’s no different at BingX.
BingX uses the model on our official exchange, even to the point where we offer lower fees that are most competitive whether you are a maker or taker. The flat maker fee on BingX is only 0.045%, with a current fee discount down to 0.020%. Takers have a flat fee of 0.075% with a discounted rate of 0.040%.
Adding on to this, the maker and taker fees will decrease as the volume you trade increases. Fees are divided into levels, spanning from the common user up to VIP 8. The higher level you trade at, the lower your fee will be.
For makers, it’s even possible to reach a 0% fee and 0.023% for takers.
We hope you learned a thing or two about the Maker and Taker Fee model. It’s two terms that you will bump into when trading in the crypto space, even at BingX.
If you want to learn more about crypto trading, make sure to keep an eye on the BingX blog for more content.