Crypto exchanges now number over 200 globally, and over 500 if you count the regional ones that serve only their national market. As a result, there has been a strong downward pressure on the fees they are able to charge customers.
This fierce rivalry together with aggressive marketing strategies have culminated in one exchange actually offering to pay traders to trade
Coinmate, an already established exchange staving off the newcomers, has decided to pay their high-volume traders, as part of their normal fee policy.
The exchange has implemented negative fees for those who pass a monthly volume of €3,000,000 (three million euros). Traders will automatically be paid 0.05 per cent on further trades if they are on the ‘market maker’ side of the transaction.
Olga Bersheva, communications director at Coinmate, explains: “At first glance, the economics of negative fees would seem contradictory for a crypto exchange. But we justify paying customers to trade because we want to reward those who trade more and drive the market forward.”
“The exchange, of course, still gets paid by the ‘market taker’ side of the transaction, although those fees are on the very low end of the scale and also decrease with volume.”
The key here is that the counterparty of the transaction still has to cover the cost of the trade, and the exchange is stimulating trading volume.
Another aspect is the type of customer who might be interested in such an approach.
Roman Valihrach, CEO of Coinmate, says: “Crypto trading markets are growing massively and big players have realised they need to step in or miss out. With negative fees we hope to attract more high-volume institutional traders to our platform.”
The current market downturn should put a damper on new exchanges who want to enter the market, but it might also intensify competition amongst existing exchanges.
With fees now entering negative territory, there is not much more exchanges can do except sit tight and ride out the downswing