As one of the largest and most trusted cryptocurrency exchanges, Kraken has built a solid reputation for offering a wide range of trading options and services to its users. Whether you’re a beginner or an experienced trader, understanding how to minimize or avoid fees on Kraken can have a significant impact on your overall profitability. This guide delves into the different types of fees on Kraken, strategies to minimize them, and other tips to help you make the most of the platform.
Understanding Kraken’s Fee Structure
Before we dive into the strategies to avoid fees on Kraken, it’s essential to first understand the platform’s fee structure. Kraken’s fees vary depending on several factors, such as the type of trade, the volume of your trades, and the payment methods you use. Here are the primary types of fees you may encounter:
Trading Fees: These apply when you buy or sell cryptocurrencies on Kraken. The fees are tiered, meaning the more you trade within a 30-day period, the lower your fees will be.
Withdrawal Fees: Kraken charges fees when you withdraw funds from your Kraken account to your bank account or cryptocurrency wallet. These fees vary depending on the currency and withdrawal method.
Deposit Fees: Most cryptocurrency deposits are free, but Kraken charges small fees for certain fiat currency deposits.
Margin Fees: If you’re trading on margin, Kraken charges fees for opening and rolling over margin positions.
Staking Fees: Kraken offers staking services where you can earn rewards by holding and staking certain cryptocurrencies. While there are no direct fees for staking, the platform takes a small percentage of staking rewards as a commission.
Optimize Trading Fees
Kraken uses a maker-taker fee schedule, which incentivizes liquidity on the platform. Traders who provide liquidity by placing limit orders that aren’t immediately matched are classified as “makers” and pay lower fees. On the other hand, “takers” place market orders that are immediately matched, and they pay higher fees. Here’s how you can optimize your trading strategy to minimize trading fees:
Use Limit Orders Instead of Market Orders
One of the most effective ways to reduce your trading fees on Kraken is to become a maker by using limit orders instead of market orders. With limit orders, you specify the price at which you’re willing to buy or sell, and your order will only be executed when the market reaches that price. This way, you add liquidity to the market and qualify for lower maker fees.
For example, let’s say you want to buy Bitcoin, but you’re not in a rush. Instead of placing a market order, which would match the current best available price and incur higher taker fees, you can set a limit order at a lower price. If the market price drops to your specified limit, your order will be executed, and you’ll pay the lower maker fee.
Trade More to Reduce Fees
Kraken’s fee schedule is tiered based on your 30-day trading volume. The more you trade, the lower your fees will be. Here’s a quick breakdown of how this works:
- For trading volumes below $50,000, the maker fee is 0.16%, and the taker fee is 0.26%.
- For trading volumes between $50,000 and $100,000, the maker fee drops to 0.14%, and the taker fee drops to 0.24%.
- As your 30-day trading volume increases, these fees continue to decrease, with the lowest possible maker fee being 0.00% for volumes above $10 million.
By increasing your trading volume, you can progressively lower your fees. This doesn’t necessarily mean you need to trade recklessly—if you’re a high-volume trader, you’ll naturally benefit from the lower fees.
Consider Using Kraken Pro
Kraken offers two different platforms for trading: Kraken and Kraken Pro. Kraken Pro, which is geared towards more advanced traders, features a more competitive fee structure than the standard Kraken platform. If you’re comfortable with a more complex interface, switching to Kraken Pro could save you a significant amount in fees, as it follows the maker-taker model described earlier.
While Kraken’s standard platform is user-friendly and well-suited for beginners, the pro version is ideal for those looking to trade more frequently and at lower costs. Even if you’re a beginner, the savings in fees might make it worthwhile to learn how to use Kraken Pro.
Reduce Deposit and Withdrawal Fees
Kraken supports various methods for depositing and withdrawing funds, and the fees can vary depending on the currency and method you choose. By carefully selecting the appropriate method, you can minimize the costs associated with moving your money on and off the platform.
Use Cryptocurrency Deposits Instead of Fiat
Most cryptocurrency deposits on Kraken are free, which can help you avoid deposit fees altogether. While some fiat currencies (such as EUR or USD) may have associated fees for bank deposits, depositing cryptocurrencies like Bitcoin or Ethereum usually comes with no additional costs.
To take advantage of this, you can transfer cryptocurrencies from another wallet or exchange to Kraken rather than depositing fiat directly. However, be aware of network transaction fees for transferring cryptocurrencies. For smaller amounts, these fees are often lower than fiat deposit fees, but you should always compare both options before proceeding.
Choose the Right Withdrawal Method
Withdrawal fees vary by currency and method. Here are some examples of how you can minimize fees for both fiat and cryptocurrency withdrawals:
For fiat withdrawals: Kraken supports several fiat currencies (USD, EUR, GBP, etc.), each with different withdrawal methods and fees. For instance, SEPA withdrawals for EUR are relatively cheap compared to SWIFT transfers for USD. If possible, opt for a withdrawal method with lower fees, such as using SEPA for EUR or ACH for USD.
For cryptocurrency withdrawals: Some cryptocurrencies have lower withdrawal fees than others due to the varying network costs associated with different blockchains. For example, Litecoin or XRP typically have lower network fees compared to Bitcoin or Ethereum. If you plan to withdraw to another wallet, consider using a cryptocurrency with lower network fees to reduce your overall costs.
Consolidate Withdrawals
If you make frequent withdrawals, the fees can add up quickly. One way to avoid paying multiple withdrawal fees is to consolidate your funds and make fewer, larger withdrawals. By doing this, you only pay the withdrawal fee once for each large transaction, rather than paying multiple times for smaller transactions.
Avoid Margin Fees
Kraken offers margin trading, allowing you to borrow funds to trade larger positions. However, margin trading comes with additional costs, including opening fees and rollover fees for positions held longer than 4 hours.
If you want to avoid these extra costs, consider avoiding margin trading or limiting the time you hold margin positions. Here are some additional tips:
Limit margin trading to short-term trades: Margin fees are lower for positions held for a short period. Try to limit your margin trading to short-term trades where you can quickly enter and exit positions without incurring high rollover fees.
Use lower-leverage options: Kraken allows you to choose your level of leverage, ranging from 2x to 5x. The higher the leverage, the higher your potential fees (and risks). By using lower leverage, you reduce the fees associated with margin trading.
Maximize Staking Rewards by Reducing Commission Fees
Kraken offers staking services for several cryptocurrencies, including Ethereum (ETH), Polkadot (DOT), and Tezos (XTZ). While staking rewards can be a great way to earn passive income, Kraken charges a commission on staking rewards, which typically ranges from 10% to 15%.
While you can’t completely avoid this fee, you can maximize your staking rewards by:
Choosing higher-yielding assets: Some assets offer higher staking rewards than others. By staking assets with higher potential yields, you can offset the impact of Kraken’s commission fees.
See Also: Who Founded Kraken Exchange?
Staking for the long term: If you plan to hold a particular cryptocurrency for the long term, staking can help you earn rewards instead of letting your funds sit idle. While you’ll still pay the commission fee on your staking rewards, the overall returns from staking may outweigh the costs.
Take Advantage of Kraken Fee Discounts and Promotions
Occasionally, Kraken runs promotional events offering reduced fees or even fee-free trading for certain pairs or asset classes. These promotions are typically time-limited, so it’s worth keeping an eye on Kraken’s announcements or newsletters to take advantage of these offers.
Referral Program
Kraken offers a referral program where you can earn commissions by referring new users to the platform. While this won’t directly reduce your fees, the extra income from referrals can offset some of the fees you incur on the platform. To participate in the referral program, simply share your referral link with friends or family members. If they sign up and start trading, you’ll earn a percentage of their trading fees.
Use Kraken’s Dark Pool
Kraken offers a dark pool, which allows traders to place large orders without revealing their intentions to the broader market. Trading on the dark pool has a different fee schedule, and if you’re a high-volume trader, it may offer lower fees than the regular exchange.
Consider Holding Kraken’s Own Token (If Available)
Although Kraken doesn’t currently have its own native token, like Binance‘s BNB or FTX’s FTT, it’s worth mentioning that if Kraken ever introduces a token, holding it could potentially grant you access to fee discounts. Many cryptocurrency exchanges offer reduced trading fees for users who hold and pay fees with the exchange’s native token. Keep an eye out for future developments in this area.
Carefully Manage Your Trading Strategy
Lastly, adopting a disciplined and strategic approach to trading can help you avoid unnecessary fees. Here are some additional strategies to keep in mind:
Avoid over-trading: Trading too frequently can quickly add up in terms of fees. Only trade when you have a clear strategy or opportunity, rather than trying to time the market constantly.
Plan your trades: By planning your trades in advance and executing limit orders, you can avoid the higher costs of market orders and reduce your overall fees.
Use Kraken’s tools to track fees: Kraken provides users with tools to monitor their fee levels and track their trading activity. Use these tools to stay informed about how much you’re spending on fees and adjust your strategy accordingly.
Conclusion
Reducing or avoiding fees on Kraken requires a thorough understanding of the platform’s fee structure and smart strategic planning. By using limit orders, consolidating withdrawals, choosing low-fee payment methods, and taking advantage of promotions and staking, you can significantly cut down your costs while trading on Kraken. Moreover, by trading more and increasing your volume, you can gradually lower your fees over time.
Following these tips will help you maximize your profits and make the most of your Kraken trading experience. Whether you’re just getting started with Kraken or are already a seasoned trader, these strategies will ensure that you’re not leaving money on the table when it comes to fees.
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