By trading assets on an exchange, the investor must pay trading fees, taker or maker fees in this case. What is it about ? To understand, you should first understand the notions of liquidity, market taker and market maker.
Liquidity, market taker, market maker: understanding the trading market
To know the ins and outs of taker and maker fees in crypto trading, any investor must first understand the concept of liquidity. The latter refers to the ease with which an asset can be bought or sold at a stable price in a specific market. Here, that of cryptos.
Liquidity measures the number of buyers and sellers on an exchange, as well as market activity. It is an indicator of stability and therefore of confidence. For a trading market to work properly, traders need to work together. These traders are market takers and market makers.
The market maker designates the person who creates an order to buy or sell. This order will only be executed when all the required conditions are met. The investor can for example place a purchase order for 2 bitcoins when the asset reaches a certain value. These traders create liquidity. The market taker for his part creates an order to buy or sell at the current market price, therefore for immediate execution.
Taker and maker fees: what are they?
A taker is a trader who fills another investor’s order. A maker on its side creates bids for the order book of the exchange. This makes it easier for users to buy and sell. On a crypto exchange, each of these traders is subject to fees. These vary depending on the status of the trader (taker-maker), but also on the platform and the size of the transaction.
Market takers need liquidity and immediacy to ensure that a reasonable price exists each time they need to initiate a trade or close a trade. position existing. They are almost always willing to buy or sell, but may be inclined to pull back in times of extreme volatility. These traders pay taker fees to the exchange when a trade order is executed.
Market makers make profits by receiving a premium from the market taker in exchange for constant liquidity. They always seek to position themselves in the market, because each trade can generate potential profits with relatively low risk. These traders too must pay a fee to the exchange to place trades. But since they provide liquidity, their fees are usually lower than those of takers.
Crypto exchanges provide users with a convenient and secure platform to trade assets. But it is above all a company that generates part of its income via taker and maker fees in the same way as deposit and withdrawal fees or commissions on transactions. These levies basically cover the company’s production and operating costs.
Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of daily and weekly so you don’t miss any of the essential Tremplin.io!
