Planet technology

Trading cryptocurrencies often entails paying high transaction fees, although there are workarounds

According to its proponents, Bitcoin and other cryptocurrencies are expected to render the US currency obsolete. Nevertheless, the crypto trading mania of this year has resulted in large profits for organizations that assist investors in buying and selling digital money.

It took fewer than six months for the overall value of the cryptocurrency market to be more than treble, according to CoinMarketCap estimates. While new crypto traders and investors quickly joined the fast-moving bandwagon, their trail left behind billions of dollars in income for the firms that exchanged digital currency.

It may be free to trade on Robinhood, but the online broker reaps the benefits of these transactions by selling data to high-frequency trading businesses. A recent SEC filing shows that the cryptocurrency business at Robinhood produced approximately $88 million in revenue in its first three months of operation. 

Robinhood reported this in its IPO filing. Dogecoin, the currency that started as a prank but has become one of the world’s most popular cryptocurrencies, accounted for 34% of that total.

Coinbase said in its most recent financial statement that its 6.1 million retail users are generating an average monthly net income of $34 to $45 — or the equivalent of $540 per year — from their transactions. Low-cost index funds that follow a benchmark like the S&P 500 could charge just $3 a year for $10,000 invested.

For sure, while consumers race to the moon searching for the newest cryptocurrency, firms benefit – either directly through trading fees or indirectly via selling data. Matthew Sigel, the director of digital assets research at VanEck, says that “the velocity of money is significantly greater on the planet crypto,” he says. For busy traders, fees may quickly mount up.”

Crypto trading costs may quickly spiral out of control.

Cryptocurrency and Bankruptcy

These holdings of cryptocurrency are appearing in bankruptcy schedules of debtors in increasing numbers. There are a variety of issues that could be raised in this regard such as whether cryptocurrency should be included as the estate’s property as well as the way to value it and the way it should be classified for bankruptcy. These questions right here on BankruptcyHQ, in reality, only the tip of the iceberg.

Is Cryptocurrency an asset that should be disclosed in bankruptcy?

Although there are only a few cases on the subject of cryptocurrency, it’s clearly an asset that should be made public. In bankruptcy cases every property of the debtor, regardless of its value (see the section below for more details about value) is required to be reported.

But, the most important question is whether cryptocurrency is identified by a trustee if the debtor does not declare its assets as such. Because cryptocurrency cannot be classified as a commodity and is not disclosed, this could be a bit innocent.. A majority of people don’t realize the fact that cryptocurrency is an asset that must be disclosed. This misconception must be corrected since the deliberate failure to declare a cryptocurrency could result in the possibility of criminal prosecution.

If cryptocurrency is recognized as an asset on the bankruptcy plan of the debtor there are challenges to taking control of the cryptocurrency and understanding its value. In fact, the person with”the private key” is effectively the owner of the cryptocurrency stored inside the electronic wallet. Therefore when a trustee or insolvency professional wishes to realize what the cryptocurrency is worth held in the digital wallet of the debtor, the professional or trustee requires the consent of the debtor in order to acquire access to the secret key. Otherwise, the trustee , or professional won’t have enough control over access to the cryptocurrency to fully realize its value.

How can you keep the costs of trading cryptocurrencies as low as possible?

Cryptocurrency trading is still in its infancy since Bitcoin has only been around for a decade. Brokers have yet to establish a uniform method of disbursing the associated fees. Even as Robinhood prepares for its IPO, its zero-commission strategy has come under attack.

Crypto-focused brokers have a broad range of fees that might be challenging to understand. Payments for all transactions at Coinbase and Gemini start at $0.99 and go up depending on the amount of the transaction, which is a 0.5 percent spread (or convenience fee).

According to Justin Barlow, a research analyst at The Tie, a supplier of digital asset information services, the fees you pay reflect a proportion of the overall transaction value. Though crypto trading costs tend to be greater than traditional markets, there are techniques to lower them.

Barlow has four suggestions:

  • Decentralized exchanges are the way to go. Peer-to-peer crypto trading is possible thanks to these exchanges, which eliminate the need for a “middle man” (beyond transaction fees). Uniswap and PancakeSwap, which charge fees of 0.25 percent, are two examples of flat-fee services.
  • Make use of centralized exchanges with cheaper costs. The “middle man” is still present in these exchanges. However, some, like FTX US, offer reduced fees.
  • If you’re qualified, sign up for a “pro” account. Pro users pay a fraction of the costs that regular users do.
  • Invest in coins that provide a trade discount. A 25% discount on spot trades is available to Binance.US users who own the company’s Finance currency.

Options for low-cost crypto wagering

There are several ways to join the larger crypto community other than simply purchasing virtual currency. Investing in funds that monitor the underlying coins, in funds that track the sector, or in individual equities are all viable options for cryptocurrency investors.

If you want to diversify your investments, you may invest in funds that hold bitcoin and other significant cryptocurrencies. Invictus Capital charges a 0.5 percent management fee for an index fund that follows the top 20 cryptocurrencies. Many mutual funds charge less than that amount, if not less.

It is possible to buy ETFs that track firms with a stake in cryptocurrencies or blockchain technology and profit from their growth. For example, Amplify Investments’ blockchain fund and Exchange Traded Concepts’ crypto-focused fund has cost rates of 0.85% and 0.71%, respectively. It comes up to an annual cost of up to $85.

Since Coinbase went public in April, some stock market investors have acquired shares as a proxy for the cryptocurrency market. Others, though, may look at Robinhood as a comparable gamble. Even though it’s free at most brokers these days, investing in stocks comes with an increased level of risk.

However, if you’re determined to use a cryptocurrency, you can anticipate costs to drop as the market becomes more competitive. According to Sigel, it is reasonable to expect that blockchain transaction costs will decline in line with the cost of the processing power necessary to carry them out, assuming a competitive market (which crypto most surely is).