Schwab, Vanguard, Webbull… Basically every equity broker has gone to no trading fees.
Not such the case with the crypto. Most brokers want to collect a little (or big fee) for executing your trade.
It feels insulting at this point as I haven’t paid a fee for trading equities in a loooong time.
So I figured I would do some reasearch and make a (short) list of the no fee crypto brokers!
There are 2 brokers with no fee that I recommend based on my research. They are Robinhood and Voyager. Although they both have hidden fees they are competitive with and in some cases better than brokers/exchanges that have fees when dealing with major cryptos.
Since writing this post, I made a video. So you can watch it here, or read on!
First let's talk about the hidden fee, cause nothing is ever really free.
The hidden cost of brokers with no fee.
The broker has to make money somehow so it is very important to consider that “no fee” doesn’t actually mean ‘no cost’. Instead they bury the cost in the transaction and call it a spread. How? Let me explain...
A transaction of any product occurs based on a buyers and sellers price. In the world of securities (financial instruments) this is known as the bid and ask prices. When you place an order with most brokers you’ll see the bid and ask prices published. But in the world of crypto they typically are not the best bid/ask prices available.
Let’s consider an example…. you want to sell Bitcoin. You login to your brokerage account and see a bid price of $40,000 and an ask price of $40,500. Here we have a spread of 1.23%. This is a radical example but not far-fetched.
In reality the actual spread price of Bitcoin-USD is usually about 1 cent or .000025%.
So if you go to sell your Bitcoin in this example, the broker will show you the best offer for it of $40,000 and that is what they’ll give you for it, while on the backend they have a buyer for it at $40,250.
How is this legal? When it comes to stocks, this is not legal in the US and is regulated by SEC Regulation NMS which establishes a set of bid and ask prices for nationally traded stocks known as the National Best Bid and Offer (NBBO). In other words a if the NBBO ask price is$50 for a stock the broker can’t say “best I can do for you is $51” and then pocket that difference.
But Bitcoin isn’t a part of the national market system covered by Regulation NMS so brokers are in the clear to make mone on the spread.
Awesome Because: It pays good interest on your crypto balance
Best For: Holding Crypto
Overview: Voyager is a mobile cryptocurrency broker that allows you to trade over 60 coins. The platform also provides interest benefits, and institutional clients may use a variety of cryptocurrency services. Voyager links to several most trusted and secure cryptocurrency exchanges, giving you access to the world's largest crypto trading market.
Voyager provides you with faster and more reliable executions. To trade assets like bitcoin, ethereum, Litecoin, and Dogecoin, the account minimum required is as low as $10. There are no trading costs (excluding Voyager's small spread fee for executing orders at better prices). Here is the summary of pros for trading crypto with Voyager:
- Commission-free trading
- Interest paid on cryptocurrency holdings
- Straightforward platform
About the spread: Although Voyager claims that they "execute trades at a better price" the reports of that are questionable and seem to be slightly higher than Robinhood.
Competitive Interest: Voyager pays 'rewards' on your crypto balance -- what is effectively interest. The rates are competitive with the market leader Blockfi. The rewards do change monthly, but as of writing this in December 2021, they are paying 5.75% on Bitcoin compared to Blockfi's rate of 4.75%.
Awesome because: Easy to use, lowest spread fee of the free crypto brokers.
In Short: Robinhood has the best spread of the free brokers and even better than some brokers that do charge a fee. This makes it my pick for people that want to actively (although it does not have all cryptos, only major ones).
Overview: Robinhood Crypto makes learning and trading cryptocurrencies simple and secure. For cryptocurrencies, Robinhood charges no fees to trade. You may acquire cryptocurrency for as little as $1 and gradually increase your holdings. There is no requirement to purchase or sell a complete currency on Robinhood Crypto, with the exception of Dogecoin, which needs a minimum of 1 DOGE. You may, for example, purchase as little as 0.000001 BTC.
Robinhood is the broker for traders who prefer a basic, easy-to-use interface without all the bells and whistles that other brokers provide. Despite its limited trading choices and account types, even a complete novice may rapidly understand Robinhood's straightforward and simplified site. The broker safeguards your bitcoin with industry-leading security, cold storage for the majority of cryptocurrency held by Robinhood Crypto, and crime insurance. Pros of Robinhood are as follows:
About the spread: Robinhood has a public user interface which shows the current price of the crypto along with an ‘estimated price’. So they don’t actually show a bid and ask price, however we can still calculate a spread from the two numbers.
I calculated the spread a few times over two days and found the spreads to range from 0.13% - 0.26% for Bitcoin and ethereum. That’s a fair fee, and it is even lower than Coinbase Pro…. if we look at in the context of Robinhood vs Coinbase Pro, Robinhood has a lower fee than Coinbase Pro until you are trading over $100,000.
One down side of Robinhood is that you can’t actually take possession of the coin, and there are limited coins available on the platform. For the average retail investor that just wants some exposure to the crypto market and doesn’t care to hold some odd coin like Cumstar in their own virtual wallet, it will not be a problem.
NOT Awesome Because: High Spread fee
Webull is a popular stock trading app that has crypto and advertises ‘no fee’ but they explicitly charge a 1% spread as they state “Webull does not charge for trading crypto. There is a 100-basis point spread on either side of a crypto trade.” That statement is comical but considering all these no fee crypto brokers do actually have some type of cost, but maybe they should receive commendation for at least being transparent about it? None the less, the 100-basis point fee puts them well above the cost of the other no fee brokerages.