[trompetenaccoun]

That's like Robinhood users telling me they pay zero trading fees. Then how does RobbingHood make money?

Think about it, running an exchange has costs. I really don't understand how people can be so easily tricked by "free" offers that are actually more expensive when you do the math. PFOF (i.e. legal theft), unfavorable spread, etc... They get their money one way or another. It can technically make sense when you're trading something like $50 worth of a stock, because of course that would not be reasonable with a brokerage using a traditional fee structure. But frankly trading such low figures is silly. You have to invest a lot of time (=money) in research when stock picking, else you're guaranteed to lose sooner or later. But the reward simply isn't there. Even if you make 100% profit you now have $100. Better put that money into an index fund savings plan and forget about active trading. You're guaranteed to receive a better reward on your investment just getting a part time job selling fast food or something like that.

[Terr_]

> That's like Robinhood users telling me they pay zero trading fees. Then how does RobbingHood make money?

I was reading a book about that recently, it boils down to: "You're not [just] the customer, you're [also] the product."

Key term: Payment For Order Flow (PFOF) [0], with the book-paragraphs I was thinking of down below:

____________

> Retail investors have one hugely attractive property when considered by a professional – they’re dumb money. Not only are they unlikely to have private information, a lot of the time they haven’t taken care to consider all the public information. When the party on the other side of the trade is a small investor (or a lot of orders from small investors all over the country, ‘bundled’ by a retail stockbroker), you can be reasonably sure that you’re not taking too big a risk that the person selling stock to you knows something about it that you don’t.

> This makes retail orders very valuable to the market. One of the reasons why stock brokerage commissions are so cheap these days is that retail brokers have actually realised how valuable they are. They charge a quite substantial fee to players like the high-frequency traders for the privilege of dealing against their order flow, and they rebate some of this fee to their customers. But the retail orders would eventually dry up if the customers lost too much or felt that they weren’t being given a fair chance. And without a steady flow of ‘dumb money’ lubricating the wheels, the professionals would find it a lot harder to trade, as they’d always suspect each other’s motives for buying or selling.

-- Lying For Money by Dan Davies

[0] https://www.investopedia.com/terms/p/paymentoforderflow.asp

[nikolay]

I pay for Coinbase One - more than I've ever paid to any bank for a year. And what's my benefit? Almost none, because I still have to pay the immense fees!

In crypto, the margins are much wider than in any traditional financial services, which rely on volume and wide adoption!

[trompetenaccoun]

Coinbase is a centralized exchange, the trading does not happen onchain so the trading itself has nothing to do with crypto, it's fundamentally just like a stock exchange. Onchain trading would be using a decentralized exchange, and that's much cheaper now on Ethereum L2 for example (although still in the experimental phase, slowly getting there). Coinbase is btw one of the more expensive CEX, but I guess you're there paying the higher fees and not with the competition, because they're reputable and unlikely to steal or lose your funds, correct?

The great thing about cryptocurrency is you can trade it any way you like. You can take your tokens in self custody. You can in theory trade with a random guy on the street, without any third party involvement and with zero fees. I know a guy who does this because he's worried about a coming police state, so he buys everything with cash during meetups.

I think the high fees CEX are currently charging, which you're right about, has multiple reasons. One is it's a completely new and largely unregulated space. There are a lot of risks, they need to set aside a lot for litigation. FTX had very low fees for example while stealing customer funds to lobby Washington ;) Coinbase is legit but has to spend a lot on legal fees and compliance, because they're in it for the long run. Also a huge part of the reason is surely simply because they can. Crypto traders are making so much money that they're more likely to accept paying high fees than the average stock trader. That won't last forever, it's just because the market is new and volatility is crazy.

[WrongAssumption]

You have no idea how PFOF works