Analysis of crypto transaction fees suggests exchanges prefer to move in Bitcoin ( $65,424.00 )

Crypto exchanges can earn revenue through various means, including lending to margin traders, liquidation fees, and on/off ramping charges. However, the core revenue generator remains taking a fee on transactions.

There are multiple types of transactions and, therefore, many types of transaction fees. When comparing different transaction fees on the Bitcoin ( $65,424.00 ) and Ethereum ( $3,329.70 ) chains, the data suggested exchanges prefer to use the former to transfer value internally.

Transaction fees

On-chain data provided by Glassnode and analyzed by CryptoSlate showed an erratic history for fees earned by exchanges on Bitcoin ( $65,424.00 ) transactions.

The chart below features a considerable spike in fees towards the end of 2017, as BTC hit its $20,000 previous cycle peak.

The 2021 bull market saw another fee spike in April 2021, albeit significantly less than the 2017 bull, as BTC approached $65,000.

Strangely, the most recent bull market top, of $69,000 in Nov. 2021, was not accompanied by another fee spike, suggesting comparatively less exchange activity versus April 2021.

Since April 2021, fees through Bitcoin ( $65,424.00 ) transactions have sunk significantly and remain truncated.


Bitcoin ( $65,424.00 ) : Exchange Fee Dominance

The Exchange Fee Dominance metric is defined as the percentage of total transaction fees paid in relation to on-chain exchange activity. This is further split into the type of transaction that earned the fee as follows:

Deposits: Transactions that include an exchange address as the receiver of funds.Withdrawals: Transactions that include an exchange address as the sender of funds.In-House: Transactions that include addresses of a single exchange as both the sender and receiver of funds.Inter-Exchange: Transactions that include addresses of (distinct) exchanges as both the sender and receiver of funds.

The chart below shows Bitcoin ( $65,424.00 ) transaction fees made up 36% of all exchange revenue sources related to BTC. This is further split:

Deposits – 21%Withdrawals – 4%In-House – 10%Inter-Exchange – 1%

Over the past five years, the categories of Deposits and In-House have grown exponentially.


Ethereum ( $3,329.70 ) : Exchange Fee Dominance

Analysis of Ethereum ( $3,329.70 ) ’s Exchange Fee Dominance paints a very different picture. Currently, Ethereum ( $3,329.70 ) transaction fees account for 5% of exchange revenue sources related to ETH.

Withdrawals make up the most significant category of transaction fee type, which has been the case since July 2017.

The relative lack of In-House fees compared to Bitcoin ( $65,424.00 ) suggests exchanges prefer not to use ETH when transferring funds between internal wallets.


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