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Wisebitcoin Commissions Explained

Wisebitcoin 2021-05-25

Learn about the functions of market makers and market takers and provide details on Wisebitcoin’s trading commissions for traditional and perpetual contracts.

In this post, we provide brief explanations on the functions of market makers and market takers and provide details on Wisebitcoin’s trading commissions for traditional and perpetual contracts. We also talk about how Wisebitcoin margins are calculated to support leveraged trades made using USDT or cryptocurrency.

Cryptocurrency exchanges are essentially liquidity providers. They create a marketplace where individuals and investors can find others who want to buy or sell whatever they have to trade.

Market makers can be thought of as liquidity providers. They provide liquidity and depth to the market by agreeing to sell a certain amount of a token or asset at a certain price. As such, market makers can be generalized as acting as sellers of a token, asset, or commodity. Market takers, on the other hand, can be thought of as buyers.

Both makers and takers must pay the platform commissions for facilitating exchange. While many leading cryptocurrency platforms charge between 0.10% and 0.30% as maker and taker fees, Wisebitcoin boasts maker and taker fees of 0.07%.

 

Traditional and Perpetual Contracts

This is how traditional futures contracts work. An investor will agree to buy a certain amount of an underlying asset at a certain price at a certain time in the future. When that time arrives, the investor can choose to make the purchase, or they can back out of the contract. There is a small fee for drawing up the contract, but having a contract in place gives investors today the opportunity to speculate on price changes in the future and make bets about price direction.

If the investor believes that prices will rise, they will enter a contract to buy the asset at today’s (lower) price, and if they believe that prices will fall, they can enter a contract to sell at today’s (higher) price.

Perpetual contracts (called perpetual swaps) are fundamentally the same, but the only difference is that they have no end date. They allow traders to take long or short positions on an underlying asset, as well as the flexibility to use leverage (up to X100 on Wisebitcoin) but the added benefit is that these contracts never have to be settled (i.e., terminated) and the investor never has to actually own or take custody of the underlying asset.

In addition to the expiry date, the other main difference between traditional futures and perpetual swaps is that of funding fees. These fees are required to keep the prices of perpetual swaps balanced. With an expiry date on a futures contract, the price of an underlying asset will converge to the market (spot) price as the expiry date nears. Without this convergence mechanism, perpetual swap prices can diverge significantly from the spot price of the underlying asset.

The fees for balancing and maintaining these trading mechanisms vary from exchange to exchange, but they are an important component of ROI, so it is important to understand these fees before entering into either traditional or perpetual contracts of any kind. In the next section, we summarize Wisebitcoin’s margin and fee rates.

 

Margin Calculation

There are two types of margins that traders may have to pay. The first are margins on USDT swaps, and the other are margins on coin-based swaps.

For both fees, we do the following:

  1. Take the contract value.
  2. Multiply it by the contract quantity.
  3. Multiply it by price.
  4. Divide it by the leverage amount.

Remember: For USDT swaps, one contract value is always 0.0001BTC. For coin-based swaps, one contract value is 1USDT.

To illustrate how this would work, let’s assume the following:

  1. Bitcoin price of 10,000USDT.
  2. 2000 contracts being traded.
  3. Using X10 leverage.

For USDT swaps, the calculation looks like this:

contract value * quantity * price / leverage

0.0001 * 2000 * 10,000 / 10 = 200USDT

This means it would cost 200USDT to open 2,000 positions with X10 leverage at a Bitcoin price of 10,000USDT.

For coin-based contracts, the calculation looks like this:

contract value * quantity / (leverage * price)

1 * 2000 / (10 * 10,000) = 0.02BTC

In other words, it would cost 0.02BTC to open 2,000 positions with X10 leverage at a Bitcoin price of 10,000USDT.

Additional fees and rates for specific tokens and trades, as well as further details on minimum margins, maximum leverages, and maintenance margins can be found in Wisebitcoin's Trading Guide.