One of the fastest-growing crypto exchanges of the past few months is Phemex. Established recently in November 2019, Phemex has already become the sixth-largest exchange for Bitcoin perpetual contracts (as reported by CoinMarketCap) with a daily trading volume of just under $250 million.

What sets Phemex apart from other exchanges is their unique business model. Instead of charging trading fees, the exchange offers premium members spot trading for zero fees. This means that high-volume traders can easily save hundreds, if not thousands of dollars, by simply purchasing a premium subscription at Phemex.

The Team behind Phemex

Phemex is led by a team of former Morgan Stanley executives with extensive knowledge in high-frequency trading software and cybersecurity. The CEO Jack Tao served as a global development leader at Morgan Stanley for 11 years. He then established the Singapore-based exchange in November of 2019.

Their vast experience is reflected in their approach to security. All trading functions are zoned off from each other by firewalls, creating multiple levels of security within their internal network structure. Their trading engine is written in C++, offering a fast and reliable solution for cryptocurrency trading.

User funds are stored in multi-signature cold wallets, shielding them from hackers. All withdrawals are rigorously checked for legitimacy. Anything identified as a potential malicious attack or action immediately triggers the suspension of all withdrawal operations and an overall account freeze. As should be expected from all exchanges by now, two-factor authentication is also required for all critical transactions.

Growth Hacking

Phemex has been one of the fastest-growing exchanges in 2020, for a good reason. The exchange operates in close cooperation with their community and shows good activity on their social media channels. In order to boost their social media presence, Phemex has recently announced a contest for video creators, with up to 10.000 USD or 1 BTC on the line.

Additionally, Phemex has recently partnered up with Banxa. This adds a fiat gateway to the exchange and allows users to make deposits with their fiat credit or debit card, which can instantly be converted into BTC, ETH, or USDT.

Membership Packages

While the trading of perpetual contracts is open for all users, access to their spot markets requires a purchase of a premium membership first. Premium members do not pay any spot trading fees, saving them large sums of money in the long run.

Premium membership plans are priced at $9.99 for 30 days, $19.99 for 90 days, or $69.99 for 365 days. In order to test the exchange, all new users receive a free trial premium membership for 7days. Besides access to the zero-fee spot markets, premium members also enjoy faster and unlimited withdrawals.

Features and Perks

Phemex offers perpetual contracts for six different cryptocurrencies, as well as a contract for gold. The BTC/USD contract can be leveraged up to 100x, as can the GOLD/USD contract.

Altcoin contracts (ETH/USD, XRP/USD, LINK/USD, XTZ/USD, and LTC/USD) can be traded with up to 20x leverage. Phemex is one of only three exchanges offering perpetual contracts for Chainlink and Tezos.

New users can get a welcome bonus of up $72. Additionally, there is an exclusive referral program, under which selected users can earn a commission of 50% from all the customers they refer to. Another feature is simulated trading, which allows traders to test out their strategies before applying them to real money trading.

How does Phemex compare with other Exchanges?

Assuming a trading fee of 0.1% otherwise, spot traders with an annual volume of $70.000 or more can save money by switching over to Phemex. This volume is easily reached and surpassed by active day traders.

Many derivatives exchanges, includingPhemex, have a negative maker fee to incentivize users to add liquidity to the order book and not take away from it. In general, the bigger exchanges have a more equal ratio between the taker and maker fees. For derivatives traders, their total costs will thus depend on how they use the exchange. Phemex specifically has one of the highest taker fees on the market but also offers the highest rebate for makers.

I have compiled a list of all exchanges that offer BTC derivatives, excluding two (ZBG does not report any fees and dYdX is a DeFi platform with less than $1 million in trading volume). Additionally, I have picked four of the most reputable spot exchanges listed on CoinMarketCap (Coinbase Pro, Bitstamp, Bittrex, and Poloniex) for comparison.

Trader Models

In order to compare what different types of traders pay in total for one year, I use six different day trader models with an annual BTC/USD trading volume of $100.000 each. There are three models for derivatives markets and three traders for the spot markets. One trader in both categories only uses market orders and pays the taker fee, one only uses limit orders and pays the maker fee, and one uses a mixed strategy with a 50/50 split between maker and taker.

Three of them trade BTC/USD derivatives, while the other three are trading Bitcoin on the spot market. Additionally, there will also be a seventh model, which simulates a HODLer who buys into Bitcoin for $10.000 at the beginning of the year and cashes out at $20.000 in USDT at the end of the year, assuming that Bitcoin’s price doubles during this time span.

Total Trading Fees

In the table below, I compare how much money (in USD) each of the seven simulated traders pay in fees over the course of one year. I assume only the base rate fees without any rebates and exclude all other fees the exchanges might charge besides regular maker and taker fees.

Summary

Compared to other derivatives exchanges, Phemex has a large difference between its taker and maker fee, giving traders a strong incentive to add liquidity. This means that for traders who primarily use limit orders, Phemex is one of the cheapest options on the market.

With few exceptions, spot exchanges charge a base fee of at least 0.1%, indicating that traders with at least a six-figure annual trading volume can save money by buying a Phemex premium membership.

One notable exception from this trend is FTX. This is due to the fact FTX is first and foremost a derivatives exchange, whose “spot trading” refers to the trading of leveraged tokens, as an alternative to perpetual contracts and futures. Although FTX has spot markets for select cryptocurrencies, these do not attract any significant trading volumes.

Generally speaking, when it comes to trading fees, Phemex is one of the best options for limit-order derivatives traders and high-volume spot traders.