When exchanging cryptocurrencies on NinjaSwap, you have two rate options to choose from: fixed or floating. Each option has its own benefits and considerations, and understanding the difference will help you make the best choice for your exchange needs.
Quick Comparison
Fixed Rate
The exchange rate is locked in at the moment you create the order and remains unchanged regardless of market fluctuations.
You know exactly how much you'll receive before sending your funds
Market price changes during the exchange won't affect your rate
The security of a fixed rate comes with a slightly higher service fee
Floating Rate
The exchange rate is determined at the moment your deposit is confirmed, reflecting the current market rate at that time.
Floating rate exchanges typically have lower fees than fixed rate exchanges
You may benefit if the market moves favorably during your exchange
You won't know the exact amount you'll receive until your deposit is confirmed
How Fixed Rate Exchanges Work
When you choose a fixed rate exchange on NinjaSwap, you're essentially locking in the current exchange rate for a limited time window. Here's how it works:
Rate Lock-In
When you create an exchange order with a fixed rate, NinjaSwap locks in the current exchange rate. This rate is guaranteed as long as you complete your deposit within the specified time window (typically 20-30 minutes).
Risk Premium
Fixed rates include a small risk premium (typically 0.5-1.5% depending on market volatility) to protect NinjaSwap from potential market fluctuations. This is why fixed rates may appear slightly less favorable than the current market rate.
Guaranteed Output
If you complete your deposit within the time window, you'll receive exactly the amount of cryptocurrency specified in your order, regardless of how the market moves during the exchange process.
Time Limit
If you don't complete your deposit within the time window, your order will either be recalculated with a new fixed rate or converted to a floating rate, depending on market conditions.
Fixed Rate Example
Let's say you want to exchange 0.1 BTC for ETH. The current market rate is 15 ETH per BTC. With a fixed rate:
- You're guaranteed to receive 1.485 ETH (0.1 BTC × 15 ETH/BTC × 0.99 fee adjustment)
- Even if ETH's value drops 10% during your transaction, you still receive the full 1.485 ETH
- Similarly, if ETH's value increases 10%, you still receive exactly 1.485 ETH
How Floating Rate Exchanges Work
When you choose a floating rate exchange on NinjaSwap, the final exchange rate is determined at the time your deposit is confirmed. Here's how it works:
Estimated Rate
When you create an exchange order with a floating rate, NinjaSwap shows you the current approximate rate, but this is only an estimate. The actual rate you'll receive is determined when your deposit is confirmed on the blockchain.
Lower Service Fee
Floating rates have a lower service fee than fixed rates because NinjaSwap doesn't need to account for the risk of market volatility. This can result in a more favorable initial rate.
Market-Based Output
The amount of cryptocurrency you receive will be based on the market rate at the time your deposit is confirmed. This means the final amount may be different from the initial estimate.
No Time Limit
Unlike fixed rate exchanges, floating rate exchanges don't have a strict time limit. Your deposit will be processed with the current market rate whenever it's confirmed on the blockchain.
Floating Rate Example
Let's say you want to exchange 0.1 BTC for ETH. The current market rate is 15 ETH per BTC. With a floating rate:
- The estimated output is 1.495 ETH (0.1 BTC × 15 ETH/BTC × 0.997 fee adjustment)
- If ETH's value drops 10% by the time your deposit is confirmed, you might receive around 1.345 ETH
- If ETH's value increases 10%, you might receive around 1.645 ETH
When to Choose Fixed Rate
Fixed rate exchanges are ideal in the following situations:
- During Volatile Markets: When the market is experiencing high volatility, a fixed rate protects you from sudden price movements
- For Large Exchanges: When exchanging significant amounts, the certainty of a fixed rate can reduce financial risk
- When Exact Planning is Needed: If you need to know exactly how much cryptocurrency you'll receive for budgeting or planning purposes
- During Bearish Trends: If the market is trending downward for your target cryptocurrency, locking in the current rate can protect you from further decreases
Fixed Rate Use Case
Imagine you're making a cryptocurrency payment for a specific service that costs exactly 1 ETH. By using a fixed rate exchange to convert your BTC to ETH, you can ensure you'll receive exactly 1 ETH, regardless of market fluctuations during the transaction process.
When to Choose Floating Rate
Floating rate exchanges are advantageous in these scenarios:
- During Stable Markets: When market volatility is low, the risk of significant price changes during your exchange is reduced
- For Smaller Exchanges: When exchanging smaller amounts, the impact of market fluctuations may be more acceptable
- During Bullish Trends: If the market is trending upward for your target cryptocurrency, you might benefit from price increases during your exchange
- When Fee Minimization is Priority: If you want to minimize service fees and are comfortable with some amount uncertainty
Floating Rate Use Case
Let's say you're exchanging BTC to ETH during a time when Ethereum is making positive announcements about upcoming technical upgrades. By choosing a floating rate, you might benefit from ETH price increases that could occur during your transaction processing time.
Market Conditions and Rate Selection
Understanding current market trends can help you decide which rate type to choose:
Bull Market
In a strong upward market:
- Buying: Consider floating rate (you might get more for your money)
- Selling: Consider fixed rate (lock in the high price)
Bear Market
In a declining market:
- Buying: Consider fixed rate (protect against further price drops)
- Selling: Consider floating rate (might get better rates if market recovers)
Important Note
No one can predict market movements with certainty. Both fixed and floating rates involve some level of risk. The best choice depends on your personal risk tolerance and specific exchange needs.
Frequently Asked Questions
Can I change from fixed to floating rate after creating an exchange?
No, once you've created an exchange with a specific rate type, you cannot switch between fixed and floating rates. If you want to change the rate type, you would need to create a new exchange order.
Why is the fixed rate sometimes significantly different from the current market rate?
During periods of high market volatility, the risk premium for fixed rates may increase. This happens because NinjaSwap needs to manage the increased risk of significant price movements. Additionally, for less liquid cryptocurrency pairs, the difference between fixed and market rates might be larger.
Do all cryptocurrency pairs offer both fixed and floating rates?
Most mainstream cryptocurrency pairs on NinjaSwap offer both fixed and floating rates. However, for some less liquid or highly volatile pairs, fixed rates might be temporarily unavailable. In such cases, only floating rates will be offered.
How does NinjaSwap protect itself when offering fixed rates during volatile markets?
NinjaSwap uses a combination of risk management strategies including hedging, risk premiums in the fixed rate, and sophisticated risk assessment algorithms that adjust fixed rates based on market conditions. This allows us to offer consistent fixed rate services while managing our exposure to market volatility.
Summary
Both fixed and floating rates have their advantages and are suited to different situations:
- Fixed Rate: Choose for certainty, protection from volatility, and exact planning—best during uncertain or declining markets
- Floating Rate: Choose for potentially better rates, lower fees, and to benefit from positive market movements—best during stable or rising markets
By understanding the differences between these rate types and considering current market conditions, you can make a more informed decision for your cryptocurrency exchanges on NinjaSwap.