How Fee Errors Are Flattering Your Backtest Results

Most crypto backtests underestimate trading fees through oversimplified models, artificially inflating strategy returns. For high-frequency strategies like grid trading and market making, this oversight becomes critical—fee handling can be the single largest error term in the entire backtest. A realistic fee model must layer in maker/taker asymmetry, token discounts, VIP tiers, and actual fill patterns; ignoring these compounding effects can overstate profitability by multiples.