Digging deeper into the crypto world is sometimes threatening, particularly when you’re dealing with a complex subject. While you deal with such complexities, it is necessary that you have to deal with the difficulties of trading cryptocurrencies. If you’re willing to enter the crypto world, then you need to have all the basics of understanding crypto trading.
Cryptocurrencies are usually traded against other cryptocurrencies. This is the reason why understanding crypto trading pairs are quite necessary. So let’s get started with what are crypto trading pairs and how they work. Also, I will help you out in choosing the right trading pairs for your currencies.
What Are Crypto Trading Pairs?
Whenever you trade cryptocurrency on an exchange, you’ll require a trading pair. Usually, people use BTC to trade against other cryptocurrencies. But the crypto world allows many other trading pairs to use. A certain value of cryptocurrency is displayed. This is that value which is compared to the price of Bitcoin. Alternately, how much of that cryptocurrency you can get for one Bitcoin.
Instance Of Crypto Trading Pairs
Suppose if Rinnie owns a Bitcoin and he likes to purchase Ethereum instead, then he goes to the exchange and selects ETH/BTC trading pair. Further, the exchange displays the Ethereum value when compared to Bitcoin. Hence Rinnie agrees to sell half of his Bitcoin for Ethereum. This was possible only because Rinnie was already Bitcoin.
Instead of BTC, if Rinnie was holding XRP and this was not a trading pair on his exchange then the crypto trading process would be entirely different. To perform such trading, Rinnie needs to trade XRP/BTC to get some Bitcoin. Furthermore, he could perform ETH/BTC trade where he can trade Bitcoin for Ethereum.
Always note that when an asset is listed on an exchange, it does not mean you can directly trade it for other cryptocurrencies on that exchange. In such cases, you need a “pass-through” currency for trading to work. Suppose you’re not sure which currency to trade for, then it always best to trade Bitcoin.
How To Choose A Crypto pair For Trading?
Whenever you wish to choose a crypto pair for trading, it is important to consider a few factors:
- Make sure that the exchange you choose allows you to trade on that specific base currency.
- To find this out, you can visit this exchange in question and then view their market listing.
- While you select an asset, you should also see something that denotes the other currency that creates an equation.
- The number of pairs that the exchange offers varies with the platform. But most of the exchanges will have at least three options.
- It is very important to identify the correct base currency you need before you can proceed.
The base currency is a common trading pair on exchanges. Basically, for crypto-only exchanges, it is necessary to have one of these base currency pairs before your trade. Typically, Bitcoin and Ethereum are the ones that almost all exchanges include. Along with these, the exchanges also have their own base currencies.
There are a few popular Base currencies that are available on all exchanges:
Bitcoin: Bitcoin is one such asset that is available on all exchange and it can also be exchanged for every asset. Bitcoin is one of the most versatile base currency.
Ethereum: Ethereum accounts to be the second most popular base currency. If there are tokens that are not tradeable for bitcoin, then they can be exchanged for Ethereum.
Litecoin: Another popular pairing currency is Litecoin, which most of the exchanges support. Litecoin offers faster transaction times and much lower fees.
Basically, a pairing will establish a baseline for trading other coins or tokens. Also, to trade in one of these markets, you should own the base currency to purchase new currencies. If there is a green blip, which describes gain on the chart for Bitcoin pairing, this indicates the asset has increased in value against Bitcoin price.