What Are Crypto Trading Pairs? How Do You Choose Them?
For new investors, navigating the world of cryptocurrency can be a difficult task. There’s a lot to understand before you can start trading these unpredictable financial vehicles, both in terms of exchanging and safely storing them.
Trading pairs is going to be one of your initial concerns. Even if you’ve previously invested in other assets, such as stocks, you might not be familiar with this because such securities were most likely traded against your local government’s currency.
In most cases, cryptocurrencies do not trade against fiat currencies, though some choices are emerging presently. Instead, you’ll be trading against another cryptocurrency’s worth. These combinations aid in determining the value of your coins. Typically, an exchange will provide various pairings, and you may choose which ones to use based on the currencies you already hold.
Bitcoin is by far the most popular trading pair, with the majority of coins’ volume concentrated here. However, Ethereum and Litecoin are two more popular options.
Even Dogecoin has a role as a trading pair, and it’s frequently used for low-market-cap coins that would be difficult to exchange with something like Bitcoin. Doge is also preferred by certain investors because its value is typically constant, making it a good location to keep discounts.
A pairing is essentially a starting point from which you can trade other coins or tokens. To change in one of these markets, you’ll need to own the base currency in order to buy new currencies. This is how much your acquired asset has gained in value against Bitcoin’s price when you see a pretty little green blip on the chart for a Bitcoin pairing.
If you’ve ever seen an investment that was worth more the next day but didn’t seem to show up the next day, it’s most likely because both Bitcoin and the asset in question climbed against the USD, boosting their value without revealing it.
What are Crypto Trading Pairs?
Crypto trading pairs are a component of a cryptocurrency transaction in which cryptocurrencies are purchased or traded. You’ll need a currency to buy and convert after selling a cryptocurrency while buying or selling it. Crypto Trading Pairs refers to the process of choosing a currency to trade.
For example, if you’re a beginner and want to buy Bitcoin(BTC) with fiat currency, consider the US Dollar (USD). As a result, this deal will include the BTC/USD trading pair. Furthermore, if you choose to sell your BTC in order to buy another cryptocurrency, such as Ethereum(ETH), this deal will include the BTC/ETH trading pair.
A trading pair is required whenever you trade cryptocurrencies on an exchange. BTC is typically used by traders to trade against other cryptocurrencies. However, in addition to BTC, numerous other trading pairings can be employed. A specific cryptocurrency value is displayed. This is the value that is compared to Bitcoin’s price. Alternatively, how much of that cryptocurrency can one Bitcoin buy?
How Do Crypto Trading Pairs Work?
Cryptocurrency pairs enable you to compare the costs of several cryptocurrencies. These comparisons show how much Bitcoin (BTC) is worth in Ethereum (ETH) and how much ETH is worth in Bitcoin Cash (BCH). Exchanges typically provide many pairing options, allowing you to select a pairing depending on the currencies you already own. If you hold Bitcoin (BTC), for example, you can trade with any pairing listed on an exchange that accepts BTC.
Some crypto exchanges don’t really offer trading pairs between cryptocurrencies and fiat currencies such as the US dollar (USD), however companies such as Gemini, Coinbase, Binance, and Kraken do. BTC and ETH are the most adaptable cryptocurrency pairs to trade because they offer the most exchange alternatives.
How do you choose a trading pair?
It’s critical to consider all of the variables involved in your potential deal when selecting a pair. The first step, of course, is to make sure that the exchange you wish to trade on will enable you to utilize that specific base currency, as each one has its own set of possibilities.
You can readily determine this by going to the exchange in question and looking at their market listings. When choosing an asset, look for anything that will represent the other currencies in the equation. If we were exchanging Bitcoin Cash and the paired currency was Bitcoin, the pair would most likely be shown as BCH/BTC.
The number of pairings available on your exchange will vary greatly depending on the platform, but most will have at least three popular possibilities. They will usually enable all of their assets to trade in each of these markets.
Although some cryptocurrency exchanges enable you to purchase your first coin with fiat currency, the majority do not. That means you may need to use a service like CoinBase to purchase a base currency, which you can then use to purchase an altcoin like Neo or EOS. As a result, you’ll need to figure out what base currency you’ll need to do before going.
How does liquidity Effect pairings?
When selecting a base currency, it’s critical to consider the market’s available liquidity. While trading Litecoin for your new items instead of Bitcoin may seem like a good choice due to lower transaction fees and faster payouts, keep in mind that you may wind up overspending for your purchase.
These secondary marketplaces are frequently much quieter than the leading pair. Because there are fewer assets to go around in this market than there would be for a more popular combination, the market will usually react by raising the price.If you’re not careful, you could end up spending a lot more than the market price if you use a different base coin. This might soon deplete whatever charge savings you might have made.
Before giving up hope on trading with your preferred pairing, remember to explore other exchanges. Just because one company has a light order book doesn’t indicate the rest of them will. You can usually use a cryptocurrency market aggregator tool to quickly determine which coin or token pairings are available, as well as the exchanges that offer them and their trading volumes, for the coin or token you want to acquire.
This will enable you to immediately discover where and how you can make your trades quickly and at a good price. This is especially handy if you intend to trade for a less well-known asset with a low trading volume.
Benefits of Crypto Trading Pairs
Many advantages come with crypto trading pairs, some of which are described below.
- Many cryptos can be explored.
Traders might be exposed to a variety of cryptos to trade. People usually prefer to transact in basic currencies such as BTC and ETH. The other cryptocurrencies will eventually be forgotten.
As a result, trading with other crypto pairs can predict the potential profit utilizing other crypto pairings.
- The popular cryptos in different regions can be known.
Every region in this universe has its own popular money. For example, while BTC is the most popular crypto in most crypto sectors, EOS has the largest market share in China, and BTC is ranked fifth.
- Various investment options can be analyzed.
As previously said, many investment opportunities involving various cryptocurrencies are provided. As a result, a trader or a renowned investor can look into alternative choices in order to increase the return on his investment.
They can compare profits from several cryptocurrencies and choose the crypto pair that will bring them the most profit.
Is there any reason to choose one pairing over another?
Choosing a currency to trade against is partly a matter of personal taste. You may, however, obtain a few other benefits. As we saw in the last section, pricing in one market may range significantly from those in other marketplaces.
If you wanted to sell a certain asset for an altcoin, you might be able to get a better price if you were willing to wait for a deal. Others may simply want to try to make money in a market where there is less competition.
However, many people choose other cryptocurrencies as a pair because they have lower costs and faster transfers. It’s up to you whether or not to use alternative base currencies, and you’ll have to assess the benefits to see if they make sense in your circumstance.