Key Highlights
- Crypto trading pairs are the pairs of two cryptocurrencies that can be traded with each other according to their market price.
- While many cryptocurrencies are available for trading, not all are suitable options to be used as a part of the trading pair.
- The global demand and liquidity of a cryptocurrency are some factors to consider while choosing a crypto trading pair.
There exist thousands of cryptocurrencies today. Each has a different price, trading volume, utility, and popularity. But not all are suitable to be paired with each other for trading purposes. If we look at the numbers, crypto traders only use a dozen out of thousands of cryptocurrencies in their trading pairs.
Choosing the right trading pairs can be cumbersome as it involves multiple parameters to consider. But it becomes child's play if you know the right things to look for.
Since the whole blog is about Crypto trading pairs, why don't we start by understanding the "Crypto Trading pairs"?
A Crypto Trading pair means a pair of those cryptocurrencies that can be traded with each other on a crypto exchange like Flitpay.
For example, if you trade your BTC for ETH, the trading pair will be BTC to ETH or BTC/ETH. Here, the first currency mentioned in the currency pair (BTC) is called the base currency, and the second currency (ETH) is called the quote currency. Since it is a pair, you can always buy one currency while selling another. In other words, a trading pair tell you how much of one cryptocurrency you can purchase with a given amount of a different cryptocurrency.
Every crypto exchange offers a different set of Trading pair options where you can choose the trading pair that is suitable for you. But some trading pairs like BTC/USDT and ETH/USDT are available on almost all crypto exchanges.
How does a Trading pair work?
The value of cryptocurrencies of a trading pair with respect to each other depends on the market. It means that if the market price of BTC is $100 and the market price of ETH is $20, then the value of 1BTC would be 5 ETH. So when you want to buy 1BTC, it will cost you 5 ETH.
How to pick Crypto Trading pairs?
Here are a few tips for picking the best crypto trading pair-
- You can check which trading pairs are most popular in crypto exchanges. The "Coin to USDT" pair is the most popular crypto trading pair available on almost all prominent crypto exchanges. While others like ETC/ETH, USDT/BTC, and ETH/USDT are also very frequently found trading pairs.
- Global demand is another important factor in choosing the best trading pair. Because when the global demand for any cryptocurrency is high, you can find its buyer whenever you decide to sell it. Bitcoin and Ethereum have tremendous demand in the market. They are the ideal options to be used as the quote currency.
- The next point to consider while picking the best trading pairs is liquidity. It means the ability to buy or sell a crypto asset quickly. As per various industry experts, the top trading pair choice of traders involves cryptocurrencies with high liquidity. Hence, USDT, BTC, LTC, BCH, and ETH are the most opted currencies for crypto trading pairs. You can estimate the liquidity of any cryptocurrency by its trading volume.
- While the above points will help you shortlist a few crypto trading pairs, your personal preference will help to make the final decision. You can consider the availability of trading pairs on your crypto exchange and your trading strategy to make the last call.
How to make a profit from Trading pairs?
The best way to understand the logic behind using trading pairs is through an example-
Imagine you have both BTC and fiat currency. Now you want to buy LTC. So there are two ways to do it, the first is by using fiat currency and placing a regular buy order, and the second is by using a trading pair LTC/BTC. Now, if BTC price hikes to 15% and Litecoin price stays the same. Then, you can buy 15% more LTC from BTC than your fiat currency. Here, the fiat amount you invested in Bitcoin is the same, but it went high, and you became able to buy more LTC with that value. There can also exist further chances that LTC will also hike, and you will be able to buy more BTC than you had before by selling your LTC back for buying BTC.
There are chances that such trade can result in loss too. It all depends on your research, trading logic, and market conditions.
What base currency should you use?
Half your work is done if you succeed in deciding the best base currency for your trading pair. Hence, to make your "finding the best trading pair" task further easy, we will give you some insights into the most commonly used base currencies.
Bitcoin, Ethereum, Tether, and Litecoin are the most frequently chosen Base currencies in crypto. The reason is their availability on every exchange and high demand.
Though these are the tried and tested ones, they come with both pros and cons. Below is a glance at them.
BTC- The most popular cryptocurrency with high demand and easy availability, it poses high transaction fees and slow transaction time.
ETH- A very popular cryptocurrency with higher versatility than Bitcoin. But it also suffers from fluctuating high fees and time-taking transactions in network congestion.
LTC- Supports faster transactions and low fees compared to Bitcoin and Ethereum. But it is a result of Bitcoin forking that favors its big brother BTC most of the time.
USDT- It is the most popular trading pair in the stablecoin class. One reason is its direct pegging with USD, and another is its stability compared to highly volatile BTC and ETH.
Conclusion
Crypto trading pairs are the pairing of two different cryptocurrencies that you can trade with each other. Every crypto exchange offers different sets of trading pairs to its users. Choosing the best trading pair for yourself can help you make a profit, while the wrong trading pairs can cause loss. Bitcoin, Ethereum, Tether, and Litecoin are some most popular cryptocurrencies used in Trading pairs.
