When it comes to any activity that involves your time and money, it is important to study the issue from a to z. We can never say it enough – it’s vital to do your own research (DYOR) before dealing with any kind of crypto investment, trading, mining, etc.
In this regard, we continue to provide you with educational articles based on our crypto and blockchain glossary. Today, we’re going to explain what cryptocurrency trading pairs are and how they work. Let’s go!
What Are Cryptocurrency Pairs?
A crypto trading pair is simply a pair of crypto assets that can be traded one for each other. For example, if you want to trade Ethereum for Bitcoin, you will be participating in an ETH/BTC trading pair. In this particular case, Ethereum is the base currency and Bitcoin is the quote currency. The reason it’s called a “pair” is that you are always buying one currency while selling another.
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How Do Crypto Trading Pairs Work?
The value of each crypto trading pair is determined by the current market price of each respective cryptocurrency. For example, if the market price of Ethereum is $200 and the market price of Bitcoin is $10,000, then the value of 1 ETH would be 0.02 BTC (1/5000). This means that if you wanted to buy 1 ETH, it would cost you 0.02 BTC.
It’s important to note that crypto trading pairs are not always directly traded against each other. In some cases, a trading pair may be traded against a fiat currency, such as the US dollar (USD). For example, the BTC/USD trading pair is simply the market price of Bitcoin expressed in US dollars.
How to Choose a Crypto Pair to Trade?
The first step is to decide which currencies you want to trade. For example, do you want to trade Bitcoin for Ethereum? Or Litecoin for Ripple? Once you’ve decided on the currency you want to trade, you can then research the various trading pairs that involve those currencies.
It’s up to you to decide which pairs you want to trade based on your own risk tolerance, investment goals, and your research.
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What Is to Consider when Choosing Cryptocurrency Trading Pairs?
Some things you may want to consider when choosing a crypto pair to trade. Check yourself with the following checklist:
- The volatility of the chosen cryptocurrencies;
- The trading volume of the pair;
- Security, nativity, and reputation of a cryptocurrency exchange on which you want to trade your crypto trading pair;
- The liquidity of the chosen assets and the crypto exchange platform;
- Your own knowledge, experience, and research.
What Are The Most Popular Crypto Trading Pairs?
In general, the most popular trading pairs are those that involve BTC or stablecoins like USDT-20, USDC, BUSD, etc.
The most popular crypto trading pairs tend to be those that involve the major cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, Ripple, or any of the top-20 cryptocurrencies by market capitalization. However, there are thousands of different cryptocurrencies available on the market today, so there are many possible combinations of trading pairs to choose from.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.