What Are Trading Pairs in Cryptocurrency?

What Are Trading Pairs in Cryptocurrency?

Buying specific cryptocurrencies and using complex arbitrage trading methods require trading pairs knowledge

Summary

What we call “trading pairings” or “cryptocurrency pairs” refers to the assets that may be exchanged for one another on a particular exchange. Bitcoin/Litecoin (BTC/LTC) and Ethereum/Bitcoin Cash (ETH/BCH) are often used in cryptocurrency trading. For investors, knowledge of trading pairs is essential for two reasons: Understanding cryptocurrency pairings is crucial if you want to diversify your crypto holdings beyond the most popular ones since certain cryptocurrencies can only be purchased with other cryptocurrencies. In addition, astute crypto investors may take advantage of arbitrage possibilities or profit from the price discrepancies between various marketplaces by understanding the relationships between various crypto trading pairs.

How Do Crypto Trading Pairs Work?

• Using cryptocurrency pairings, you can quickly see how the value of one cryptocurrency compares to another. These comparisons show how much another value one cryptocurrency has; for example, one bitcoin is worth in ether, and one ether is worth in cash. In addition, the many available currency pairings at most exchanges allow you to trade based on the coins and bills you currently have in your possession. If you have Bitcoin, for instance, you may use it to make trades with any pair available on any exchange that supports Bitcoin.
• Most cryptocurrency exchanges support trading between Bitcoin and Ethereum, making this combination the most flexible. However, some cryptocurrency markets do not allow trading between cryptocurrencies and fiat currencies like the U.S. dollar (USD), while others do.

What Is a Base Currency and Why Is It Important?

• You must know the base currencies to make the most of cryptocurrency trading pairings. The worth of various assets may be expressed as a base currency. Using “base currencies” to evaluate the relative value of several national fiat currencies is widespread. For example, a tourist from the United States visiting Italy must change some of their dollars into euros. The US dollar is used as the “base currency” here. Cryptocurrency assets are subject to the same rules.
• Finding a lesser-known cryptocurrency on an exchange requires having one of the primary currencies in a pair. For example, although Bitcoin and Ethereum are often used as “base currencies,” other cryptocurrencies may be accepted depending on the exchange. Therefore, investors should ensure that their preferred exchange accepts their base currency and provides the trading pairings they’re interested in before getting too far into the market. In addition, several markets provide trading pairs in stablecoins, which are often tied to the US dollar.

Which cryptocurrency pairs aid in arbitrage opportunities?

Choosing appropriate cryptocurrency pairings when using an arbitrage trading technique might take time and effort. Arbitrage possibilities arise when the correlation between two cryptocurrencies on different exchanges is poor. For example, Bitcoin (BTC) has the largest market cap and is essential to the cryptocurrency industry. Using low-volume trading pairings or an obscure exchange may reduce the strength of this association. Since the market becomes less liquid as a result, arbitrage opportunities arise. Generally speaking, arbitrage between different cryptocurrency trading pairs is an expert trading technique not suggested for new cryptocurrency traders.