Crypto trading pairs consist of two assets that can be traded with each other on different exchanges. Trading in pairs is essential on exchanges like Binance, Kucoin, Coinbase, etc. It is mandatory to buy cryptocurrency in pairs.
Most people trade with stablecoins like Tether (USDT), Binance USD (BUSD), and USD Coin (USDC), which are pegged to the U.S. dollar. Stable coins are frequently used against different cryptocurrencies because they allow each asset in the pair to be valued without using fiat money.
Another advantage of using trading pairs is the reduction of trading fees. Without the existence of a specific trading pair, you would need to engage in at least two separate trades to acquire your desired cryptocurrency. This means you would incur additional trading fees for each trade, whereas a direct trading pair allows you to complete the transaction with just one trade and lower costs.
Here's how to read cryptocurrency trading pairs:
Trading pairs consist of two parts only. Trading pairs are usually represented with a set of three to four letters with a backslash, such as XXX/YYY.
The base currency always comes first in the trading pair, as it is the currency that is used in comparison of other currencies. If we look at the example of BTC/USDT, BTC is the base currency. Another way to find out base currency is by looking at the first part of the pair. The ticker before "/" is always base currency.
The second part of a trading pair is quote currency. The price of the base currency is expressed in terms of the quote currency, which appears after the “/.” In the BTC/USDT trading pair, for example, USDT serves as the quote currency.
The most commonly used and liquid trading pairs typically involve fiat-backed stablecoins like tether (USDT), USD coin (USDC), and Binance USD (BUSD). This popularity contributes to the high market capitalization of these stablecoins. Some popular crypto pairs linked to stablecoins include BTC/USDT, ETH/BUSD, and ADA/USDC.
From an investor’s perspective, stablecoins simplify the process of calculating value in fiat currency, as the top three stablecoins by market capitalization are pegged to the U.S. dollar. Additionally, the wide availability of stablecoin pairs on exchanges provides traders with easy access to purchase more cryptocurrencies.
Two main categories of trading pairs:
There are two types of trading pairs. You can either trade crypto for a fiat currency (Fiat-to-crypto trading pairs) or trade one cryptocurrency for another (crypto-cross pairs).
Crypto-cross pairs include two cryptocurrency pairs, such as the ETH/BTC pair. These pairs indicate the trading volume and liquidity of those specific pairs against each other. For example, the ETH/BTC pair indicates how much bitcoin (BTC) is converted/converting in Ethereum (ETH).
In a fiat-to-crypto trading pair, one side is a cryptocurrency, and the other is a fiat currency such as USD or EUR. New traders in the crypto space often prefer fiat-to-crypto trading pairs. Many of these pairs use USD as their base currency because it is considered a benchmark fiat currency in the cryptocurrency market.
