Crypto currency pairs are exactly what their name suggests; it refers to two crypto assets that can be exchanged for each other. In crypto trading activities, currency pairs are fundamental.
For example, if we wanted to exchange Tether (USDT) for #Bitcoin ( $BTC ), we would use the USDT/BTC trading pair. In this example, USDT is the base currency while Bitcoin acts as the exchange rate currency.
In simple terms, we are basically buying one digital asset at the same time as selling another asset. Trading pairs are very important for cryptocurrency market analysis and current market conditions.
Each cryptocurrency pair on the exchange has its own trading mechanism that measures its value. This mechanism uses a comparison method that measures the relative value of certain products and their relative prices.
Two Main Categories of Trading Pairs
Before diving into the world of crypto trading, it is important to understand the main differences between the two fundamental categories of crypto trading pairs; we can trade crypto for fiat currency or trade one crypto currency for another crypto currency.
Crypto-cross pairs
Crypto-cross pairs include two digital assets such as the BTC/ETH pair. When we look at trading pairs featuring major cryptocurrencies such as BTC, ETH, LTC, or some other well-known cryptocurrencies, we will also likely see high trading volume and liquidity on many crypto exchanges.
This is because major crypto assets have substantial popularity in the crypto community. The more traders involved, the fewer complications there can be with cross-crypto trading pairs.
On the other hand, if we choose altcoins with low liquidity, we can face lower trading volumes and wider spreads due to reduced popularity and lower market capitalization.
Pasangan Trading Fiat ke crypto (Fiat to crypto trading pairs)
In a fiat-to-crypto trading pair, we have digital assets on one side, and fiat currencies such as USD or EUR on the other side. Fiat-to-crypto trading pairs are usually preferred by traders who are new to the world of crypto.
Many fiat-to-crypto trading pairs include USD as their base currency because it is recognized as the benchmark fiat currency for the entire cryptocurrency market.
Explanation of Base Currency and Exchange Rates
If we want to know how to read crypto trading pairs, we need to understand its two main parts â the base currency and the rate currency. Reading crypto trading pairs is easy, so let's break down crypto trading pairs into parts.
Crypto trading pairs are generally represented by a series of three letters with a backslash; for example, it always looks like AAA/BBB.
The first currency in a trading pair is always the base currency. This becomes a reference and serves as a reference to other currencies. For example, if we look at the EUR/USD fiat trading pair, the euro is the base currency. In the case of BTC/ETH, Bitcoin is the base currency. Bitcoin and Ethereum are the most common base currencies; however the bigger the exchange, the more trading pairs it provides.
Base currency is a way to represent the agreed value of different assets; they present a common tool for comparing exchange rates between fiat currencies around the world.
The second part is the exchange rate currency or the value of the base currency expressed in terms of the second currency. In the BTC/ETH trading pair, Ethereum acts as the exchange rate currency, and in the EUR/USD fiat pair, the United States Dollar is the exchange rate currency.
What is the Purpose of Cryptocurrency Pairs?
Crypto trading pairs are an important part of any trading strategy and the entire crypto market. Crypto currency pairs allow each digital asset in the pair to be valued without using fiat money.
For example, if we are in the United States and decide to travel to Germany, we must find out the exchange rate of the euro against the United States Dollar in order to plan our vacation. It's the same with crypto exchanges; The platform provides various trading pairs and users can easily exchange one cryptocurrency for another.
How Does Crypto Pair Trading Work?
Crypto pair trading activity refers to market neutral strategies that allow traders to profit from divergent conditions in the crypto market such as uptrends, downtrends or sideways movements.
The mechanics of cryptocurrency trading include calculating the value of one cryptocurrency against another to determine their relative value. This is similar to checking product prices in traditional stores, which are expressed in fiat money.
However, this is different from regular day-to-day transactions as the crypto space includes dealing with several digital assets. That is why trading pairs play an important role in determining the value of a particular cryptocurrency when exchanged for another currency.
To buy a base currency, a trader must have an exchange rate currency. Traders determine the price they want to buy and the amount of currency they want to enter for trading. The seller indicates the price of the base currency and the amount of the asset they want to sell.
Most Popular Crypto Trading Pairs
It has been explained that the most popular crypto pairs are those involving major cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin, or other top cryptocurrencies by market capitalization. We can see it here Binance Crypto Pair
Additionally, crypto trading volumes also appear to be skewed towards fiat base pairs and the stablecoins they are pegged to. However, there are many other cryptos available on the market so there are a variety of pairs to choose from.
We can see which crypto trading pairs are currently popular by looking at several things:
Check Trading Volume
Trading volume shows the number of trades made in a particular trading pair during a particular period.Â
High volume pairs are more attractive to users as they provide fast trade execution. Pairs with low volume can experience slow trade execution and wider spreads which can affect the entire trading experience.
Pay Attention to Volatility
The crypto market is famous for its volatility. This refers to the degree of price fluctuation in a cryptocurrency trading pair. Higher volatility can lead to large profits or losses in a short period of time, so markets with high volatility can be friends or enemies, depending on the trader's level of knowledge and risk management approach.
#TopCryptoPairs #Crypto #CryptoPairs
