Crypto Trading Pairs – What it is & How it Works – DailyForex

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex…
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Cryptocurrency trading started with crypto-to-crypto crypto trading pairs, and fiat currencies followed later. It gained momentum after the creation of the first stablecoin. But what are crypto trading pairs? Should you trade crypto-to-crypto pairs or crypto-fiat pairs? What about their availability and liquidity? My review below explains what crypto trading pairs are, how trading in crypto trading pairs works, the dominant trends to monitor, the risks of crypto trading pairs, and how to build a crypto trading strategy.

An Overview of Cryptocurrency Trading Pairs

The cryptocurrency market, like the Forex market, functions in pairs. It consists of two assets, but unlike the 24/5 availability of Forex trading, crypto trading pairs trade 24/7. Cryptocurrency exchanges quote the most crypto trading pairs, while derivative brokers using Contracts for Difference (CFDs) often quote cryptocurrencies in US Dollars. They are adding crypto-to-crypto assets as demand from pure cryptocurrency traders rises to bypass fiat currencies in cryptocurrency trading.
On the other side of the equation is a surge in Forex-crypto combo strategies, making cryptocurrency pairs quoted in non-US fiat currencies popular. The Euro, the British Pound, the Swiss Franc, the Australian Dollar, and the Japanese Yen rank among the most widespread non-USD quote currencies.

What Are Cryptocurrency Trading Pairs?

Cryptocurrency trading pairs are pure crypto assets, quoting one cryptocurrency pair against another. For example, the BTC/ETH quotes Bitcoin (BTC), the base currency, against Ethereum (ETH), the quote currency. Therefore, BTC/ETH allows cryptocurrency traders to exchange or swap Bitcoin for Ethereum.
The first asset in all crypto trading pairs is the base currency, and the second is the quote currency. Therefore, the price of BTC/ETH displays how much Ethereum a trader would receive for one Bitcoin.
Common Types of Trading Pairs

How Do Crypto Trading Pairs Work?

Crypto assets trade in pairs. Therefore, traders exchange the first asset in a pair (the base currency) for the second (the quote currency).
Here is an example:

• The BTC/ETH, the most popular crypto-to-crypto pair, shows a price of 45.25
• Therefore, a trader would receive 45.25 Ethereum (ETH) for 1.0 Bitcoin (BTC)
• Alternatively, it requires 45.25 Ethereum to buy 1.0 Bitcoin

Crypto Trading Pair Analysis

While the specific analysis depends on the trader’s preferences and strategy, traders must consider the core fundamentals below.
The building blocks of crypto trading pair analysis include the following:

• Interpreting price charts to determine trends
• Understanding trading volume to confirm trends or highlight potential reversals
• Reading candlesticks to pinpoint entry-and-exit levels
• Using technical indicators to confirm buying and selling opportunities
• Monitoring social media for short-term price spikes
• Entering trades confirmed by multiple factors
• Deploying adequate risk management
• Adjusting portfolios as per market developments

Trends in Cryptocurrency Trading Pairs

The cryptocurrency market continues to change and adapt, but some trends have dominated the sector.
Here are the most dominant trends in cryptocurrency pairs:

• The US Dollar (USD) and stablecoins pegged to the USD account for most crypto trading pairs due to their liquidity and availability
• The BTC/USDT, the ETH/USDT, the BTC/USD, the ETH/USD, the BNB/USDT, and the BNB/USD rank among the most traded cryptocurrency pairs
• The BTC/ETH is the most liquid crypto-to-crypto pair
• The trend favors crypto-to-fiat currencies, with non-USD pairs on the rise

Crypto Trading Risks

Crypto trading risks mirror risks in other asset classes but include crypto-specific risks.
Here are the core risks to consider when trading cryptocurrencies:

• Lack of knowledge
• Volatility
• Asset correlation
• Cybersecurity
• Inadequate risk management
• Inadequate trading infrastructure
• Manual trading

Building a Crypto Trading Strategy

Crypto trading strategies usually fall into one of the following categories, with many variations.

My Take

Crypto trading pairs are the building blocks of cryptocurrency trading. While traders have 10K+ crypto trading pairs, the top 100 by market capitalization dominate trading with a trend towards crypto-to-fiat currencies, where the USD and USD stablecoins dominate.
Profiting from crypto trading pairs begins with in-depth knowledge and understanding of the cryptocurrency market. Participants must know what moves the cryptocurrency pair they wish to trade, consider fundamental developments, understand how social media impacts short-term moves, rely on technical analysis, and execute appropriate risk management. It requires experience as an active trader, backed by cutting-edge technology and, ideally, algorithmic trading solutions to assist in the analysis, trade placement, and ongoing portfolio management to consistently profit.
The cryptocurrency market trades 24/7, and the best time for crypto trading pairs is when the trader’s strategy identifies a trade. From a liquidity and market-moving perspective, the Asian trading session dominates the sector, with Europe and the US mostly following trends.
The best crypto pairs depend on the trader’s strategy and preference, but highly liquid crypto trading pairs have tighter spreads, lower trading fees, and faster order execution. The top 100 cryptocurrencies based on market capitalization rank among the most commonly traded cryptocurrencies.
Cryptocurrencies trade in pairs, with the first currency being the base currency and the second currency being the quote currency. For example, in the BTC/USD, BTC is the base currency, and the USD is the quote currency. Assume the BTC/USD shows a bid price of 80,000 and an ask price of 80,050 (using CFDs in MT5). This means that 1.0 Bitcoin is worth $80,050 if a trader wants to place a buy order or execute a spot trade.
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