Crypto Pairs Trading
In cryptocurrency trading, a trading pair refers to two different types of cryptocurrencies that are being traded with each other. For example, if you want to trade Ethereum for Bitcoin, you will be participating in an ETH/BTC trading pair
What?
Ethereum is the base currency and Bitcoin is the quote currency. The value of each crypto trading pair is determined by the current market price of each respective cryptocurrency. For example, if your pair is USD and BTC, you know you can get 22 500 USD for one of your BTC. Not bad, Bitcoin! Considering it was worth a hundredth of a penny not so long ago.
So when you started trading, you had $22 000 and 0 BTC. Then you bought 1 BTC. And now you have 0 USD. But 1 BTC. And then it went up in price by $500. And you sold it. And now you have 0 BTC. But $22 500, which means you’re slightly wealthier. Repeat a 100 times, and you’re doing really well. Now you see: becoming a millionaire isn’t so hard.
Read more about Bitcoin
Of course, IRL it’s diabolically tough. But let’s imagine it isn’t, for now, so you can get the principle down.
How do traders benefit from trading popular crypto pairs?
Traders benefit from trading popular crypto pairs with most popular cryptocurrencies in several ways.
✓ Popular crypto pairs tend to have higher liquidity, which means that traders can buy and sell these cryptocurrencies more easily and quickly.
✓ Trading popular crypto pairs can provide traders with a better understanding of the market trends and price movements of these cryptocurrencies.
✓ Trading popular crypto pairs can offer traders more opportunities for profit as they are more likely to experience significant price fluctuations. Here are the most popular trading pairs, and how to use them.
Bear in mind that crypto trading is a very complex process that takes a lot (a lot!) of calculations. Here’s how complicated it can actually get:
USDT/DOGE
Tether (USDT) is a stablecoin, which means its value is pegged to the U.S. dollar.
The idea behind Tether is that 1 USDT can always be traded for $1, regardless of market conditions. This makes it useful for storing or transferring value, as it is always worth the same price and its owner doesn't have to worry about losing purchasing power.
USDT helps investors move funds between cryptocurrency markets and the traditional financial system, minimizing volatility due to its 1-for-1 peg to traditional currencies.
Trading USDT/DOGE involves buying or selling USDT in exchange for DOGE on a cryptocurrency exchange that supports both tokens.
The easiest way for most people to acquire Tether is through an exchange that supports USDT. Once you have acquired USDT, you can trade it for DOGE on the same exchange. When trading USDT/DOGE, the value of DOGE will fluctuate based on market supply and demand while the value of USDT will remain stable at $1 per token.
It's important to note that there are risks associated with investing in cryptocurrencies like Tether and Dogecoin. Cryptocurrencies are highly volatile and their values can fluctuate rapidly based on market conditions. It's important to do your own research and understand the risks before investing in any cryptocurrency.
USDT/BTC
The USDT/BTC trading pair is a pairing of two cryptocurrencies that can be traded with each other on an exchange. It compares the value of Tether (USDT) to Bitcoin (BTC).
When trading this pair, you are simultaneously buying one currency and selling the other. The value of the quote currency (USDT) is used to determine the price of the base currency (BTC).
You can choose this pairing based on currencies you already possess. If you long the BTC/USDT pair and short the ETH/USDT pair, and your BTC long is successful, you can close the ETH short and make a profit.
USDT/ETH
To trade USDT/ETH pair, you need to have both currencies in your cryptocurrency wallet. You can then place a buy order for ETH using your USDT or a sell order for ETH to receive USDT. Trading pairs with stablecoins like USDT are popular because they offer stability against market volatility.
Pairs trading strategy can also be implemented based on the correlation between two pairs or values on the exchange. These pairs are often a crypto versus a stablecoin such as BTC/USDT or ETH/USDT.
To make a functioning strategy, a trader needs two pairs that they will long and short simultaneously. If a trader believes that Solana will pick up the pace and outperform Ethereum in the immediate term, they can start a simultaneous long order on the SOL/USDT pair and a short order on the ETH/USDT pair.
Final thoughts
Crypto exchanges are coming to realize the need for providing as many crypto pairings as possible in order to suit the demands of traders. Some particular crypto trading pairs might provide better trading conditions in terms of fees and taxes. Nonetheless, correlations between various cryptocurrencies can change rapidly and unpredictably due to market volatility. It is critical for investors to understand trading pairs in order to diversify their cryptocurrency holdings beyond the most popular currencies and create possibilities for profiting from discrepancies in asset values between marketplaces.
