How to Trade Crypto Pairs and How They Work

Crypto pairs are the bedrock of cryptocurrency trading. They enable you to swap one token for another on trading exchanges. The pairs are made up of a base asset and a quote asset.

For example, if you want to trade between Ethereum and Bitcoin (ETH/BTC) – Ethereum is the base asset, and Bitcoin is the quote asset. The price attached to the pair shows you how much BTC you need to buy 1 ETH. It’s the same as trading traditional fiat currency like US Dollars for Euros.

Trading crypto pairs gives you the ability to swap one cryptocurrency for another. Without trading pairs, it would be impossible to swap one digital asset for another directly. Often, traders deposit funds into an exchange using a single major cryptocurrency like Bitcoin, Ethereum, or Tether. You are then able to trade these deposited funds across a range of other coins to diversify your investment portfolio.

Additionally, the best trading strategies involve crypto pair trading, since it offers more flexibility and broader opportunities. This includes the ability to take advantage of price differences between exchanges and the chance to profit from market movements.

Trading pairs also allow you to trade in and out of cryptocurrencies quickly. Often, this is from a volatile asset like Bitcoin to a stablecoin asset like Tether – or vice versa.

Industry-leading exchanges like Binance or Coinbase list hundreds of individual cryptocurrencies. This leads to the opportunity to choose from thousands of different pairs. Here are the most popular crypto trading pairs:

BTC/USDT 

The Bitcoin and Tether pairing is the most widely traded combo. It enables you to trade between the largest crypto, Bitcoin, and the largest stablecoin, Tether. It has massive liquidity and is available on all reputable exchanges.

ETH/BTC

Ether is the second biggest crypto behind Bitcoin. Both are incredibly popular with all types of investors. So, it’s useful to move between the two. Moreover, trading Bitcoin for Ether helps to open up more options on the Ethereum blockchain.

XRP/BTC

The XRP and Bitcoin pairing is another common one. It favors investors looking for cross-overs between the traditional finance world and decentralized cryptocurrencies. XRP offers faster, cheaper transactions than Bitcoin.

BNB/USDT 

Binance Coin paired with Tether is one of the most frequently traded ‘non-bitcoin’ pairs. This is particularly popular on the Binance exchange where BNB is the native token.

SOL/USDT 

Trading Tether for Solana provides a way for users to access more Web 3 infrastructure. It is a popular pair with NFT investors who want to hold funds at a stable value of USDT. They can then swap to the more volatile SOL when purchasing NFTs on the Solana blockchain.

Crypto trading pairs are represented using the ticker symbol for each pair with a slash between the two. For example, “BTC/USDT” or “ETH/BTC.” The first currency symbol is the base currency, and the second is the quote.

It is important to learn and double-check the abbreviated crypto tickers for the pairs. With thousands of options, things can get confusing. Costly mistakes can easily happen.

When you read a trading pair, the price you’re looking at is the amount needed to purchase one token of the base currency. So, if BTC/USDT is trading at 60,000, you’ll need 60,000 USDT to buy 1 Bitcoin.

The pair breakdown looks like this:

• Pair: BTC/USDT (Bitcoin and Tether)
• Base Currency: BTC (What you want to buy)
• Quote Currency: USDT (What you want to sell)
• Price: 60,000 (You need 60,000 USDT to buy 1 Bitcoin)

Trading pairs fall into two different categories. Some exchanges offer both types, while others only offer one type.

Crypto-cross Pairs

Crypto-cross pairs are what we’ve discussed so far – exchange one crypto for another. It means you can quickly diversify your digital portfolio and gain access to up-and-coming coins. Plus, savvy traders take advantage of arbitrage opportunities when comparing the prices of different assets.

In addition, you can gain more anonymity or access a wider choice of exchanges internationally when only trading in crypto-cross pairs.

Fiat-to-crypto Trading Pairs

Fiat-to-crypto trading pairs are where everyone starts their crypto investment journey. It allows you to use traditional money like Dollars, Euros, and Pounds, to buy crypto. Generally, most people start with a Bitcoin / Fiat pair such as BTC/USD or BTC/EUR.

The pricing for these pairs can be easier to understand. The listing price is simply how much of your fiat currency you need to buy 1 crypto token. Pairs can be more limited on some exchanges, although more and more altcoins are being made available in a Fiat-to-crypto pairing. In addition, you’ll usually find high liquidity and trading volumes compared to crypto-cross pairs.

If you want to successfully trade crypto then selecting good pairs is vital. There is a lot to analyze, including market dynamics, liquidity, volatility, volume, and trends. If you’re not sure where to start, then keep reading as we’ll go through each of these.

The first thing to be aware of is trading pair market dynamics. This helps spot factors like supply and demand and stable trading activity.

Liquidity

New crypto investors often overlook liquidity. Especially when betting on a new ‘up and coming’ asset. High liquidity means it’s easy to enter and exit a coin. There are plenty of people willing to buy and sell at any time. Pairs with tight bid-ask spread indicate strong liquidity. The more popular a trading pair is, the more liquidity it offers. Beware, if you trade into a pair with low liquidity, then it can be hard to sell, and prices become extremely volatile.

Volatility

Volatility can be your friend and your enemy. If you’ve spent any time watching the crypto market, you’ll know that it leads to massive profit opportunities or increased risk of loss.

Traders who prefer short-term day trading strategies might enjoy more volatile pairs as they look to trade in and out quickly. Long-term investors might look for steadier options to preserve their wealth.

More popular trading pairs have lesser volatility compared to obscure trading pairs. This is for several reasons, including price manipulation on low liquidity pairs to create wild price swings.

Keeping an eye on a pair’s trading volume can help you spot potential popularity and liquidity. High-volume pairs deliver a quicker execution and more reliable price action.

Exchanges should list the 24-hour volume with each pair. It’s the amount of each cryptocurrency traded in that pair. For example, it might read:

24-hour volume:

ETH: 31,789

BTC: 1,420

This is the amount of ETH and BTC traded, respectively, over the last day.

In addition, you’ll also see the 24-hour price spread for the pair. That’s the highest and lowest price it has traded. For example:

High: 0.04514

Low: 0.04416

The gap between these two prices is called the ‘spread.’ A small spread reflects low volatility. A big spread reflects high volatility.

All markets move in trends. Crypto is no different. In fact, it is highly susceptible to both short-term and long-term trends. You might spot some crypto pairs showing a long-term uptrend while others are showing a short-term pullback.

Exchange platforms build in trend-following indicators and tools to help you analyze these. Moving Average Divergence (MACD) or Relative Strength Index (RSI) indicators are popular with traders to confirm trends.

Once you understand how to analyze crypto trading pairs, you can develop your trading strategy. This can include day trading, swing trading, arbitrage, or long-term investing. Whichever route you go down will reflect the type of pairs you are looking to trade.

You might focus on high-liquidity popular pairs like BTC/USDT. Or dig deeper into altcoin pairs, which offer untapped potential but higher risk.

A comprehensive analysis approach gives you the best chance of success. Using technical indicators like RSI, MACD, and Bollinger Bands will help you test theories, confirm trends, and pick entry and exit price points.

Adding in a foundation of fundamental analysis gives you a wider, long-term view of the market. It can help you stick to your strategy through unexpected price action. Take the time to research underlying technology, development teams, use cases, and adoption rates of cryptocurrencies. Plus, keeping an eye on events like hard forks, token burns, and token airdrops allows you to prepare for potential problems and opportunities.

Often, traders look for price discrepancies between different pairs and exchanges. This is known as arbitrage trading. It can be a lucrative form of trading, particularly with less common pairs.

There are risks if you’re not careful. It’s important to account for transfer fees which can suck up any profits. Plus, speed is everything. If you spot an opportunity, it won’t last long. The top traders use automated bots to identify and execute their arbitrage trades between multiple exchanges.

First and foremost, you should prioritize security when trading crypto pairs. Stick to reputable exchange platforms with strong security and a reliable history.

You should also check the regulations in your country. Some governments have restrictions on crypto ownership and trading. Plus, there are likely tax implications, as in the US for crypto trading. So, our CoinHint trading team strongly advises keeping detailed records for all your trades.

An understanding of crypto trading pairs is basic knowledge for anyone looking to buy or sell cryptocurrency. If you’re not careful, it is easy to accidentally trade into the wrong cryptocurrency. There are hundreds of currencies available and thousands of pairs. Some of which look very similar. Take the time to understand the difference between Bitcoin (BTC) and Bitcoin Cash (BCH), for example.

If you’re not sure, do your research, refer to this guide, and start with a small account to build confidence. Don’t forget to keep detailed records of all your trades.