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.
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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
Types of Crypto Trading Pairs | Examples | Description |
Crypto-to-crypto pairs | BTC/ETH, BTC/LTC, BTC/ADA, BTC/BNB, ETH/XLM | One crypto asset quoted against another crypto asset |
Stablecoin pairs | BTC/USDT, ETH/USDC | One crypto asset quoted against a USD-pegged stablecoin |
Crypto-fiat pairs (USD) | BTC/USD, ETH/USD, BNB/USD | One crypto asset quoted against the USD |
Crypto-fiat pairs (non-USD) | BTC/EUR, BNB/AUD, ETH/JPY | One crypto asset quoted against a non-USD fiat currency |
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.
Trading Style | Time Frame | Trader Type |
Scalping | M1 - M5 | Aggressive traders |
Day trading | M15 - D1 | Active traders |
Swing Trading | H4 - D1 | Casual traders |
Position Trading | H4 - MN | Patient traders |
HODLing | D1 - MN | Buy-and-hold investors |
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.
