There is this old Chinese proverb that goes: “All good things come in pairs”. Of course, that is not particularly true. Well, the Chinese obviously didn’t account for stumping your pinky on the coffee table twice on the same day. However, in DeFi crypto trading pairs are some of the most important elements to understand when beginning your trading journey — and the guide “Crypto Trading Pairs Explained” offers you almost everything you need to know about this fundamental concept in cryptocurrency trading.
At first, dealing with all the intricacies of crypto trading can be quite demanding. After all, what could “DYOR” or “HODL” mean? And why the heck is everyone talking about a new dog currency gaining 10000% in value all of a sudden while you’re the only one missing out?
We get it, it truly is a lot to take in. However, lucky for you Bitcoinsensus provides you with a plethora of guides and how-to’s to help you become the best trader possible.
One crucial part of crypto trading that beginners should understand from the get-go is the notion of crypto trading pairs. Understanding these trading pairs early on is important for anyone seeking success in the world of crypto.
In this article, we dive into this topic, explaining the differences between different crypto trading pairs, focusing on the most commonly used currencies, and giving clear examples of such pairs to help you begin your crypto trading journey.
What Are Crypto Trading Pairs?
A crypto trading pair is exactly what it sounds like. It is a duo of crypto assets that you can swap for one another.
Take, for instance, if you wish to exchange Tether (USDT) for Bitcoin; you’d be engaging in a USDT/BTC trading pair. In this setup, USDT takes on the role of the base currency, and Bitcoin becomes the quote currency. Basically, it takes two to tango. In order to buy BTC you need USDT to “trade”. But we will touch more on base and quote pairs in the next section.
Crypto trading pairs are also useful to allow us to get a sense of the relative value of different crypto assets. Think of it like this, off the top of your head can you estimate the value of one U.S. dollar? Pretty easy, right? However, if we ask you to assess the value of one BTC — you most likely won’t be able to quantify it unless you estimate 1 BTC in USD.
Well, congratulations! What you just did is use the BTC/USD trading pair!
Guide to Understanding Trading Pairs in Crypto
When it comes to reading crypto trading pairs, there is no rocket science involved. Crypto trading pairs consist of just two components:
- Base currency
- Quote currency
These pairs are typically denoted by three-letter symbols separated by a backslash. For example, a trading pair for Bitcoin and Tether will look like BTC/USDT.
Base Currency
The first asset on a pair serves as the reference against the other currency. For example, in BTC/ETH, BTC is the base currency. The part before the “/” sign is always the base currency in crypto pairs.
Quote Currency
The second part, the quote currency, is the value of the base currency expressed in terms of the quote currency. The quote currency appears after the “/”. In the BTC/ETH pair, ETH acts as the quote currency. Similarly, in the ETH/USDT pair, USDT serves as the quote currency.
Together, these pairs provide a clear picture of how much of the quote currency is required to equal one whole unit of the base currency.
Fiat to Crypto and Crypto-to-Crypto Trading Pairs
There are two types of crypto trading pairs: Crypto-to-Crypto and Fiat-to-Crypto. The first is more used when traders want to exchange different cryptocurrencies directly. While Fiat-to-Crypto pairs are used when traders want to buy cryptocurrencies using traditional money like dollars or euros.
How Trading Pairs Work
In a very dumbed-down way, the base and quote currencies in trading pairs represent how much you need of one asset to trade it for another asset.
For instance, Bitcoin is currently valued at $93,641 while ETH is at $3,430. This means that 1 BTC is worth 27,18 ETH, and 1 ETH is the same as 0.037 BTC.
Knowing that is important because not all pairs involve fiat currencies, and choosing the best trading pairs for beginners is very important.
Crypto-Cross Pairs
These pairs involve two digital crypto assets, as exemplified by the BTC/ETH pair mentioned earlier. When you encounter trading pairs featuring major cryptocurrencies like BTC, ETH, LTC, BNB, or others, you can expect high trading volumes and abundant liquidity on crypto exchanges. These well-known cryptocurrencies enjoy healthy popularity in the market.
However, if you opt for less-liquid altcoins, prepare to deal with wider spreads and lower trading volumes. This is mainly due to their lower market capitalization and reduced popularity in the crypto space. The fewer the traders, the more complications you will have with that pair.
Fiat-to-Crypto Pairs
These pairs are favored by traders who are just embarking on their crypto journey and may find crypto-cross pairs a bit challenging to interpret. In a fiat-to-crypto pair, one side includes a digital asset, while the other side incorporates a fiat currency like USD, EUR, AUD, and so on.
It’s worth noting that a significant majority of fiat-to-crypto pairs have USD as their base currency. The U.S. Dollar serves as a benchmark currency for the entire crypto market, making it a common choice for these pairs.
How to Trade Cryptocurrency Pairs
So it’s finally time to get your hands dirty and pick a crypto pair to trade. Fortunately, this part is super easy if you have enough know-how baggage to start trading according to your necessities and trading profiles.
Selecting the right crypto trading pair is an important decision that depends on your goals and risk tolerance. Here are the steps to guide you in choosing a suitable trading pair:
Pick Your Cryptocurrency Exchange
The first step would be to pick a cryptocurrency exchange. These platforms allow you to trade your fiat currency for crypto, allowing you to finally start trading digital assets.
If you have a specific pair in mind, start by looking for a cryptocurrency exchange that supports the specific cryptocurrencies you intend to trade.
Choosing an exchange can also seem challenging. After all, there are so many options out there. We also have a guide for picking a reliable exchange that you can read here. But in short, you can’t go wrong with some of the most popular exchanges in the market like Bybit, MEXC, and Binance.
Keep in mind that different exchanges may offer varying pairs and features, so it’s important to find one that aligns with your needs.
Consider Trading Volume
Trading volume refers to the number of trades conducted in a specific pair over a given period. It directly translates to how liquid this pair is, and what price movements you can expect to see in the future.
More volume generally means a more active market for that pair. Think of how many investors are on the BTC/ETH pair, while there are far less active on less used pairs like SHIB/DOGE.
Also, high trading volume pairs are generally more attractive because they have quicker trade execution and shorter spreads when compared to pairs with lower trading volume.
Evaluate Liquidity
Liquidity is a measure of how easily an asset can be bought or sold without significantly affecting its price. A cryptocurrency pair with high liquidity will have tight bid-ask spreads, meaning there’s a minimal difference between the buying and selling prices. This allows you to sell your assets close to the current market price. In contrast, trading in pairs with low liquidity can be challenging, as it may be difficult to find buyers or sellers willing to match your desired price. In such cases, you may need to adjust your price or wait for liquidity to improve.
Assess Volatility
Volatility is the degree of price fluctuation in a pair. Higher volatility could mean larger price swings. The more volatile a pair is, the riskier the trade gets. For this reason, aligning your risk tolerance with the correct pair is essential. Some traders are risk-averse and try to minimize large price swings for their everyday trading — while some like to jump head-first into riskier territory, aiming to get the best out of volatility and go home with more profits.
Established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) tend to have more stable prices compared to newer, less-known altcoins.
Popular Crypto Trading Pairs in 2024
The crypto market in 2024 might be one of the best times to start trading crypto. Market-leading assets like Bitcoin are trading at their highest levels, while many other altcoins are quickly gaining momentum as well. So here is a small list of pairs like BTC/ETH and other common trading pairs.
1. BTC/USD and ETH/USD: By far the most popular fiat-to-crypto trading pairs. While Bitcoin/Dollar is the most traded pair in the market, the Ethereum pair is also very important as ETH is the main currency for dApps and smart contracts.
2. BTC/ETH: You can’t beat the classics! The first crypto-to-crypto trading pair in history is still one of the most traded to this day.
3. DOGE/USDT: Dogecoin has gained a lot of popularity this year after being loosely connected to the Trump campaign during the U.S. election.
4. XRP/USDT: Ripple is arguably the most popular altcoin in the market today. With the SEC expected to change leadership in 2025, Ripple will likely continue to be among the most traded pairs in the future.
This is just a small sample of the large amplitude of pairs in the market. Of course, do your own research, trade carefully, and always keep a lookout on the news to understand what pair might benefit you more.
Conclusion
With all those tips for analyzing crypto trading pairs in mind, you’ll sure have a good foundation to start trading cryptocurrencies.
While it is important to research what are the hottest trends in the market — always make sure you pick the best crypto trading pairs for you.
If you want to learn more about trading for newbies, check out our trading guides for beginners!
Happy trading!
