Crypto trading pairs are required for trading on crypto exchanges such as Coinbase, Binance, and KuCoin. They allow users to exchange one cryptocurrency for another without first trading either coin for fiat currency.
Bitcoin (BTC), the cryptocurrency with the biggest market capitalization, and tether (USDT), the largest stablecoin linked to the U.S. dollar, are widely traded crypto pairings. Depending on the exchange, the pair will be shown as BTC/USDT or BTC-USDT.
Understanding Crypto Trading Pairs
Each asset in a cryptocurrency pair can be valued without using fiat currency. Trading pairs in cryptocurrencies are essential to the crypto economy and liquidity.
Consider a real-world example of a currency pair encountered by many tourists. Let’s imagine that on May 12, 2022, an American visitor was bound for France. The traveller would investigate the euro-to-dollar exchange rate in order to budget the trip and comprehend the cost of goods in France. On May 12, 2022, the foreign currency rate for the EUR/USD pair would have been approximately $1.04 per euro. So, to get 1 euro, it would require $1.04.
Similarly to foreign exchange (forex), crypto platforms offer a number of trading pairs so that customers can quickly trade one cryptocurrency for another. Because there is so much demand, crypto exchanges now offer as many pairs of cryptocurrencies as they can.
Crypto trading pairs are also utilised to reduce trading fees. If the trading pair didn’t exist, you would have to use at least two other pairs to get the cryptocurrency you wanted. This would cost you more in trading fees because you would be making two trades instead of one.
Here’s one instance: A trader wishes to exchange Dogecoin (DOGE) for Shiba Inu coins (SHIB) and searches a decentralised exchange for the DOGE/SHIBA combination (DEX). The DEX did not offer this trading pair, though.
As an intermediary, the trader might use a more common trading pair to trade DOGE/SHIBA. In this instance, the trader can choose to exchange DOGE/USDT. The trader can acquire USDT through the sale of DOGE. The trader can then use the SHIB/USDT trading pair to purchase SHIB coins.
You can see how much easier it would be to locate and use a SHIB/DOGE pair as opposed to a SHIB/DOGE pair.
To return to our global travel example, a traveller going from the United States to France and then to England does not need to exchange euros back into U.S. dollars since he or she can use the EUR/GBP trading pair to reduce transaction fees.
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How to Interpret Crypto Trading Pairs
There are only two components to a crypto trading pair: the base currency and the quote currency.
Most cryptocurrency trading pairs are made up of three letters separated by a backslash, like AAA/BBB.
The base currency in a crypto trading pair is always the first cryptocurrency. The base currency is the currency against which the other currency is compared; in our EUR/USD example, the base currency is the euro (EUR). BTC serves as the base currency for BTC/USDT. In crypto, the ticker preceding the “/” is always the base currency. ETH/BTC is another example, with ETH serving as the base currency.
The quote currency is the second component. It is the value of the base currency expressed in terms of the quote currency. The quoted currency follows the “/” character. For the trading pair BTC/USDT, the quote currency is USDT. Referring back to the EUR/USD example, the quote currency is the U.S. dollar (USD).
Together, the pairs indicate how much of the quote currency is required to equal 1 unit of the base currency.
On May 12, 2022, ETH/BTC was trading at around 0.0695 in the real world. Since the quoted currency for ether is bitcoin, a trader could get 1 ether for about 0.0695 bitcoin.
Crypto Trading Pairs with Stablecoins
Numerous crypto trading pairs are linked to stablecoins on global crypto exchanges. Stablecoins play a crucial part in crypto trading pairs on major exchanges like Binance and KuCoin.
The most popular and liquid trading pairings typically involve stablecoins backed by fiat currency, such as tether (USDT), USD coin (USDC), and Binance USD (BUSD). This is another reason why these stablecoins have a huge market cap.
Here are some examples of popular crypto-currency pairs related to stablecoins:
The top three stablecoins by market capitalization are tied to the U.S. dollar, which makes it easy for investors to calculate the value in fiat money while using stablecoins. There are also a lot of stablecoin pairs available on exchanges, making it easy for traders to buy other cryptocurrencies.
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