What is a Crypto Trading Pair?
A cryptocurrency trading pair is a set made of two cryptocurrencies that are swapped with each other. Most cryptocurrency trading platforms such as KuCoin, Coinbase, and Binance Group offer various combinations of crypto trading pairs on their trading platforms.
Why are Crypto Trading Pairs Important?
Cryptocurrency trading pairs allow different groups of virtual currencies to reflect each other’s value without traditional unit of account such as fiat currencies. Therefore, they have become a key component of Tokenomics and liquidity. This system works in the same way as the trading pair on a forex market.
When visiting another country people are likely to compare their native currency with the foreign currency to understand the conversion rate.
In this instance, the forex trading pair will allow them to budget their trip or other projects. In the same manner, cryptocurrency investors can understand the value of their total portfolio by translating it into another digital token such as stablecoins etc.
Most crypto trading platform try to incorporate as many trading pair options for their account holders as possible to bring more liquidity for the investors.
Understanding Crypto Trading Pairs
Every digital currency investor should learn to read a crypto trading pair which consists of two parts, the base currency and the quote currency. Each side of a crypto trading pair is assigned a rating that can be denoted as AAA/BBB.
In this instance, the currency mentioned before the slash is the base token and it is the one with which other coins are compared. In the case of BTC/USDT, Bitcoin is the base currency.
At the same time, the currency that goes after the slash sign or is the second in order is called the quote currency. An investor determines the value of base currency represented or quoted in the form of the quote currency.
Based on the earlier example, for BTC/USDT pair the tether stablecoin is the quote currency. It means that investors will be able to get 34 thousand USDT units for one Bitcoin at the current market value.
Importance of Stablecoins in Crypto Trading Pairs
Stablecoins are the most exchanged cryptocurrencies in the market. It is on account of their fixed value that allows the investors to preserve their profits at any given time and enjoy greater liquidity based on their trading ventures.
Therefore, top 10 cryptocurrencies are arranged in trading pairs with stablecoins such as USDT and USDC etc.
It is important to note that crypto exchanges prefer to list stablecoin in trading pairs that are backed by fiat currencies reserves. On this account, most used stablecoin crypto trading pairs are USDT, USDC, and BUSD. Another reason for the highest frequency of these three stablecoins is their high market cap.
Furthermore, investors find it easier to calculate the total value of their swapped virtual currency assets in these stablecoins as their unit value is fixed to $1 at all times.
It is easier for investors to convert their cryptocurrency trading portfolio into and back from stablecoins in comparison to fiat currency conversions.
Advantages of Crypto Trading Pairs
Here are some of the most important advantaged associated with cryptocurrency trading pairs:
The most important advantage of a cryptocurrency trading pairs is that they make the process of investing easier and seamless. Investors are likely to not find fiat currency conversion options as readily as virtual currencies. Therefore, crypto trading pairs bring more liquidity for their users.
Crypto trading pairs allow investors to determine the value of a given virtual currency in comparison to other cryptocurrencies. In this manner, the dependency of cryptocurrencies on fiat money is reduced.
Trading Fee Savings
Cryptocurrency trading pair also reduces the transaction costs for the investors by many folds. If an investor wants to convert A token to B token they can do that if the A/B trading pair is listed on the platform otherwise they might have to go through various swaps to able to change one crypto coin for the other.
As mentioned before, the presence of various trading pairs allow the investors to easily trade their virtual currency reserves from one type of coin to another.
Cryptocurrency trading pair makes it easier for the investors to send or receive virtual currencies on an international scale in a seamless manner. They make for easier and more economic remittance options.
Trading with cryptocurrency pairs is a great way to reduce trading hurdles and gain more control over the trading positions. Crypto trading platform try to list as many trading pairs as possible to ensure highest possible liquidity for their consumers.