Cryptocurrency pairs are a pair of digital assets that market participants can trade for each other on an exchange – for example, Bitcoin/Litecoin (BTC/LTC) and Ethereum/Bitcoin Cash (ETH/BCH). Comparing cryptocurrency pairs allows you to see how much they cost.
How Crypto Trading Pairs Work
In a crypto trading pair, the cost of one crypto is compared to the price of another cryptocurrency. Through this, traders establish value. It’s not very different from buying something from a store for a certain amount of fiat money. An investor can also use a crypto trading pair to analyse how they can make investments in real-time.
The only difference is that people don’t transact with multiple fiat currencies every day like they do with cryptocurrency. In general, trading pairs serve to determine the trading value of an asset compared to another one. Also, it is important to note that although cryptocurrency trading pairs might be similar, each crypto exchange has a different exchange rate.
Trading Pairs Base Currency
A base currency has been established on exchanges as a common pairing for trading. Before you can trade digital assets on an exchange that only allows crypto, you will need to have one of these pairs. Most of the time, these are the cryptocurrencies that you could buy.
Exchanges accept different base currencies, so you’ll need to verify for yourself which ones they receive. You can do this easily by going to the trading screen on your account page. You’ll be able to see on the exchange what currency pairs are available.
Do Cryptocurrencies and Trading Pairs Correlate?
Occasionally, yes. The price of popular cryptocurrencies and paired coins have a specific correlation, but not always. Due to Bitcoin’s ties to the entire cryptocurrency market, many tend to follow it, but sometimes they stray from it.
Mainly if your pairing or exchange has relatively few traders, this can be true. Almost all of the demand in such cases lies within the BTC base currency. Exchanges do the pairings in prior, so there is little room for other pairings. When trading, you should be aware of the potential for strange price movements caused by low liquidity.