If you are a beginner, or if you still want to play in this market, take good notes; you need to understand the market liquidity password (base asset vs. quoted asset, your trading efficiency is determined by it)
🔍 How do trading pairs work? The game between base asset vs. quoted asset
In cryptocurrency exchanges, each trading pair (Trading Pair) is presented in the format of "Base Asset/Quoted Asset" (e.g., BTC/USDT). Its essence is:
- Base asset (Base Currency): The asset you want to buy or sell (like BTC, ETH)
- Quoted asset (Quote Currency): The asset used for pricing (such as USDT, USD, BTC)
▶ Operational logic:
1. When trading BTC/USDT, you are buying BTC with USDT, or selling BTC to obtain USDT.
2. When trading ETH/BTC, you are purchasing ETH with BTC, and the price reflects the value of ETH relative to BTC.
Key differences:
- Stablecoin pairs (like BTC/USDT): Price volatility comes only from the base asset (BTC)
- Coin-to-coin pairs (like ETH/BTC): affected by the volatility of both cryptocurrencies, requiring dual judgment
💡 Do you prefer stablecoin pairs or cryptocurrency-valued pairs? Why?
✅ Stablecoin pairs (like BTC/USDT)
Advantages:
- Prices are more intuitive (directly pegged to the US dollar)
- Liquidity is usually higher, and slippage is lower
- Suitable for short-term traders, avoiding interference from the volatility of the quoted currency
For example:
> When you go long on BTC in BTC/USDT, you only need to judge the rise and fall of BTC, without worrying about the depreciation of USDT (theoretically).
✅ Cryptocurrency-valued pairs (like ETH/BTC)
Advantages:
- Can capture the relative strength and weakness of two assets (e.g., when ETH outperforms BTC)
- Suitable for long-term holders (avoiding frequent exchange of fiat/stablecoins' tax issues)
- Some exchanges (like Binance) have lower trading fees for coin-to-coin pairs
For example:
> If you think ETH will rise faster than BTC, you can buy ETH/BTC, and even if the overall market falls, as long as ETH's decline is smaller than BTC's, you can still profit.
My choice:
- Short-term trading: Stablecoin pairs (reduce variables)
- Long-term layout/Alpha strategy: Coin-to-coin pairs (capturing relative value between assets)
🎯 How to choose the right trading pair for trading?
1. Liquidity is king
Prioritize trading pairs with **24-hour trading volume > $10 million** (to avoid slippage eating into profits)
- Observe order book depth: Buy/sell price difference should be <0.1%
2. Volatility matches strategy
- High-frequency/arbitrage: Choose mainstream stablecoin pairs (like BTC/USDT)
- Trend trading: Choose high volatility coin-to-coin pairs (like SOL/ETH)
3. Fee structure optimization
- Some exchanges (like Binance) offer fee discounts for BTC trading pairs
- Pay attention to the **risks of the quoted asset itself** (for example, when trading BTC/UST, consider the possibility of UST de-pegging)
4. Market sentiment correlation
- Early bull market: BTC-valued pairs (altcoins usually outperform BTC)
- Late bear market: Stablecoin pairs (capture BTC bottoms more accurately)
📈 Case study: How does the choice of trading pair directly affect results?**
Scenario comparison (January-March 2023)
| Strategy | Trading Pair Choice | Result Analysis |
| Bullish on ETH | Buy ETH/USDT | +35% return (ETH from $1200 → $1620) |
| Bullish on ETH relative to BTC | Buy ETH/BTC | +58% return (ETH/BTC exchange rate from 0.067 → 0.106) |
Key conclusions:
- If you had judged at that time that **ETH would outperform BTC**, choosing ETH/BTC would have earned you an extra 23%!
- But if you judge incorrectly (ETH rises but BTC rises more), then ETH/BTC may incur losses.
💎 Ultimate advice
1. Beginners: Start with mainstream stablecoin pairs like BTC/USDT, ETH/USDT
2. Advanced users: Use coin-to-coin pairs to capture cross-asset opportunities (need to be familiar with the fundamentals of both currencies)
3. Beware: Stay away from trading pairs with low liquidity (such as small-cap altcoins/unpopular quoted assets)
📌 Remember: Trading pairs are the "leverage" of your trading system—if chosen correctly, you can achieve twice the results with half the effort; if chosen incorrectly, you will get half the results with twice the effort.
Have you ever made a big profit or lost out due to trading pair choices? Share your stories