Trading pairs in crypto allow you to determine the value of one cryptocurrency in terms of another.
For example, in the BTC/ETH pair:
- BTC is the base currency.
- ETH is the quote currency, indicating how much ETH is needed to buy 1 unit of BTC.
Types of Trading Pairs:
- Crypto-Cross Pair: Two digital assets, e.g., BTC/ETH.
- Fiat-to-Crypto Pair: A cryptocurrency and a fiat currency, e.g., BTC/USD.
Trading Actions:
- Buying: Exchanging the quote currency for the base currency (e.g., buying ETH with BTC).
- Selling: Converting the base currency into the quote currency (e.g., selling ETH for BTC).
Pairs Trading Strategy:
- Speculating on the relative value of two cryptocurrencies.
- Profiting from temporary price differences between two assets that usually move together.
Considerations:
- Fees and Taxes: Vary by exchange.
- Intermediary Trades: May be necessary if a specific pair is unavailable, increasing costs.
Automated trading tools can enhance efficiency, especially for pairs trading strategies.
