What is a Crypto Trading Pair? Cryptocurrency Pairs Explained

Gianluca Lombardi, 8 min read
Last Updated: 22 October, 2023

crypto trading pairs btc-eth

A cryptocurrency trading pair refers to the pairing of two different cryptocurrencies or one cryptocurrency and a fiat currency on a cryptocurrency exchange platform. Cryptocurrency trading pairs allow traders to exchange one cryptocurrency for another, or to buy and sell cryptocurrencies in exchange for currencies like EUR and USD.

As editor in chief of Ecoinomy, I have established myself as an authority on cryptocurrency trading since 2017, with numerous of my blog posts going viral in the crypto community.

In this comprehensive guide, I will cover everything you need to know about crypto trading pairs as a beginner. You’ll learn what trading pairs are, types of pairs, why they are important, how to analyze them, and examples of the most common pairs. I’ll also provide actionable tips on how to choose a pair and develop effective crypto trading strategies around them based on my extensive knowledge.

How Crypto Trading Pairs Work

Cryptocurrency trading pairs work in a similar way to traditional forex trading pairs. There is a base currency and a quote currency. The base currency is the cryptocurrency that you wish to buy or sell, while the quote currency is the cryptocurrency you will use to pay for the base currency.

For example, a common trading pair is BTC/USDT. In this case:

  • BTC is the base currency
  • USDT is the quote currency

If you want to buy Bitcoin, you need to pay for it with USDT. If you want to sell BTC, you will receive USDT in exchange.

The exchange rate between the two currencies in a trading pair fluctuates based on supply and demand. If more people want to buy Bitcoin, the price of BTC goes up compared to USDT. If more people want to sell, the price of BTC goes down compared to USDT.

Types of Cryptocurrency Pairs

There are a few main types of crypto trading pairs:

  • Crypto-to-fiat pairs – These pairs involve buying or selling cryptocurrency in exchange for currencies like USD, EUR, GBP, etc. For example, BTC/USD, ETH/EUR.
  • Crypto-to-stablecoin pairs – Stablecoins are cryptocurrencies pegged to the value of fiat currencies. Popular stablecoins include USDT, USDC, BUSD. Common crypto-to-stablecoin pairs include BTC/USDT, ETH/USDC.
  • Crypto-to-crypto pairs – These only involve trading between two cryptocurrencies, without any fiat currency involved. Examples are BTC/ETH, LTC/XRP, ETH/ADA.
  • Altcoin-to-BTC pairs – These involve trading altcoins in exchange for BTC, rather than directly for fiat. For example, ETH/BTC, DOGE/BTC.

Why Crypto Trading Pairs Matter

Make sure first, you are familiar with what cryptocurrency trading itself is.

Cryptocurrency trading pairs are important for a few key reasons:

  • Allows traders to exchange one crypto for another directly on an exchange platform.
  • Provides liquidity in the markets – traders need counterparties to buy/sell to.
  • Allows traders to value altcoins against more liquid coins like Bitcoin, rather than directly against a fiat currency.
  • Let traders execute various trading strategies like arbitrage between exchanges.
  • Necessary for creating market demand and price discovery of new cryptocurrencies.

Providing Liquidity

Trading pairs provide liquidity to the crypto markets. Liquidity refers to the ability to easily convert an asset to cash or other assets without impacting its price.

For example, Bitcoin has high liquidity because its large market cap and trading volumes mean traders can easily find counterparties to buy/sell BTC. Small cap coins have low liquidity because there may not be enough buyers/sellers readily available.

Having BTC/altcoin trading pairs provides liquidity to altcoins and allows them to be more easily traded. Traders can buy obscure altcoins with dominant assets like BTC or ETH, rather than having to use fiat.

Valuing Against Bitcoin

Cryptocurrency valuations are highly volatile against USD or EUR. Having BTC as a base trading pair provides a more stable benchmark to value other crypto assets.

For example, an altcoin’s price in USD may fluctuate wildly day-to-day. But its valuation ratio compared to Bitcoin may remain more consistent.

Traders may look at ALT/BTC charts to make trading decisions, rather than only looking at USD charts. The ALT/BTC ratio allows them to gauge the altcoin’s strength or weakness against the more stable BTC cryptocurrency.

Enabling Arbitrage

Having the same trading pair on different exchanges allows traders to profit from price discrepancies through arbitrage.

For example, if BTC/USD is trading at $55,000 on Exchange A but at $56,000 on Exchange B, traders can:

  1. Buy 1 BTC for $55,000 on Exchange A
  2. Sell 1 BTC for $56,000 on Exchange B
  3. Profit $1,000 with no risk

This helps equalize BTC/USD pricing across exchanges and improves market efficiency. Trading pairs enable these arbitrage opportunities.

Allowing Convenient Trades Between Cryptos

Trading pairs like ETH/BTC allow traders to easily exchange between cryptocurrencies. For example:

  • Trader wants to exchange 1 ETH for BTC
  • They could trade the ETH for USD, withdraw the USD, then use it to buy BTC. This incurs fees.
  • Or the trader could directly trade their 1 ETH for the equivalent value of BTC in a single ETH/BTC transaction. This is more convenient.

The ETH/BTC pair enables this without needing to go through EUR or USD.

How Trading Pairs Affect Crypto Prices

The availability and liquidity of certain trading pairs on exchanges can directly affect cryptocurrency valuations. Here are some examples:

  • Increased demand pushes price up: If a new BTC/USD pair opens up on a popular exchange, it may attract new traders. Their increased demand for Bitcoin will push up the price.
  • Low liquidity increases volatility: Newly listed altcoins with only obscure BTC pairs will see highly volatile price swings. Lack of liquidity exaggerates price movements.
  • Arbitrage equalizes prices: If BTC/EUR trades at a premium on one exchange, arbitrageurs will buy on the cheaper exchange and sell on the more expensive one. This will raise the price on the first exchange and lower it on the second.
  • Speculation around new pairs: If an exchange pre-announces an upcoming new BTC/ALT pair, it will draw speculative interest. Traders will buy the altcoin in anticipation of increased liquidity after the official pair listing. This drives the altcoin’s price up.

bitcoin ethereum trading pair examples

While there are thousands of cryptocurrencies and dozens of exchanges, a small number of trading pairs dominate the global trading volumes. These are the most widely-used and liquid crypto trading pairs that traders should be aware of:

Major Crypto-to-Fiat Pairs

Trading Pair Description
BTC/USD Bitcoin price in US Dollars
ETH/USD Ethereum price in US Dollars
BTC/EUR Bitcoin price in Euros
ETH/EUR Ethereum price in Euros
BTC/GBP Bitcoin price in British Pounds
ETH/GBP Ethereum price in British Pounds

These are the most common direct fiat on-ramps and off-ramps for crypto trading. Exchanges must maintain banking relationships to facilitate fiat-to-crypto trading.

Top Crypto-to-Stablecoin Pairs

Trading Pair Description
BTC/USDT Bitcoin price in Tether
ETH/USDT Ethereum price in Tether
BTC/USDC Bitcoin price in USD Coin
ETH/USDC Ethereum price in USD Coin
BTC/BUSD Bitcoin price in Binance USD
ETH/BUSD Ethereum price in Binance USD

Stablecoin pairs have high liquidity and allow traders to hedge volatility. Tether (USDT) is the most widely used stablecoin.

Major Crypto-to-Crypto Pairs

Trading Pair Description
BTC/ETH Bitcoin vs Ethereum price
ETH/BNB Ethereum vs Binance Coin
BTC/BNB Bitcoin vs Binance Coin
ETH/SOL Ethereum vs Solana
ETH/ADA Ethereum vs Cardano
BTC/DOT Bitcoin vs Polkadot

These are top crypto-to-crypto pairs without fiat currencies involved. Traders use them to exchange between major cryptoassets.

Leading Altcoin-to-BTC Pairs

Trading Pair Description
ETH/BTC Ethereum vs Bitcoin
LTC/BTC Litecoin vs Bitcoin
BCH/BTC Bitcoin Cash vs Bitcoin
XRP/BTC Ripple vs Bitcoin
LUNA/BTC Terra vs Bitcoin
ADA/BTC Cardano vs Bitcoin

These pairs allow traders to value altcoins against the Bitcoin benchmark rather than a fiat currency.

How to Read Crypto Trading Pairs

Now that we’ve covered the different types of trading pairs, let’s look at the actual mechanics of executing trades between a crypto pair.

We’ll use a BTC/ETH pair as an example:

1. Check Latest Exchange Rate

The first step is to check the latest exchange rate between BTC and ETH. On the exchange, this will show up like:

ETH/BTC  0.07500

This means 1 ETH = 0.07500 BTC

The exchange rate fluctuates based on market supply and demand.

2. Determine Order Type

You need to decide whether you want to buy or sell BTC, and place the corresponding order type:

  • Buy BTC: This is called a bid order – you are bidding for the BTC with a buy
  • Sell BTC: This is called an ask order – you are asking for a price to sell your BTC

For example, if you wanted to buy BTC with ETH, you would place a “Bid” order for the BTC/ETH pair.

3. Set Desired Rate and Amounts

Continuing the example, you would:

  • Place a bid order for BTC/ETH
  • Input the rate you want to buy at, like 0.07500 BTC for 1 ETH
  • Enter the amount of ETH you want to buy, like 5 ETH

This means you will spend 5 * 0.07500 = 0.37500 BTC to get 5 ETH.

4. Execute and Confirm Order

You will then submit the order which gets processed and filled. Soon your exchange account will reflect:

  • 5 ETH added
  • 0.37500 BTC deducted

The order is complete! You successfully bought ETH at your desired rate by trading the BTC/ETH pair.

You can use the same process to sell BTC for ETH by placing a sell order.

Managing Risks When Trading Crypto Pairs

While trading crypto pairs provides opportunities, it also comes with some risks to keep in mind:

  • Volatile prices – Crypto prices can swing wildly, leading to rapid profits or losses. Use stop-losses.
  • Hacking risk – Exchanges can be hacked with funds lost. Use cold storage.
  • Liquidation risk – On leveraged trades unable to cover margin requirements, exchange will liquidate position. Use appropriate leverage.
  • Regulatory bans – Governments may abruptly ban crypto trading leading to crash in prices.

Key ways to mitigate these risks include:

  • Start with small position sizes
  • Diversify across many crypto assets rather than going “all in” on one
  • Use dollar-cost averaging rather than buying at one price
  • Store funds in a hardware wallet rather than leaving them on an exchange
  • Trade on reputable exchanges that follow security best practices
  • Stay up to date on cryptocurrency regulations in your country

How to Chose a Crypto Trading Pair – Step by Step

For beginners looking to start trading crypto pairs, follow these steps:

Step 1: Choose a Reliable Exchange

  • Research and select a reputable exchange that offers the desired pairs.
  • Our top recommendations include eToro, Bybit, Bitget, Binance, gate.io.
  • Consider factors like security, fees, liquidity, and fiat on-ramps.

Step 2: Fund Your Account

  • Fund your exchange account with fiat currency or crypto.
  • Make sure to enable two-factor authentication for account security.

Step 3: Analyze the Markets

Step 4: Execute Your First Trades

  • Start by trading a small amount as a test.
  • Place limit orders at desired prices rather than using market orders.
  • Get a feel for the trading experience.

Step 5: Expand Your Strategy

  • Diversify across multiple trading pairs.
  • Implement more advanced strategies like arbitrage or swing trading.
  • Set stop losses to limit potential downside.

Take sufficient time to learn and practice trading crypto pairs with small amounts first. This will set you up for success in the long-run.

Common Cryptocurrency Trading Strategies

Once familiar with basic trading, you can apply various crypto trading strategies using different pairs to try and profit:

Arbitrage

This involves exploiting price discrepancies across different exchanges to buy crypto low on one exchange and sell it higher on another exchange. Efficient arbitrage helps equalize prices across the markets.

Example:

  1. Buy BTC at $55,000 on Exchange A
  2. Sell BTC at $56,000 on Exchange B
  3. Profit on the price difference

Arbitrage opportunities close quickly so traders use automation and bots to profit from small discrepancies.

Swing Trading

This aims to profit from swings in price over a period of days or weeks based on technical analysis and momentum. Traders identify trend reversal points to open and close positions.

Example:

  1. Identify support level for a BTC/USD pair
  2. Buy Bitcoin once price bounces off the support level
  3. Sell Bitcoin once price reaches a technical resistance level
  4. Book profit from the upswing

Swing trading requires identifying trends, support/resistance, and timing entries/exits based on momentum.

Hedging

This involves taking additional counteracting positions to mitigate the risk of your primary position. Hedging reduces potential downside.

Example:

  1. Buy ETH for long-term investment
  2. Short sell ETH/BTC pair to hedge against ETH dropping relative to BTC

If ETH goes down, the short position offsets some losses on the long position. Traders give up some profit for reduced risk.

Going Long/Short

Long positions profit from buying low and selling high. Short positions profit from short selling high and buying back low.

Example:

  • Go long on a LTC/USD pair by buying Litecoin and profiting from a price increase.
  • Go short by borrowing and selling Litecoin, hoping to buy it back later at a lower price.

Advanced traders use leverage to amplify potential profits and losses from long/short positions.

Resources for Cryptocurrency Trading Pairs

Here are some useful resources for learning more about crypto trading pairs:

  • Messari – Key trading pair data and crypto prices across exchanges
  • CoinMarketCap – Charts showing pair volumes and exchange listings
  • CoinGecko – Website showing crypto pair price data with filtering options
  • Twitter – Follow crypto exchanges for quick updates on new pair listings

In summary, crypto trading pairs are at the core of the cryptocurrency markets. Learning how to analyze and trade major BTC and ETH pairs provides endless trading opportunities and strategies. Make sure to use appropriate risk management and take sufficient time to practice trading pairs before risking significant capital.

Gianluca Lombardi

Gianluca is the editor-in-chief of this site. A finance graduate, he is an active trader who has tested all trading platforms and knows all their secrets. Technology is his passion; he spends much of his free time in the metaverse. Gianluca loves learning new things, researching, discussing and writing about technology, especially when it comes to cryptocurrency and blockchain technology.