Cryptocurrency Pairs

November 21, 2023 - Around 2 mins mins to read

Understanding Cryptocurrency Pairs

Cryptocurrency pairs refer to the comparison of prices between two different crypto tokens. One of the most well-known cryptocurrency pairs is ETH/BTC, which shows the value of one Ethereum token in terms of Bitcoin. In essence, trading pairs indicate the amount of one token that can be bought with a specific quantity of another token.

Similar to traditional currency trading, cryptocurrency exchanges rely on crypto trading pairs to determine the value of each token. Initially, there were only a limited number of trading pairs available, with most trades being tied to Bitcoin, the primary cryptocurrency token. However, with the emergence of altcoins, new trading pairs are constantly being introduced.

Cryptocurrency trading pairs provide investors with the opportunity to make informed decisions about their transactions on an exchange. With the availability of more pairs, traders have a wider range of options. To exchange one cryptocurrency token for another, traders either need to find an exchange that supports the specific trading pair or perform multiple transactions between different pairs to achieve their desired outcome.

Trading pairs represent the different trading options available on an exchange. For instance, if a trader wants to exchange LTC for DOT but the exchange does not support that particular pair, they would first need to trade LTC for Bitcoin and then exchange that Bitcoin for DOT. Unfortunately, this would result in higher taxes and fees due to the two separate transactions. If the exchange supported the LTC/DOT trading pair, the trader could achieve their desired outcome in a single transaction.

Cryptocurrency trading pairs play a crucial role in the crypto economy as they facilitate the easy swapping of tokens. Crypto exchanges strive to support as many trading pairs as possible to meet the needs of traders. Additionally, certain trading pairs may offer more favorable trading conditions in terms of fees and taxes. While less popular pairs between altcoins often incur higher trading fees, the most sought-after trading pairs have proven to be more advantageous. However, correlations between different cryptocurrencies can sometimes result in more profitable trading pairs for altcoins. Therefore, it is important to research and consider the fees and taxes associated with each trading pair of interest.