Cryptocurrency exchanges are centralized and decentralized platforms that place trading assets side by side. Once a trader owns an asset, they can directly exchange them with each other. This system is a sustainable design specifically designed for digital exchanges. Assets paired in this way are called trading pairs.
Trading pairs refer to the combination of two cryptocurrencies to simplify transactions on a trading platform. A trading pair indicates which cryptocurrencies can be exchanged during trading operations. It refers to assets that can be traded with each other on trading platforms. In other words, trading pairs usually refer to a pair of assets where one cryptocurrency is traded for another. Cryptocurrency pairs compare the value of one asset against the value of another asset. Some cryptocurrencies can only be bought with other cryptocurrencies. Traders who are familiar with trading can better understand arbitrage trading. A trading pair on a trading platform shows the amount that must be paid to own a unit of cryptocurrency.
A hyphen or slash separates two cryptocurrencies and indicates a pair. Examples include trading pairs such as BTC/ETH, BTC/USDT, and BTC/LTC.
Apart from cryptocurrency pairs, trading platforms that support fiat currencies may also have fiat/cryptocurrency pairs.
What Is the Purpose of Trading Pairs?
The purpose of trading pairs is to allow traders on cryptocurrency exchanges to trade different cryptocurrencies. A trading pair, which combines two different cryptocurrencies, allows traders to trade between them. At the same time, trading pairs allow traders to exchange one asset for another. For instance, once a trader owns Bitcoin (BTC), they can use the BTC/ETH pair to convert Bitcoin to Ethereum and vice versa.
Trading pairs create liquidity on cryptocurrency exchanges and provide traceability in the market. They also provide different investment opportunities for traders. The values of cryptocurrencies can fluctuate relative to each other, so traders can use trading pairs to take advantage of price movements to profit or manage risk. Trading pairs also help people compare and analyze the performance of cryptocurrencies. The price movements and trading statistics of different assets give traders data to make more informed decisions.
Trading Pairs and Arbitrage
Crypto trading pairs and arbitrage are strategies to profit from price differences between cryptocurrencies. Arbitrage refers to the process of buying the same asset at a low price and selling it at a high price by exploiting price differences on different cryptocurrency exchanges or different trading pairs on the same exchange.
It should be noted that cryptocurrencies are listed on different exchanges, and these exchanges have different liquidity and trading volumes. This means that the same cryptocurrency may have different prices on different exchanges.
Stablecoins and Trading Pairs
Stablecoins are cryptocurrencies designed to reduce volatility in the cryptocurrency market. They usually have values pegged to a fiat currency such as the Euro, the US dollar, or another asset class such as gold. Therefore, stablecoins offer a more stable value and protect against the price fluctuations of cryptocurrencies. Crypto trading pairs are pairs in which cryptocurrencies are traded with each other. For instance, there are crypto trading pairs such as Bitcoin (BTC)/Ethereum (ETH). In these pairs, one cryptocurrency appreciates or depreciates against the other.
There is a relationship between stablecoins and crypto trading pairs. Stablecoins can be paired with trading pairs commonly used in the cryptocurrency market. In particular, trading pairs can be created with cryptocurrencies such as Bitcoin (BTC), and Ethereum (ETH). For instance, pairs like Bitcoin/USDT (Tether) or Ethereum/USDC (USD Coin) offer a stable trading pair by linking the values of cryptocurrencies to a pegged fiat currency.
