In the crypto market, the concept of a trading pair manifests as the convergence of two distinct digital currencies, wherein they are interchanged on a specific exchange. These pairs wield significant influence over the valuation of one cryptocurrency in relation to another.
To represent these trading pairs, abbreviated symbols are commonly employed, such as BTC/ETH or ETH/USDT. The initial symbol denotes the base currency, while the subsequent symbol represents the quote currency. The base currency denotes the cryptocurrency being either procured or sold, whereas the quote currency determines the value assigned to it. For instance, when examining the BTC/ETH trading pair, BTC assumes the role of the base currency, while ETH fulfills the position of the quote currency. Consequently, one can procure or vend BTC by employing ETH as the quote currency. Similarly, large crypto platforms support crypto-fiat trading, which means you can exchange Bitcoin to euro by cheating a BTC EUR pair where you pay euros to buy bitcoins.
Crypto Pairs Trading Mechanism
When engaging in a trade, it becomes imperative to specify the desired quantity of the base currency for purchase or sale. Subsequently, the exchange utilizes the prevalent exchange rate associated with the trading pair to calculate the corresponding quantity of the quote currency. This exchange rate materializes through the interplay between supply and demand for the two cryptocurrencies within the market.
Trading pairs enable traders to engage in speculation pertaining to the fluctuating prices of distinct cryptocurrencies, thereby seizing potential opportunities for arbitrage. Additionally, these pairs augment market liquidity by facilitating the seamless exchange of disparate cryptocurrencies among buyers and sellers.
However, it is crucial to recognize that not all cryptocurrencies enjoy direct trading capabilities with one another. On certain occasions, the usage of a universally accepted quote currency, such as Bitcoin or a stablecoin like USDT, becomes necessary to bridge the gap between less frequently traded digital assets. Actually, here is the list of liquid cryptocurrency to watch:
In essence, comprehending the functioning of trading pairs is indispensable for navigating the complex terrain of cryptocurrency exchanges and effectively participating in crypto trading. Learn more about crypto trading on the WhiteBIT blog. You may also practice trading different combinations of cryptos by using the WhiteBIT demo account.