How Crypto Pairs Help You Maximize Upside in Volatile Markets
The crypto market is full of different crypto instruments. On average, there are at least 12,000 cryptocurrencies for a crypto investor to consider. Of these, many people are widely familiar with a handful.
Comparing the figure with fiat, there are only about 180 fiat currencies. Differences in fiat value are the reason for the excitement in the forex currency market that beckons many traders. Although it is less talked about, the crypto market has its exchange market. The industry borrows heavily from the fiat currency market, where a person can easily exchange Bitcoin for Ethereum and vice versa.
People looking for tips for cryptocurrency margin trading or any other type of trading often hope for simple answers that point them in the perfect direction for maximum profits. The dynamics of crypto exchange markets are difficult to predict and often make crypto investment positions very risky. However, beyond day traders, crypto pairs work for people looking to use different blockchain networks.
Exchange BTC for LTC
The fiat market has a few favorite fiat pairs, which dominate the trade. As of this writing, the dollar and euro dominate the forex markets in terms of volume traded. The reason for the dominance of USD/EURO is that the two pairs are the most preferred in the world for trading goods and services.
The pound sterling dominates the currency market in the United Kingdom. The yen has its dominance in Asian markets. In a nutshell, a local currency will dominate the domestic market, alongside an internationally acceptable monetary unit, which is usually the dollar or the euro.
Bitcoin is the basic exchange point in crypto pairing. It is the most valuable crypto and it enjoys great popularity in the crypto space. While Ethereum is the second most valuable crypto, only behind Bitcoin at the time of this writing, pairing Bitcoin with the dollar takes the lion’s share. Note, the latter is not a crypto-currency. However, when it comes to pure crypto, the BTC/ETH pair is what dominates the crypto markets.
When it comes to BTC and LTC, the latter is a minor player in the forex market alongside over 10,000 other cryptocurrencies. People looking to own LTC might find it difficult to use BTC to get a coin. However, to make the transaction possible, a crypto fanatic can liquidate their Bitcoin in an exchange and then use fiat to buy LTC.
Some exchanges allow the exchange of one crypto with the other, but since there are over 11,000, some will need the dollar to buy them.
Why is BTC the base crypto?
Usually, the main trading product by trading volume is the basic tool to normalize any market. In the monetary world, each of the more than 180 fiat is the base currency in an individual state, using the currency for local exchanges. For example, the Rand is the most useful exchange tool in South Africa.
However, when looking at things from an international perspective, the forex market becomes something completely different. Small currencies have tiny or non-existent reserves in other central banks. Reserves help local businesses trade internationally.
The dollar, for its part, has built a reputation over the years, coupled with US economic hegemony, which causes most central banks and countries to use it as a reserve. Consequently, the dollar has become the base fiat currency, which means that other currencies base their values on using it in international transactions.
The other reserve currencies are the euro, the pound sterling and the Japanese currency.
The crypto exchange market is not far from the regular forex markets. Since bitcoin is the most valuable crypto, it has earned the right to base the value of other coins on crypto exchanges.
How Stablecoins Are Fair in Crypto Exchanges
Stablecoins are already at par with the dollar by their definition. Using stablecoins in the forex market is akin to creating a BTC/USD pair. However, in their own right, stablecoins are not fiat, meaning they operate on decentralized exchanges. Therefore, a USDT/ETH pair is highly probable.
A slight variation in the price of one coin relative to the other makes crypto pairs an effective investment strategy for a day trader. Many events crop up in the crypto markets that help make a coin more or less valuable.
For example, a BTC endorsement on Twitter will quickly move Bitcoin’s value much higher relative to another cryptocurrency. A vigilant crypto investor can quickly dump their BTC for the dollar.
Crypto pairs also help blockchain users change their crypto to one that supports a particular blockchain.