Blockchain is one of the fastest-growing financial markets in the world. Due to its speedy and almost free transactions across the borders, it is considered the future of payment by many. The way popular crypto pairs as investment strategy like bitcoins are mined makes it even rarer over time. Yet, the cryptocurrency market has never failed to attract millions of investors around the world. The market capitalization of one of the Bitcoins stood at $1,179 billion making it the biggest cryptocurrency in the world.
One of the main factors that stood in way of the cryptocurrency growth is the security concern of most people. The concern was real since the news related to hacking and stealing bitcoins wasn’t uncommon. Even the largest cryptocurrency exchange at the time Mt. Gox was hacked which resulted in the largest cryptocurrency scam. However, Bitcoins and other cryptocurrencies have evolved to be a much secure way to invest over time. The Bitcoin wallets in the market today are far better and offer advanced security features like encryption to secure the wallet.
This security feature makes it impossible for hackers to steal your bitcoins or other digital money. These advancements in the cryptocurrency markets are one of the reasons that we have less news related to cryptocurrency scams today. Another excellent advantage of a cryptocurrency over the other forms of money is that they are decentralized. Unlike fiat money which is heavily regulated, bitcoins are not. That means you can escape those bank charges if you want to send or receive payments across borders.
What is Pair Trading Cryptocurrency and How Does It Work?
This gives cryptocurrency is a big advantage over fiat money for international payments and even domestic payments. These features of cryptocurrency have managed to gain the attention of a large number of investors around the world. It has also attracted some big companies like Tesla and Microsoft. One of the emerging forms of cryptocurrency investment strategies is cryptocurrency pair trading. The cryptocurrency pair trading is done with the help of 2 cryptocurrencies that are knows trading pairs.
The trading pair comprises 2 cryptocurrencies in which their prices can be compared against each other for exchange. For instance, Bitcoin/Etherum or Litecoin/Bitcoin cash can be the cryptocurrency pairs. Unlike the traditional forms of trading, cryptocurrency pair trading works on the principle of relative value. A pair in the cryptocurrency pair trading is compared to each other to see the value of the first currency against the second cryptocurrency.
Many exchanges offer the option for cryptocurrency pair trading in the present world. This includes some of the popular cryptocurrency exchanges like Evolve Markets, Coinbase, Gemini, and Binance. According to Evolve Markets review, the cryptocurrency exchange is one of the best exchanges in the blockchain market. These exchanges offer you several pairing options based on the cryptocurrency you already have. For instance, if you have Bitcoins then you can trade in any cryptocurrency pairs that include bitcoins let’s say Bitcoin/Litecoin or Dogecoin/Bitcoin.
Many cryptocurrency exchanges in the market also give the option to pair your cryptocurrency with fiat money. However, you may not find the option to pair your cryptocurrency with fiat money in many cryptocurrency exchanges. Yet, many popular exchanges provide you with the option to pair your cryptocurrency with fiat money like US dollars. This is very useful especially if you already have experience in the forex market since cryptocurrency pair trading works on a similar principle to that of forex trading.
What Is the Base Currency in Crypto Pair?
Understanding the base currency is essential before you make a move towards cryptocurrency pair trading. A base currency in the cryptocurrency pairs refers to the first currency listed in the pair. The cryptocurrency in the pair is compared against each other to find how much of the second currency equal to the 1 unit of the first currency. Base currencies are used to compare fiat currencies of different currencies. If you are an American who wants to travel to Italy you might first need to convert your USD to Italian currency Euro. For that, you would be looking at how many of the euros would be equal to the 1 unit of USD.
Hence, in this case, the USD is the base currency and Euro is the quote or second currency. The most popular cryptocurrency for pair trading is the ETH and the BTC. Moreover, the currency pair BTC/ETH is the most traded cryptocurrency pair in the cryptocurrency pair trading. If you want to trade a less known cryptocurrency in the exchange you will need to have one of the base currencies that the exchange has to offer. An investor should also ensure that the cryptocurrency exchange has the cryptocurrency trading pair that he wants to trade.
Effect of Liquidity of Crypto Pair Trading
The liquidity does have a significant impact on cryptocurrency pair trading. Liquidity refers to the ability to sell a cryptocurrency easily. High liquidity is a good sign of the investor’s confidence in the cryptocurrency. Since a pair in the cryptocurrency pair trading includes two cryptocurrencies, the trader has to be aware of the liquidity of both currencies in the market. That means the liquidity of your cryptocurrency pairs is determined by the currencies in your pair. This is one of the reasons why investors are more likely to trade in pairs that usually consist of BTC, ETH, LTC, or the USD. One of the main advantages of choosing a highly liquid cryptocurrency is that it can easily be sold even if the market is down.
Cryptocurrency pair trading is one of the emerging trading strategies in the cryptocurrency market. The cryptocurrency pair trading involves two cryptocurrencies compared against each other. The first of these cryptocurrencies is known as the base pair. The base pair is the currency against which the second cryptocurrency is compared. The most commonly paired cryptocurrency trading pair in the market is BTC/ETH.
The traders are likely to trade with a highly liquid cryptocurrency to ensure that they can easily buy and sell the pair on demand. The cryptocurrency pair trading requires a trader to have good knowledge about the market and also on the fundamentals of cryptocurrency pair trading. Hence, cryptocurrency pair trading can be very risky for a beginner in the cryptocurrency market.