What are cryptocurrency pairs?
Cryptocurrency trading involves buying and selling digital assets like bitcoin, ether and other cryptocurrencies on exchanges. Trading pairs represent two different cryptocurrencies that can be exchanged for one another on a trading platform.
Some of the most common pair types are fiat-to-crypto. This is where a traditional currency like the United States dollar is traded against a cryptocurrency like bitcoin. The pair is often labeled with the currencies separated by a slash, such as BTC/USD or ETH/USD. Additionally, two digital currencies can be exchanged for each other, such as ETH/BTC.
The first currency listed is the base currency, while the second is the quote currency. For instance, in the BTC/USD pair, bitcoin is quoted in U.S. dollars; the price reflects how many dollars are needed to purchase one bitcoin. This concept extends to the crypto-to-crypto pairs, where the value signifies how much of one cryptocurrency is needed to exchange for another.
What can the price of crypto pairs tell us?
Looking at pairs can give a sense of the change in relative value between two cryptocurrencies regardless of their movement against a fiat currency such as the U.S. dollar.
For example, while bitcoin and ether prices are highly correlated when quoted in U.S. dollars, their relative price can move. In mid-June 2017, ether could be bought for $343 while bitcoin was trading at $2,450. The price of ether in bitcoin terms was 0.14 BTC (think of it as $343/$2,450). Seven years later, in mid-June 2024, ether traded for $3,493 while bitcoin was at $66,139. However, the price of ether in bitcoin terms was then at 0.053 BTC ($3,493/$66,139), much lower than in 2017. That tells us that while both of those cryptocurrencies soared exponentially against the greenback over the course of seven years, bitcoin's value increased far more relative to ether's.
Why do people use crypto trading pairs?
People trade them for several key reasons:
- Diversification: Trading pairs allow investors to diversify their portfolios by exchanging one cryptocurrency for another.
- Liquidity: They often offer high liquidity, making it easier for traders to enter and exit positions without significantly impacting the market price.
- Market access: Some cryptocurrencies, particularly smaller and less-liquid ones, may not be directly tradable against fiat currencies. Trading pairs with more widely accepted cryptocurrencies, like bitcoin or ether, provide access to a broader range of digital assets.
- Risk management: Investors can hedge against price movements in their primary assets using trading pairs. For example, if one holds a volatile cryptocurrency, one might trade it against a more stable asset to manage exposure.
Crypto trading pairs offer flexibility and strategies for optimizing trading outcomes and managing risk in the dynamic cryptocurrency market.
Disclaimer: This article was produced with the assistance of OpenAI’s ChatGPT 3.5/4 and reviewed and edited by our editorial team.
© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
