The crypto market is full of different crypto instruments. On average, there are at least 12k cryptocurrencies for a crypto investor to consider. Out of these, many people know a handful widely.
Contrasting the figure with fiat, there are only about 180 fiat currencies. The differences in fiat value are the reason for the bustling forex currency market that invites many traders. While not so much talked about, the crypto market has its exchange market. The industry borrows heavily from the fiat currency market, where a person can easily exchange a Bitcoin for Ethereum and vice versa.
People seeking tips for cryptocurrency margin trading or any other type of trading often hope for straightforward answers that point them towards the perfect direction for maximum profits. The dynamics in the crypto exchange markets are hard to predict and often make investment positions in crypto highly risky. However, beyond day traders, crypto pairs work for people looking to use different blockchain networks.
Exchanging BTC for LTC
The fiat market has some preferred fiat pairs, which dominate the trade. As of this writing, the Dollar and Euro dominate the forex markets in terms of volume exchanged. The reason for USD/EURO dominance is that the two pairs are the most preferred in the world for exchanging goods and services.
The Sterling pound dominates the currency market in the United Kingdom. The Yen has its dominance in the Asian markets. In a nutshell, a local currency will dominate the domestic market, alongside an internationally acceptable unit of currency, which is usually the dollar or the Euro.
Bitcoin is the Base Exchange point in crypto pairing. It is the most valuable crypto and has significant popularity in the crypto space. While Ethereum is the second most valuable crypto, only behind Bitcoin as of this writing, Bitcoin pairing with the dollar takes the lion’s share. Noteworthy, the latter is not a cryptocurrency. However, in pure crypto matters, the BTC/ETH pairing is what dominates the crypto markets.
In matters BTC and LTC, the latter is a minor player in the currency market alongside over 10,000 other cryptocurrencies. People looking to own some LTC might have some difficulties using BTC to have a piece. However, to make the transaction a possibility, a crypto fanatic can liquidate their Bitcoin in an exchange, and then use fiat to buy LTC.
Some exchanges allow the trading of one crypto with the other, but since over 11K of them exist, some will require the dollar to buy them.
Why Is BTC The Base Crypto?
Usually, the leading trading commodity by volume of trade is the base tool to standardize any market. In the currency world, each of the over 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 entirely different. Smaller currencies have minuscule or non-existent reserves in other central banks. The reserves help local businesses trade internationally.
The dollar on its part has built a reputation over the years, coupled with US economic hegemony, which makes most central banks and countries use it as a reserve. Therefore, the dollar has become the base fiat currency, meaning that other currencies base their values using it when trading internationally.
Other reserve currencies are the Euro, the Sterling pound, and the Japanese currency.
The crypto exchange market is not far off from the ordinary forex markets. Bitcoin being the most valuable crypto has earned the right to base the value of other coins on crypto exchanges.
How Do Stablecoins Fair in Crypto Exchanges
Stablecoins are already in parity with the dollar according to their definition. Using stablecoins in the exchange market is akin to making a BTC/USD pair. However, in their own right, stablecoins are not fiat, meaning that they work in decentralized exchanges. Therefore, a USDT/ETH pair is highly probable.
Closing Remarks
A slight change in the price of one coin over the other makes crypto pairs a working 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 shift the value of Bitcoin much higher against another cryptocurrency. A watchful crypto investor can quickly dump their BTC for the dollar.
Crypto pairs also help blockchain users change their crypto for the one that supports a particular blockchain.