Currency Pairs in Crypto

currency pair
Currency Pair.
The other day a friends asked the following question: “I am not a Forex trader. So what are currency pairs? I see them all over the crypto exchanges and am confused.”

A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in an exchange market. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

The most traded currency pairs in the world are called the Majors. They involve the currencies euro, US dollar, Japanese yen, pound sterling, Australian dollar, Canadian dollar, and the Swiss franc. These currency pairs are traded on the Forex market.

When you buy bitcoins with US dollars (fiat money) on a crypto exchange or an ATM, you are technically buying bitcoins and selling US dollars. You did not just buy a thing called bitcoin, you actually traded some things: bitcoins for US dollars. The currency pair for that trade is typically denoted as BTC/USD. Currency pair trading is the simultaneous buying of one currency and selling another.

Unremarkable, most newbies and beginning investors and traders will start trading the BTC/USD or ETH/USD currency pairs on an exchange like Coinbase. Coinbase offers several cryptocurrencies and makes trading intentionally simple.

For example, when you set up an account at Coinbase, you most likely will fund your new account with US dollars with either a wire transfer or a debit card. And then you buy some bitcoins with your funds. It’s called onboarding, but that is also already trading, and not just investing.

Many cryptocurrency exchanges allow for the trading of currency pairs other than BTC/USD. Kraken, another US-based exchange, offers a lot of additional non-USD currency pairs to trade. Ripple’s XRP, Stellar’s XLM, and Zcash’s ZEC are just a few samples.

In other words, on many exchanges other than Coinbase – and there are hundreds, you can trade coins and tokens not only with US dollars (fiat) but with bitcoins or even ether. Available on Kraken are XRP/USD and XRP/BTC, XLM/USD and XLM/BTC, and ZEC/USD and ZEC/BTC – just to name a few.

Some exchanges do not even deal in US dollars or any fiat currency. It’s not on their menu. You cannot onboard there with your fiat, or park in fiat or withdraw fiat. They got tons of coins and tokens to trade, and you must typically buy BTC (or XBT by another symbol) elsewhere and move it over to these exchanges to eventually trade desired currency pairs.