On the world’s leading social trading platform eToro there are 16 crypto trading pairs (as of mid-December 2018). These pairs include six crypto-only trading pairs: ethereum-EOS (ETHEOS); ethereum-stellar (ETHXLM); ethereum-bitcoin (ETHBTC); bitcoin-EOS (BTCEOS); bitcoin-stellar (BTCXLM); and EOS-stellar (EOSXLM).
Trading crypto pairs is increasingly popular for eToro users. But what exactly is a crypto trading pair? Simply put, a trading pair comprises two separate types of currency and one is traded against the other – both could be cryptos, or one could be a crypto and the other fiat currency, for example, bitcoin-pound (BTCGBP).
Trading pairs of cryptos allows eToro users to profit from the ever-changing value of currencies. Bear in mind the position of the currency in the pair is crucial. For instance, if you believe that bitcoin will increase against the pound – as has been the case throughout Brexit negotiations in recent times – then you would want to buy the bitcoin-pound (BTCGBP) pair, with bitcoin as the so-called “base currency”, and not the pound-bitcoin pair. Generally, trading crypto pairs is a short-term commitment; after hopefully earning a profit the trader will then close the deal.There are many benefits to using crypto trading pairs as a financial instrument, including the generation of greater diversification for your portfolio, and exploring new – and different – financial markets and opportunities. It is essential to do your homework before investing in crypto pairs, though, as there are many factors to consider. Scan for impending news that might affect either the crypto or traditional currency markets.
Certainly, the pairing of a crypto with a fiat currency offers a range of investment opportunities, because cryptos and fiat currencies operate in different markets. For example, following the Brexit referendum vote in June 2016, the pound fell dramatically and the euro gained significantly. However, bitcoin did not show a great fluctuation in price.
By comparison, in September 2017, when the Chinese government announced it would be banning initial coin offerings (ICOs), the entire crypto market crashed, while the news did not impact the traditional currency markets whatsoever.
When one fiat currency rises or falls in value – the pound, say, because of Brexit – other currencies are not necessarily driven by the same factors. The ability to trade cryptos against fiat currencies other than the pound, such as the euro, the American dollar, or Japanese Yen, enables eToro traders to take advantage of a wider range of market activity.
Bitcoin is by far the most popular base currency when trading crypto pairs, partly because it is so well known, and partly because its price is not as volatile as some others in the market.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. This is not investment advice.