In a survey conducted by Encrybit, it was revealed that 22% of the traders consider lack of good trading pairs as one of the issues faced on existing cryptocurrency exchanges. Let’s see what it is and how is this an issue?
What are Trading pairs?
In traditional stock exchange markets, you only had two options, one is your fiat currency, and the other is the asset you are willing to buy. So, as such, there aren’t any pairs like the ones in cryptocurrency trading.
In this new world of trading, there are 1623 cryptocurrencies (as per today’s date May 24, 2018). The crypto trading has been fascinating to many new people who haven’t even tried stock trading. Especially, millennials are ready to take a dive no matter what. When learned with focus, cryptocurrency trading pairs are no big deal.
When you encounter an exchange, you would see pairs listed as BTC/USD, ETH/BTC and the like. Now, what does this mean? In simple terms, decoding the first pair BTC/USD, you can buy bitcoin using US dollars. Similarly, ETH/BTC means you can buy ETH using BTC. So, here you can trade crypto to crypto in addition to crypto to fiat. At the initial stage, you might get confused but once you are through, trust me that’s an achievement on lifetime.
Now, here trading isn’t limited to crypto and cash. The complications are faced with crypto to crypto. Here, both the trading entities are highly volatile, and the decision has to be made wisely, considering every aspect. The perfect timing plays the game.
Consider a case, where ETH/BTC is a trading pair. You have bought BTC using cash, and the price is BTC increased by $5. So, your cash value increased. At the same time, the price of ETH goes down by $10. On an exchange, you have to enter the amount like buy ETH worth 15 BTC. In the described price situation, you get more ETH. Thus, when the price of ETH goes up, you have extra profit.
What is the issue with lack of good trading pairs?
Situations are not always favorable as mentioned in the above case. Also, not all the cryptocurrency exchanges will have the pairs which you like to trade. Some may support 3 to 4 cryptocurrencies and thus less number of pairs. While an exchange like Binance supports a larger number of coins, it also supports a more substantial amount of pairs.
As you get sharp with crypto trading, you’d face that your exchange does not have good pairs for trading. Most probably, the professional traders have accounts on more than one exchange. Because all the favourable pairs aren’t present on one single exchange.
You might be thinking, what’s the problem in managing accounts on more than one exchange. The main reason is transaction fees. Transferring from one to another exchange is charged. Also, this charge is so high sometimes that you are left with a negligible profit.
22% of crypto traders says that Lack of good trading pairs on one particular exchange is one the issue faced while trading on existing exchange platforms. Because of this, they need to operate on more than one exchange and thus pay more a part of transaction fees.