A currency pair is the price of one currency against the other. The first listed currency in a currency pair is the base currency, while the second is called the quote currency.
Currency pairs indicate how much of the quote currency is needed to purchase one unit of the base currency.
How Do Currency Pairs Work in an Exchange?
If you want to buy cryptocurrency in an exchange, you need to sell an amount of the quote currency in its traded currency pair(s). The quote currency would be your national (fiat) currency if it is your first time buying cryptocurrency.
Fiat currencies are the government-issued currencies that we have been using ever since we were born. Today we can conveniently use them in the digital environment.
To buy cryptocurrency in an exchange, you can take the market price of that crypto (base currency). Or you can bid your own price to buy that crypto and wait for your order to fill. Your non-crypto funds will be the quote currency in this transaction.
And to sell cryptocurrency , you can take the market price of the cryptocurrency that you want to sell, or you can ask your own sell price and wait for your sell order to fill.
Currency Pairs in the Cryptocurrency Market
In the cryptocurrency market, there are basically two categories of currency pairs:
- Crypto-to-fiat: The most common crypto-to-fiat currency pair in the market is the Bitcoin-to-USD pair. The BTC/USD pair you see in an exchange represents the price of BTC in terms of USD.
- Crypto-to-crypto: The most common crypto-to-crypto currency pair in the market is the Ethereum-to-Bitcoin pair, no surprise given that Ethereum is by far the second-largest cryptocurrency. The ETH/BTC pair you see in an exchange represents the value of ETH in terms of BTC.
Although there can be dozens of cryptocurrencies to buy and sell in exchange, the majority of them do not constitute direct currency pairs. This is because there is not enough demand in the market to directly exchange any of those cryptocurrencies, so exchanges create no currency pairs for them.
Crypto-to-crypto currency pairs in exchanges most usually have BTC, ETH, some fiat-currency- pegged stablecoins (with USDT being the most common), and exchange coins (if any) as the quote cryptocurrency. You are only able to buy and sell cryptocurrency against these major cryptos.
You can benefit from crypto-to-stablecoin pairs to trade cryptocurrency if your focus is on increasing your account balance in fiat currency terms, as stablecoins possess the same functionality as fiat currencies.
With CEX.IO, you can trade on a multitude of crypto-to-fiat and crypto-to-crypto pairs. To do that, you would need to click on the Trade menu at the top left side of the CEX.IO homepage.
When you click on Trade, it will open you all different categories of currency pairs.
In the Trade page, you will find the available crypto-to-fiat pairs, which include USD, EUR, GBP, and RUB, and the crypto-to-crypto pairs, which consist of BTC, ETH, and USDT as the quoted currencies.