Liquidity is the most important factor to consider when you pick a crypto pair for trading Forex because it refers to the ability to sell the assets f
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There are over 2000 cryptocurrencies on the Forex market, with different prices, popularity, capitalisation, and trading volumes. For example, everyone knows that the most popular cryptocurrencies are Bitcoin and Ethereum, but some may find it surprising that 42-coin is the most valuable asset with an exchange rate of $20,000. But Forex traders don’t consider it a valid trading option because it has low liquidity.
If you’re new to the trading world, you should know that only a dozen are popular in the cryptocurrency sector among the thousands of assets. Their popularity is constantly changing, as is their ranking according to market capitalisation. The current trends show that Bitcoin will most likely remain the most popular digital currency, cementing its position on the Forex market, and contributing the total value to the cryptocurrency market capital. Apart from Bitcoin and Ethereum, things are shaky for other assets. For most of them, their popularity doesn’t match their overall market rating.
So how can you pick the best cryptocurrency pair to trade?
Guidelines to select the best crypto trading pairs
You shouldn’t enter the market before running an in-depth analysis of the most popular cryptocurrencies on the market to identify the ones most likely to drive profit. Once you complete this stage, you need to perform a technical analysis of the digital coin pairs to understand the market’s behaviour and trends.
But, the above two steps won’t provide you with the needed knowledge to begin trading; you still have to identify the best trading pair. It may seem simple considering that only a dozen cryptocurrencies perform well on the market. You may think that you can combine any two of them, and you have the recipe for profit. Well, if you use this method, you can easily choose the wrong pain and register loss or a small profit.
First, you should find out what the most popular pairs are among the exchanges. Most brokers provide complete information about the most sought-after teams, but you need to search for the crypto-to-crypto currencies because they usually focus on traditional coin pairs. In 2021, BTC/ETH, BTC/LTC, USDT/BTC and ETH/LTC are prevailing. As you can guess, they are successful because one of the assets is an in demand digital currency like Bitcoin, Ethereum, or Litecoin. It’s quite easy to find buyers for one of the above pairs.
After you identify the list of the most popular pairs, inspect their trading volume and look for their connection with other assets to determine which one of the most profitable at the moment on the market. Also, you may not have enough funds to trade Bitcoin or Ethereum, so you need to perform a more in-depth analysis of the market.
Consider the liquidity
Liquidity is the most important factor to consider when you pick a crypto pair for trading Forex because it refers to the ability to sell the assets fast. When the pair registers high liquidity, there are more opportunities to sell the asset. Liquidity directly impacts profit.
However, it doesn’t refer only to the speed of closing a trade and the levels of risks associated with the pair. If you know there are many buyers interested in purchasing the pair on the market, don’t lose money on a bearish trend.
The demand for the specific cryptocurrency affects its liquidity. This is why Bitcoin, Ethereum, Ripple XRP, Litecoin, NEO and IOTA are the primary choices for any Forex trader interested in digital currencies.
What base currency is best to use?
The ideal strategy implies picking a base currency for the pair. All Forex traders have heard about Bitcoin, and you probably make no exception. Even if some traders think this currency isn’t the best base digital coin from a technical point of view, a beginner trader should use it because everyone in the market wants to buy Bitcoin. Bitcoin is the best base for a cryptocurrency pair because it’s by far the most popular cryptocurrency on the market.
Ethereum is another good option because it’s as popular as Bitcoin and registers huge worldwide demand. You can pair it with any other run-after currency, and you have a lucky pair.
The third most popular base currency is Tether that has become popular a couple of months ago and established its reputation as the best stable coin. You can find USDT worldwide because the exchange rate is linked to the US dollar.
If you need more information about base currencies, install one of the following useful mobile apps for cryptocurrency users because they provide you with complete information.
Which pair brings you more advantages?
As expected, you get more advantages if you trade some pairs because they provide higher profits and trading opportunities. However, most times, the ideal pair to trade is decided by the exchange you use to trade.
Most beginner traders prefer ETH/BTC because they are added to all listings. Another well-received pair is the LTC/BTC that has maintained its popularity over the years. However, during the last months, the Forex market trends showed that it’s best to trade LTC/USDT than LTC/BTC because the first one has a higher liquidity and trading volume.
You should always go with the pair that can bring you more profit and has more buyers who close the orders during the trading day.
At the moment, the cryptocurrency Forex market is one of the most popular worldwide. More and more countries are looking for a way to implement more assets to provide their clients with a wide range of alternative payment methods. This measure will only make digital currencies more table and accessible for Forex trading.
In 2020, USDT had the highest trading volume, and the pairs USDT/BTC, USDT/XRP, USDT/ETH and USDT/EOS were by far the most in-demand. You can enter the market with as little as $1000 and gain significant amounts.
If you’re interested in getting involved in the cryptocurrency market, this article can serve as initiation because it provides basic information on the leading cryptocurrency pairs in the industry.