With over three thousand registered tokens and coins not counting obscure digital assets that are not officially listed on exchanges, the crypto industry is certainly a very complicated domain for any retail trader. Navigating this diverse ecosystem can be challenging. You need to use a variety of specialized tools like automated crypto trading, advanced technical analysis methods, and more.
Due to the sheer size and complexity of the industry, new trading pairs, sophisticated financial instruments, and innovative platforms appear regularly. It makes it even harder for newcomers to learn how to invest properly.
The best crypto trading pairs
Searching for the best crypto trading pair is not an easy task. First of all, you need to know what a trading pair is. When two different financial assets are compared against each other, we call it a trading pair. Note that a pair looks like BTC/USDT. The first asset is the base asset which price we are trying to determine against the second one.
While the vast majority of assets are usually compared as 1/x, where “x” stands for the amount of digital or fiat assets that must be paid to obtain the base asset, other denominations, and units can be used. The crypto world also has unique digital assets like NFTs which can also act as trading pairs in some scenarios.
Any commodity or financial asset can be represented by an asset pair. We do not think of it this way because the vast majority of people are accustomed to seeing prices in US dollars.
Important features of trading pairs
When it comes to selecting a good pair to trade, one must remember which qualities they value in a certain asset and how they plan to make money. Depending on your preferences, the ideal pair of assets may look one way or another.
Let’s take a look at some key features of a trading pair:
- Liquidity. In general, pairing various assets against each other improves liquidity on any given exchange. However, different pairs may have different liquidities. Some assets a wildly popular with trades occurring immediately after any order is placed. Other assets may not have sufficient liquidity to support large market movements.
- Popularity. Any investor wants to work with reliable digital assets. Cryptocurrencies are still largely speculative assets with prices fluctuating depending on the public opinion and trust from the community. Obscure tokens that do not have a big crowd of supporters quickly lose market positions and may not be a good destination for capital placement.
- Availability. Many exchanges do not carry financial instruments that they do not see as attractive to their respective user bases. It means that a cryptocurrency pair offered on one exchange may not even exist on another. While it is not a major issue for someone working with a single CEX platform, it can be a problem for retail traders using multiple exchanges at once.
The best trading pairs in crypto will be different for each investor. For example, if you are interested only in amassing assets and holding, you will probably work only with BTC/USDT or ETH/USDT. Other options will make little sense to someone who only wants to buy mainstream coins and store them until the time is right to sell.
On the other hand, active retail traders using a variety of strategies will look for other variations that may offer interesting outcomes. Using less intensive asset pairs like DOGE/LTC or ADA/USDT, one can look for price discrepancies and interesting opportunities to engage in triangular arbitrage or use other forms of automation.
Let’s look at the cryptocurrency trading pairs list consisting of the most popular coins.
BTC/USDT — the behemoth of the industry
If you are looking for the best crypto pairs for day trading, the main “power couple” of the crypto market should be on your list. Bitcoin is an established brand in the financial world with many experts describing it as “too big to fall”. Indeed, this cryptocurrency is one of the most reliable and consistent among all the coins.
USDT is the exchange symbol of Tether, a stable coin pegged by the US dollar. It works as an exchange medium and you can use it for quick transactions on CEX platforms. Some exchanges also offer their analogs. USD Coin (USDC) is used by Coinbase, Binance USD (BUSD) by the biggest centralized exchange in the world Binance, and other exchanges have their stablecoins.
Even when you look at the price of Bitcoin, it is usually denominated in USDT. The latter can be exchanged for USD with a close to 1:1 ratio. It makes sense for many publications and media outlets to use it as an alternative to the US dollar.
This pair has many advantages that will be quite useful for someone who wants to find the best crypto pairs for GRID trading, day trading, and any other system:
- High liquidity. The pair never experiences issues with liquidity. Trading volumes can exceed hundreds of billions on a good day. It is a perfect financial instrument for people who want to place large market orders or enjoy instant market execution of their orders.
- Predictability. Bitcoin can be analyzed with fundamental and technical approaches. It is already big enough to have various economic events affect it meaning that following an economic calendar is a good idea. Since it is compared against the US dollar, you may use fundamental analysis to evaluate the price from the fiat perspective.
- Consistency. Bitcoin is the number one choice for any long-term investor. It is already adopted by many ecosystems and even some nations. The future of the coin is certainly bright. Retail traders often prefer working with well-established assets.
ETH/USDT — the second-biggest pair
The market dominance of Bitcoin is hard to overestimate. Ethereum is a different project, but it has several distinct qualities. For one, the Ethereum network switched from mining (Proof-of-Work) to staking (Proof-of-Stake) which significantly improved the throughput and opened new opportunities for developers deploying their products on the network.
Another important thing is that Ethereum works as a foundation for many other tokens (ERC-20) and coins allowing it to have a certain level of predictability, reliability, and stability. It is still a speculative asset that fluctuates wildly during periods of market volatility, but many traders believe that it has better legs than Bitcoin.
Ethereum is also paired against Bitcoin itself making it one of the best BTC trading pairs for people who want to engage in arbitrage or focus on creating a balanced portfolio. Swapping these assets directly can be beneficial due to price discrepancies with USDT.
Dogecoin and Shiba trading pairs
Despite some setbacks and issues with the industry a few months ago, DOGE and SHIB are still staples for any retail trader. These tokens have liquidity and provide a lot of breathing room when you want to engage in triangular arbitrage or move large portions of portfolios quickly.
Dogecoin started as a meme and was a grossly inflationary currency until some deflationary mechanisms were introduced. Thanks to the overwhelming support from the community, it turned into a massive digital asset. Shiba is another project that started as a copycat of DOGE but expanded into a large ecosystem.
These two assets look perfect for retail traders interested in dynamic USDT trading pairs. Prices fluctuate often yet the amplitude of price action is often smaller compared to some other coins. However, some disadvantages must be mentioned:
- Volatility. DOGE and SHIB are prone to volatility and often change course multiple times within a single day. While day traders enjoy such dynamics and make money on small movements, even the introduction of new trading pairs with DOGE and SHIBA can be a source of instability.
- Brand recognition. For any other asset, this would be a huge plus. The issue with Dogecoin and Shiba is that they are “meme” coins that still have that aura of a big joke around them. Serious investors will unlikely consider moving their funds to DOGE-powered trust funds.
ADA/USDT — one of the best currency pairs for swing trading
Swing traders usually employ relatively simple strategies like MACD and RSI reversal predictions to find moments when the market changes its course. This strategy requires dynamic price action and large market movements. These happen with established coins from time to time, but it is not frequent enough for a dedicated swing trader.
ADA is compared against the most stable coins. It is a staple on many exchanges among popular USDT or USDC trading pairs. However, it also moves according to the mood of traders meaning that it changes direction regularly. It is a great speculative asset if you are interested in price retractions (corrections) or reversal-based strategies like swing trading.
ADA is the native coin of the Cardano network considered by many the biggest competitor of Ethereum. In essence, Cardano is expected to do the same thing as Ethereum but better. So far, the development team of Cardano has not been tremendously successful, but they have a strong dedicated group of supporters.
Using a pairs trading platform (automation)
Many retail traders working with cryptocurrencies focus their efforts on creating consistent trading strategies. The best tool that helps experienced users is automation. Just two decades ago, only huge financial institutions and hedge fund managers could use these powerful instruments. In 2023, anyone can use various automation options including DCA, GRID, arbitrage, and custom bots.
Before we discuss the best crypto pairs for GRID trading in 2023, we need to explain why automation is so prevalent and largely employed by crypto traders:
- Bots work around the clock. The cryptocurrency market never stops with orders executed 24/7 without any delays or pauses. It is a very stressful environment for people who tend to worry about missing out. Bots solve this issue and allow you to stay active even during nighttime.
- Mistakes are out of the question. One of the problems with human traders is that they make mistakes. These can be misplaced orders, clicking the wrong thing, or simply hesitating for too long before entering the market. Many of these mistakes are made in a hurry or due to nerves. Bots do not have this weakness.
- It is cheaper than ever. The biggest barrier to entry used to be the high price of automation. Today, with the help of cloud computing, many platforms can provide excellent service for a low price making automation available to everyone. Some companies like WunderTrading have free plans allowing users to run up to five bots simultaneously.
The advantages of using automated trading systems are plentiful and can be game-changing for some users who may have found their perfect pairs trading algorithm. It is quite tiring to sit in front of the monitor all the time trying to keep track of a myriad of different cryptocurrency pairs. Since many retail traders using the day trading approach usually have to work with multiple digital assets at once, their attention inevitably becomes scattered and unfocused.
Automation is a perfect solution for this particular problem. Contemporary methods of automating various operations on an exchange gained widespread popularity during the height of the FOREX trading era. Bots and copy trading systems worked remarkably well for currency pairs. The same principle is applied to the cryptocurrency world where investors deal with an abundance of various assets and their combinations.
Using derivatives with the best BTC trading pairs
Bitcoin is the foundational digital asset of the whole crypto industry. Without it, the whole market would not have been the same. Since BTC is the most popular and valuable digital asset, many financial institutions formed in the crypto industry focused their attention on creating advanced financial products to lure in a wider audience of investors.
Derivatives are staples in financial markets of all kinds. These are assets that are based on other assets. Typically, we refer to options and futures.
Several kinds of derivatives are based on cryptocurrency pairs:
- Futures. These contracts are a mutual agreement between the provider of goods (BTC holder) and the holder of the contract that an agreed-upon number of coins must be purchased at a certain date in the future. These are hugely popular derivatives that make up the bulk of all trading operations in the market for derivatives.
- Perpetual futures. These contracts work much like traditional futures but they can be renegotiated after the expiration date and can be automatically extended for another set period. Perpetual futures became staples on multiple centralized exchanges including Binance and Kraken.
- Options are contracts that give holders the right to buy a certain asset in the future. Options can have extremely short expiration periods with some lasting just a couple of seconds. Since they are often traded using leverage, rewards, and risks are quite high. Pairs trading with options is quite dangerous for newcomers.
All derivatives are usually traded using a margin account. Most retail traders do not have the necessary capital to create market positions with hundreds of BTCs. However, the leverage provided by centralized exchanges can be utilized to bypass this limitation. The issue here is risk.
Selecting a good automated system
When it comes to choosing a Binance, Kraken, or Kucoin trading bot, the best pairs are often those that have high liquidity and enough trading volumes to support instant order execution. All USDT trading pairs usually have the necessary metrics to warrant using an automated system.
There are many approaches that you may try:
- DCA buying. This approach is based on the Distributed Cost Average principle stating that an investor can reduce the average price of assets by splitting their order into multiple market positions. It is an especially good approach to use if you understand technical analysis and can open small market positions during price retracements or on a downtrend.
- GRID bots. GRID is DCA on steroids. Offered by multiple automation vendors including WunderTrading and some others, this approach is based on opening a multitude of market positions using a form of DCA algorithm and immediately placing take profit and stop loss commands according to the investor’s risk tolerance.
- Arbitrage. People engaging in crypto pairs trading often observe a situation when prices diverge. For example, a single BTC may be priced at $20K while floating above $1.5K against ETH. If ETH is traded at $1.6 against USDT, you can make a profit by simultaneously trading BTC for ETH and ETH for USDT. This is called triangular arbitrage.
These examples are just preset products offered by automation vendors. You can use any type of technical analysis strategy to create a powerful and consistent system that can be easily automated using custom scripts.
If you are not interested in using custom bots, try searching for the best GRID trading pairs. Here are some qualities that a cryptocurrency pair must have to work well with a GRID bot:
- High liquidity. A GRID bot may place dozens of market orders in quick succession. It means that the market must be able to support these positions and allow bots to place appropriate take profit and stop loss commands.
- Popularity among traders. If a digital asset enjoys attention from the media and other retail traders, it will have a high level of volatility caused by external factors like news, announcements, and updates rolled out on corresponding networks. Depending on your risk tolerance, you may want to avoid such periods or trade with even more vigor.
- Your expertise. While many cryptocurrencies are inherently speculative, it is still hugely important to understand how they work and where the development team is heading with certain coins. It is especially vital for your success if you plan to open long-term market positions.
Identifying the best trading bot pairs can be quite challenging considering the diversity of the cryptocurrency domain. However, you can easily find pairs that work for you specifically. Pick pairs that you understand, make sure that they have high volume and liquidity, select the right type of strategy, and use automation to reach consistency in the long run.
Interesting options to consider
People interested in working on decentralized platforms may find it useful to carefully analyze Uniswap trading pairs. This DEX platform is one of the largest in the market and often defines how traders evaluate various digital assets.
You should also research coins that have high liquidity and have strong following. For example, many XRP trading pairs work well for a multitude of technical analysis methods. Ripple is still a staple in the cryptocurrency industry.
Binance deserves an honorable mention. This centralized exchange controls a huge market share reaching 17% by some estimates. It has a big and diverse platform offering a rich product lineup to all its clients. It also has its token BNB traded against a wide range of digital assets. Many BNB trading pairs are excellent choices for automation!
Note that Binance also focuses on promoting its stablecoin BUSD (Binance USD) which is used by millions of crypto investors. It is pegged by the US dollar and works as an alternative to USDT and USDC. If you are working primarily on Binance or plan to focus on this CEX platform, consider using BUSD pairs instead of USDT-based ones.
It is impossible to find the best cryptocurrency pair for trading without taking into consideration the personal preferences and risk tolerance of each investor. Liquidity, trading volumes, and other factors play a huge role, but, ultimately, investors must make decisions driven by their expertise and experience.