WHY and HOW to Trade an Altcoin against another Altcoin ?

Trading cryptocurrencies on centralized exchange platforms is limited. Exchange platforms such as Binance, Bybit, Huobi only allow trading altcoins directly against stablecoins (USDT, USDC…), Bitcoin (BTC), or Ethereum (ETH). With a single operation, it is impossible to buy or sell a pair such as DOGE/AVAX, SOL/EGLD, ADA/SUSHI, etc.

In this article, we will first explore the interest in speculating on Altcoin pairs. Then, we will look at the different solutions to access trading one Altcoin against another Altcoin.

Why trade one Altcoin against another Altcoin?

When Bitcoin rises, Altcoins rise. When Bitcoin falls, Altcoins fall. Bitcoin drives the cryptocurrency market and generates bull/bear market phases based on its trends.

But what if you could trade one Altcoin against another Altcoin to eliminate the condition of the overall market trend and any risk of FOMO/Flash Crash instantly?

To give a concrete example, regardless of whether the overall cryptocurrency market is rising or falling, there is potentially money to be made (as a trader) if you have access to trading one altcoin against another altcoin. By trading, for example, the EGLD/AVAX cross, you speculate on the movement of the EGLD token relative to the AVAX token. So regardless of whether the market explodes upwards or downwards, you simply hope that:

• When buying the EGLD/AVAX cross and in a market that is generally rising due to Bitcoin, the EGLD token rises more than the AVAX token.
• When buying the EGLD/AVAX cross and in a market that is generally falling due to Bitcoin, the EGLD token falls less than the AVAX token.
• When selling the EGLD/AVAX cross and in a market that is generally rising due to Bitcoin, the EGLD token rises less than the AVAX token.
• When selling the EGLD/AVAX cross and in a market that is generally falling due to Bitcoin, the EGLD token falls more than the AVAX token.

Frequently Asked Questions:

• In case of FOMO, if EGLD and AVAX both increase by +100%, how does the EGLD/AVAX pair evolve?

At the end of this FOMO, if both tokens have increased by +100%, the EGLD/AVAX pair has not moved. Just a reminder, the EGLD/AVAX pair gives the value of a single EGLD token in AVAX. If EGLD is at $20 and AVAX is at $40, the EGLD/AVAX pair is therefore at 0.5 AVAX. 1 EGLD = 0.5 AVAX. At the end of the FOMO, if EGLD is at $40 and AVAX is at $80, the EGLD AVAX pair is still at 0.5 AVAX.

• In case of a FLASH CRASH, if EGLD and AVAX both drop by -50%, how does the EGLD/AVAX pair evolve?

At the end of this FLASH CRASH, if both tokens have dropped by -50%, the EGLD/AVAX pair has not moved. At the end of the FLASH CRASH, if EGLD is only at $10 and AVAX is at $20, the EGLD AVAX pair is still at 0.5 AVAX.

How to make big profits by speculating on one Altcoin against another Altcoin?

The greater the performance gap between two altcoins, the more significant the variation of the ALT/ALT pair will be. Let’s imagine EGLD at $20 and AVAX at $40. The EGLD/AVAX pair is therefore worth 0.5 AVAX. If EGLD/USD pumps by +50% ($30) while AVAX/USD dumps by -50% ($20), the EGLD/AVAX pair will soar to 1.5 AVAX ($30/$20), representing a +200% increase.

If EGLD/USD dumps by -50% ($10) while AVAX/USD pumps by +50% ($60), the EGLD/AVAX pair will collapse to 0.167 AVAX, representing a -67% decrease.

Therefore, the TOP/FLOP USD cross of the day is the cross displaying the highest positive daily performance. The FLOP/TOP USD cross of the day is the cross displaying the highest negative daily performance.

How to trade one Altcoin against another Altcoin on your platform?

As mentioned at the beginning of this article, your centralized exchange platform only offers access to trading a limited number of pairs. A trader wishing to buy/sell an ALT/ALT cross will therefore have to perform two operations on pairs listed on his platform. Let’s stick to the example of the EGLD/AVAX cross.

Your exchange platform lists:

EGLD/BTC – EGLD/USDT – EGLD/USDC

AVAX/BTC – AVAX/USDT – AVAX/USDC – AVAX/ETH

To build the EGLD/AVAX pair, the trader therefore has the choice here to go through BTC, USDT, or USDC.

Note: the trader cannot go through ETH because the EGLD/ETH pair is not available for trading…

The trader has chosen to go through TETHER (USDT) to build his EGLD/AVAX pair.

• To buy EGLD/AVAX, he simply needs to simultaneously perform two operations of the same amount: buy EGLD/USDT and sell AVAX/USDT
• To sell EGLD/AVAX, he simply needs to simultaneously perform two operations of the same amount: sell EGLD/USDT and buy AVAX/USDT

Since building Altcoin pairs requires two operations (including short selling), the trader will be required to use his margin account, Futures, or perpetuals offered by his exchange platform.

Note that in “SPOT” trading, short selling operations are not allowed.

Frequently Asked Questions:

• Why don’t platforms list all ALT/ALT pairs?

The number of possible ALT/ALT pairs to trade is too high. Note that an ALT1/ALT2 pair can also be quoted with its inverse: ALT2/ALT1. Exchange platforms would never be able to find sufficient liquidity to make these pairs attractive with a small spread.