Since I started investing into blockchain and cryptocurrencies in general, I always asked myself one question:
"Which trading pairs should I view when analyzing projects and coins?"
I feel like I found an answer after the market exploded with various projects. Now there are new blockchains that have shown that there are here to stay (like Etheruem beside Bitcoin).
Trading pair options
The classic trading pair is always with Bitcoin (BTC). You can trade almost any Altcoin listed on an exchange against Bitcoin. Over time Ethereum, Binance Coin, NEO and others have been established as trading pairs as well.
There is also the traditional option to compare coins against FIAT like the USD or EUR. More and more of the larger and established exchanges like Binance are enabling customers to directly buy Altcoins with FIAt without Ethereum or Bitcoin.
However, in my regards these are all not the key indicators to view when analyzing a currency.
Which trading pair to analyze?
This is not about trading at all, this is about analyzing an Altcoins market performance. Therefore I started to compare historical data of blockchain projects within the same industry.
For example:Altcoins like EOS, NEO, or TRON are infrastructure blockchains which have Ethereum as the most established project of their type.
Therefore, comparing these Altcoins with Ethereum makes perfect sense to see on an historical perspective whether they outperform competition long-term in their own industry or not.
But isn't the value in EUR or BTC more important?
There are various types of problems with that thought process.
- You are investing in assets of the future which means you believe in the technology long-term. Blockchain WILL outperform any other FIAT currency, the only question is: Will you outperform the other coins long-term?
- If you invest in an infrastructure blockchain you cannot compare it to Bitcoin. Yes, the value of BTC might increase to a larger degree and yes it is likely the safest bet in crypto.
However, you cannot compare apples with oranges!!! You invest in infrastructure for different reasons and should therefore compare the performance against coins alike.
- Comparing an ALTCOIN against EUR, BTC or ETH is something traders do - if you are one fair enough. But investors think long-term and dont want to lose their time on a daily basis. Therefore, you inves in technologies, type of blockchain and projects (the last one are the coins/projects). You decide to invest in blockchain, then which type like infrastructure and finally which project.
"Oh gosh, this sounds like work..." - I'm sorry you need a strategy for investing your money responsibly.
Investment strategy
The trading pair analysis method described is and should only play one role in your investment strategy. There is much more like risk management which is a key ingredient!
Still, I believe this will help you during your decision process and analysis as well as enable you to invest more strategically.
What are your opinions and what trading pairs do you use?