It is tradition for novice traders to be confused by satoshis (sats) when entering the crypto trading arena. They will make you want to trade in USD or USDT. So much simpler to plan positions around $100 targets, than 0.00041527 BTC. Trading in USDT over BTC seems like the best option.
Then you will notice more experienced traders speaking about trading altcoins vs Bitcoin instead of USDT pairs. With the surge of DeFi projects, Ethereum has become an alternative base currency too. So, you start to wonder should you trade in Bitcoin too? What would you get out of it?
No option is unequivocally wrong or right. We will try to clarify some of the reasons behind choosing BTC or USDT to trade in. You’ll be able to pick the one that fits current market conditions and your preference.
Reasons to trade in altcoin pairs against BTC/ETH:
1.You are convinced in the alt’s fundamentals
There’s an alt that you believe has stronger outlook than Bitcoin or the entire crypto space. If you are right the alt will gain against BTC and the entire crypto space in the foreseeable future. This could depend on the Money Flow Cycle as in certain periods alts tend to run more than BTC.
2.If you’re not beating BTC you might as well be holding
Bitcoin is to crypto what the S&P is to stocks. It’s the baseline that measures trading success. Let’s say you are trading alts against BTC for a month. If after that month your gains are less than just holding BTC and that level of performance is consistent, you can consider doing nothing and just holding.
When trading in USDT you don’t know if the alt is going up or just Bitcoin. In both cases your position will go up in USDT. The goal is to beat Bitcoin’s growth.
3.Your ultimate goal is to own the most BTC or ETH possible
Your funds need to be in the currency you are trading to avoid redundant fees when converting. Every trade costs you something. It will be easy to track your progress and you’ll be able to engage in other activities like staking that will further increase your funds in the desired base currency.
4.You want a bit less volatility
When the market is going up so is BTC, when it reverses the value of BTC and all cryptocurrencies goes down. If you are trading alts in BTC their value moves only in direction of BTC. If you are trading alts in USDT their value moves in direction to BTC, plus BTC’s move is added to the price. To demonstrate let’s say we’re trading LINK and the whole market just went down:
It might be great when you get lucky – but you could be putting yourself in a tough situation if the position moves against you
5.Most cryptocurrencies have a BTC/ETH pair
Till the rise of Uniswap all exchanges featured cryptocurrencies primarily in a BTC pair. USDT or alternatives became so widely available only recently. So to avoid extra conversions and have alignment across multiple exchanges BTC still tends to be the best bet.
6.It’s a bull market
When everything is going up, it’s wise to trade in BTC as the overall value of your holdings will increase too. The funds not being traded at the moment will be making passive gains that can have a BIG impact on your overall performance.
Despite all the reasons to trade in BTC, trading in USDT is widespread as well and not without advantages either.
Reasons to trade altcoin pairs against USDT/USD:
1.Support and resistance are often priced in USD
If you see LTCs price nearing 0.00617182 it might not mean much to you. But if it’s at $79 and breaks a high timeframe resistance at $80, it may go for a run to $100 easily in a bull market. Even in legacy markets like stocks S/R is often at a nice round number. There’s even an indicator called BRN (Big round number) for purchase that…rounds numbers.
The fact is, that the majority of people will not go deep into sats. They are not traders but instead just buy crypto on Coinbase and see everything in fiat. This makes thinking in USDT relevant and creates S/R when round numbers are reached.
Keeping an eye on prices in USDT is advisable.
2.It’s a bear market
When you think the value of the overall crypto market is going down and you intend to be shorting, USDT is your best choice. If you trade in BTC in these cases, the overall value of your holdings will keep shrinking with the market going down.
USDT will keep your gains constant and you might have a chance for a nice investment with your profits at the bottom of the depreciation.
3.You want more volatility
As we discussed above volatility is slightly different when trading in BTC then in USDT. If you want even more fire in an already thrilling market USDT is for you.
Let’s look at the example from above, but this time around the whole market went up:
|BTC in USDT||Link in BTC||Link in USDT|
Trade in BTC vs USDT – Conclusion:
As you can see there are no hard and fast rules. If you are determined to focus on crypto in your trading, you will need to get used to looking at the chart vs BTC and the chart vs USDT. What do you choose to trade in, depends on your goals and market conditions.
If you’re new to all this and have been trading only in USDT, do some analysis over BTC pairs and see if it’s not worth a try. In a bull market it can really be valuable. In case you are not sure where to start, backtesting is the least painful way to do it. Consider your trading strategy or approach and backtest it using both USDT and BTC as base currencies. If you have a new idea set it on paper trading in both variants and see how it performs. There’s no issue with starting one way or another, but if you’re after long-term profitability you will need to investigate and understand both.
In CLEO.one you can backtest and paper trade both options in minutes for free. If you’re a Binance trader, interested in live execution don’t miss out on our free plan.