Investing Tip: Try “Coin to Coin” Exchange

You can trade one crypto for another and do a “coin to coin” exchange. If you have discipline and make good trades, it can be better than trading crypto for USD.

In other words, instead of say trading BTC for USD, you can trade BTC and ETH (the trading pair BTC/ETH).

The perks here are many, but as it may logically figure, the dangers are many too.

First off, we all know what the value of USD (or another fiat) will be in 10 minutes. We do not however know what the value of a crypto will be. This is to say, when you trade coin-to-coin you have to consider the prices of two assets at once and not just one.

The cool thing here is that if, for example, you have $100 worth of ETH and $100 worth of BTC, and then ETH goes down $1 and BTC goes up $1, you can trade your BTC for ETH netting $2 USD profit worth of ETH.

This means you can make more off of price movements than you can with a single coin when things work out well.

That is cool right? Now add some zeros to those numbers and you’ll get why this is a pretty rad thing.

Imagine having a ton of ETH and BTC crashes, you can move to BTC without ever going to USD. Then imagine BTC recovers and ETH dips, now you can move back and have substantially more ETH than you did before!

There is a ton that can go wrong there (trust me), but theoretically and sometimes in practice such moves work rather well.

Problem is, BTC tends to go up relative to everything… and sometimes when it does other coins suffer a bit. Thus, there are only key times one can pull this off (with any trading pair, but especially one that includes BTC).

Another problem should be clear, but let me state it. The problem is, if you are holding the coin that goes down and the other goes up, you could miss a chance to ever get back into the other coin without taking a loss.

There are a lot of dangers here, but one plus is that you never go into USD, so you never exit the crypto market.

This is a plus for those who want to hold and who want to go long in a few different cryptos, but aren’t married to a specific crypto.

Nothing sucks more than “being in crypto” and then trading out to USD only to miss a quick bull run. Its frustrating to miss in a short window what you waited in crypto for. Trading back and forth between cryptos avoids this.

On GDAX one can change BTC for LTC and ETH. So if you have Coinbase, consider trying it there (many other options exist, essentially every exchange offers this). Coin-to-coin trades aren’t really any harder than trading one of those coins for USD, even though the considerations are a bit more complex.

It can take a second to figure out, but once you get the hang of it you’ll see how its a smart tool for your tool kit.

Just consider being careful and not putting all your funds into one trade (instead spread them out).

Just remember, can go really wrong as you are always having to factor in two moving prices and not one (and because one of those is BTC, it can mean being stuck in Ether while BTC takes off to new heights… in the past this has happened many times; so really do watch out for it).

In other words, this is great for a little volatility trading when you don’t want to go into USD, but there is a lot of room to go wrong… so don’t make any big moves until you know what you are doing.

TIP: You can use trading pairs to avoid using stops (although this only works if one coin goes down or up relative to another). What you do is, for example, set Litecoin to sell to Bitcoin if Bitcoin goes down and/or Litecoin up, and Litecoin to Bitcoin if Bitcoin goes down/or Litecoin goes up. This way you protect your coins without ever going to USD. This works with any trading pair you can trade on an exchange (although it won’t work well with Tether or USD; this requires two assets with volatility).

TIP: Consider always holding a bit of each coin you trade. Then, if one coin takes off, you can trade the one that took off for the one that didn’t and increase your supply of the one that didn’t. If you trade your whole stack and this happens, it feels much worse than if you aim to split your funds relatively evenly between coins (more opportunity for excitement).

TIP: As noted above, tier your buys and sells. This avoids you betting on one specific price and helps to trade volatility in a shorter period of time. If you have buys set for .05 BTC, .049, .048 (for example). Then maybe only some fill, or maybe all fill. If you just set it for .049, and the price only goes to .0491, you could miss your whole order. Then of course, once your orders fill (or before assuming you have the extra coin) set your sells the same way. That way no matter what happens, you get action. Rinse and repeat and you can, on a good day, grow your stack. NOTE: You can see why people use bots for this… but that is a whole other level and whole other set of risks. It isn’t too hard to do by hand either.

TIP: Buying ETH with BTC means spending BTC to get ETH. Selling ETH is selling ETH to get BTC. I suggest you ALWAYS AIM TO GET MORE COINS ON EACH TRADE (rather than chasing dollar value). Dollar value is important obviously, but its almost secondary here. The goal is more coins (as you should only be playing with coins you want to hold). The idea is more coins = more USD when you finally sell to fiat at the price you want down the road. Sure, there is a time to jump back into a coin at a loss of total coins, but that shouldn’t be a habit. If you do happen to make a trade like that, consider that you can trade back again to make up for it if the price difference continues. It can get complex, but hopefully this page works as a starter kit. Good luck!

Author: Thomas DeMichele

Thomas DeMichele has been working in the cryptocurrency information space since 2015 when was created. He has contributed to MakerDAO, Alpha Bot (the number one crypto bot on Discord),...