I've been curious about all the crypto trading but there's this one question i've been trying to answer and convince myself one way or the other, and it is something that those who do FOREX trading have probably dealt with before, but I'm not sure what keywords to be looking for.
The scenario is as follows. Say I have X Bitcoin, and say i know that ETH is going to increase in value vs Bitcoin. Wanting to capitalize on that I would buy ETH (because ETH-BTC is low) and then tomorrow when ETH has increased in value I'd sell it and get Y BTC where Y is greater than X. So now I have more BTC than I started with. However, could the increase in value of ETH vs BTC not be because BTC has dropped in value (so BTC-USD is lower than when i started)? And could this decrease not be large enough that if I were to transfer my BTC to USD, despite having more BTC than at the beginning, they would be worth less than the X BTC that I initially had?
If what I said above is correct, is it then riskier in some sense in trading crypto-to-crypto than trading real money to crypto when at the end of the day your interested in your real money earnings?
So if you were to analyze a potential trade this way and figure out what minimum increase you'd need to at least break even (recoup fees), you'd have to consider not only the increase between the crypto pairs but also any fluctuation between your local currency and the cryptocurrency you're using in your trade? So if you think both BTC-USD and ETH-USD will stay stable, then you can simplify and only look at ETH-BTC (assuming USD is the local money you're interested in). Are there any guides, or general rules, to help you decide when these kind of trades would be worth it, or does it just come down to hoping that you understand the relationship between the two cryptos and between the cryptos and your local currency well enough that your predictions of how much they'll fluctuate is accurate enough for you to make some kind of profit?