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?


1 Answer 1


The only general rule should be to not risk what you're willing to lose.

"Regular" money is at least backed by some people in a government or bank somewhere that says it's worth something, crypto currencies appear to be worth whatever people are willing to pay, maybe $10,000 today, maybe $50,000 tomorrow, or maybe $50.

...say I know that ETH is going to increase in value vs Bitcoin

You really don't know that. But the way they've been fluctuating it's likely at some point, if only for a few seconds at least. ETH has gone from $365US to $811US in the past 30 days, and was $8 at the beginning of the year. BTC was about $800 in January, $8,000 last month, then $19,250 4 days ago, and $15,600 today (Dec 22 - Update on the 24th it's ~$14k and was $12.7k earlier today). These appear to be bubbles, you might ride them for a while, but anything could happen.

The crypto-to-crypto doesn't really make a difference, most places compare the values to a local currency, so you should probably do the same to determine if you're "winning or losing." If you're considering greenbacks your ultimate measure of wealth then until you crystallize any profit/loss by converting back to dollars you're still "holding a hot potato," does it matter which one?

(You might even have more stable returns at a casino, and at least you'd get free drinks ;-)

  • Thanks! By the "say I know it's going to increase" I just meant that let's assume for this one hypothetical trade it did. I Kinda just wanted a resolution to my hunch that you gotta go back all the way to the base currency to properly say if you've made a profit or not.
    – Alex B
    Commented Dec 22, 2017 at 2:10
  • Welcome :) Upvotes &/or selecting a correct answer (check-mark) are the preferred "thanks" (SE seems a little too anti-social like that IMO, even editing out "Thanks" from questions). If you were planning on switching to a new currency permanently you could always stick with it & decide if you're happy with more or less, but with their volatility it reminds me of the Latchkum scene from The Orville, you don't want to be left holding it when the game's over
    – Xen2050
    Commented Dec 22, 2017 at 2:26

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