How to calculate the cross rate of cryptocurrencies?
Trading in both the foreign exchange and crypto signals or cryptocurrency markets is not limited to the ratio of the US dollar to other currencies or cryptocurrencies.
It so happened that by analogy with the American dollar in the Forex market, in the cryptocurrency market, the main assets to which altcoins are quoted are Bitcoin, Ethereum and Tether.
Going to any cryptocurrency exchange, you can see that its list consists of such direct quotes as: ADA/BTC, XMR/USDT, QTUM/ETH and so on.
But sometimes there is a need to move your position from one altcoin to another. And here we need to calculate the so-called cross rate, which implies a direct relationship between the price of altcoins, which are not considered to be the main assets, to determine the feasibility of such an operation even before it is performed.
METHODOLOGY FOR CALCULATING THE CROSS RATE OF CRYPTOCURRENCIES
Let’s say we want to know the ratio of the value of Cardano cryptocurrency to Qtum cryptocurrency in order to transfer our investments from the first asset to the second.
In this case, as with the direct relationship of ADA/BTC, Cardano will be a commodity, while Qtum will play the role of a means of payment and the final asset into which our capital will move from Cardano.
Now, in order to calculate the amount of Qtum that we have to pay for Cordano, we need to calculate the cross rate using one of the main cryptocurrencies in this operation: Bitcoin, Ethereum or Tether.
To do this, take the following cryptocurrency pairs:
- ADA/BTC at a rate of 0.00002083;
- QTUM/BTC at the rate of 0.00190166.
Now we know how much Bitcoin we need to buy each of the exchanged altcoins.
And we carry out the following cross-exchange operation:
- ADA/QTUM = 0.00002083/0.00190166 = 0.010953588 QTUM
Thus, we got a result that allowed us to calculate the cross rate of the ADA/QTUM ratio, which determines the price for one Cardano in the Qtum cryptocurrency, which is 0.010953588 QTUM.
Now, knowing the cross-rate of two directly non-trad altcoins, it will be easy for us to determine how much our deposit will change when switching to Qtum. To do this, it will be enough just to multiply the amount of our Cardano cryptocurrency by the result obtained during the cross rate calculation.
- We have 1000 Cardano, which at a rate of 0.000002083 BTC is 0.0283 Bitcoin. Now, to receive this amount in Qtum, we need to multiply 1000 ADA by the rate of 0.010953588, and we will receive a deposit equal to 10.96 QTUM.
Such a simple operation allows us to easily navigate the situation in case of transferring our balance sheet from one altcoin to another, while easily determining both the potential of profit and assessing possible risks even before we proceed directly to the transaction itself.