When it comes to cryptocurrency futures, traders typically focus on the most popular instruments — Bitcoin and Ethereum. This focus is justified not only by their liquidity and high trading volume. Altcoins often trade sideways or depreciate outside of altseason, which happens only once every few years. But there’s an excellent way to trade altcoins differently!
Introducing synthetic pairs — they unlock access to a whole market of unique trading situations and trends.
What is a synthetic pair?
Let’s start by recalling what any trading pair consists of. It includes a base currency (the first in the pair) and a quote currency (the second). For example, in the BTC/USDT pair, Bitcoin is the base currency, and USDT is the quote currency. An increase in the base currency drives the pair up, while an increase in the quote currency drives it down.
Now imagine there’s no TON/SHIB pair on the exchange, but you want to trade it. A synthetic pair solves this problem. To open a position on TON/SHIB with 1% risk, you’d need:
- A long position on TON/USDT (with 0.5% risk).
- A short position on SHIB/USDT (with 0.5% risk).
These two positions create the equivalent of a direct long position on TON/SHIB with a total risk of 1%.
For a short position, the approach is mirrored: you short TON and go long on SHIB.
Why does this matter?
Against the dollar, most coins outside of altseason show dull sideways movement. But relative to each other, cryptocurrencies can form amazing trend combinations and rare trading patterns.
Imagine that due to meme coin hype, SOL rises slightly, while BNB declines due to issues at Binance. Against USDT, these moves might seem modest. But the synthetic SOL/BNB pair could show a confident upward trend.
Synthetic pairs allow you to catch trends in markets dominated by sideways movement or low volatility against USDT.
The Math of Opportunities
The main advantage of synthetics is scale. The number of pairs you can create grows exponentially with the number of currencies considered:
- 10 currencies yield 45 synthetics (or 90, including reverse directions).
- 100 currencies yield nearly 5,000 synthetics (10,000 with reverses).
This provides hundreds of trading instruments that can be used for trends, arbitrage, mean reversion, or even market-neutral strategies.
If you trade rare patterns (e.g., triple or quintuple inside bars), super-oversold or super-overbought zones, synthetics offer nearly infinite opportunities and tools for experimentation.
To generate a synthetic pair chart, you can use platforms like TradingView.
Enter the following format in the tool: “exchange name: first pair / exchange name: second pair.”
For example, to get the TON/SHIB synthetic pair, enter: BINANCE:TONUSDT/BINANCE:SHIBUSDT.
