Converting Between Two Cryptocurrencies: The Three Routes

There are three ways to get from one cryptocurrency to another. Most people use whichever they discovered first, which means they overpay some of the time. Have a look at a crypto swap platform alongside this, because seeing the actual numbers helps more than any explanation.

Route one: a direct pair

If an exchange lists the two against each other, you can trade directly. One trade, one fee, cheapest when it is available.

It is usually only available for well-known combinations.

Route two: two trades

Sell the first for something common, then buy the second with the proceeds. Two fees rather than one.

At a tenth of a percent per trade, that is two tenths total, which still beats most swap quotes on popular pairs.

Requires both to be listed on the same venue with enough supply.

Route three: a swap

One quoted price, one operation, works across networks.

Costs more on easy trades and less on hard ones.

Choosing

Same network, both popular, both on one exchange: route one if the pair exists, otherwise route two.

Different networks: route three, without much thought. The alternative involves a bridge and several fees.

One of them unusual: route three, because gathering supply is the part you would otherwise do by hand.

What the bridge route actually costs

People underestimate this. Moving between networks manually means approving the bridge, depositing, waiting, and then a transaction on the other side before you even trade. For anyone selling online rather than buying, an exchange that publishes its full fee schedule is the equivalent.

That is three or four network fees, a wait, and a period where you hold a bridged version of the asset rather than the asset itself.

A cross-network swap replaces all of it with one quoted number.

Records and tax

In most countries, converting one crypto into another counts as disposing of the first. That means a taxable event with a gain or loss to calculate.

What you need per conversion: the date and time, what went out and how much, what came in and how much, and the value of both in your own currency at that moment.

A swap gives you that in one record. Two trades give you two records to match up. A bridge plus trades gives you several records where only some are disposals, and working out which is genuinely tedious.

If you do this often, the simpler record is worth something.

Comparing providers

Take the same conversion to two or three providers at the same moment, convert each quoted output into a percentage against the market rate, and compare. None of this is complicated once you see it done properly, and the published coverage list is a reasonable place to look.

At the same moment matters. Quotes taken an hour apart measure the market moving, not the providers differing.