Blockchain and Crypto Cryptocurrency Trading & Wallets 2 — Questions and Answers
Question 1: How is cryptocurrency market capitalization calculated?
- Total coins mined divided by price
- Current price multiplied by circulating supply (Correct answer)
- Daily trading volume multiplied by 365
- Maximum supply multiplied by all-time high price
Correct answer: Current price multiplied by circulating supply
Cryptocurrency market capitalization is calculated by multiplying the current price by the total circulating supply, representing the asset's total market value.
Question 2: What is a limit order in cryptocurrency trading?
- An order that executes immediately at the current market price
- An order to buy or sell at a specified target price (Correct answer)
- A stop-loss order triggered by price movement
- A recurring automated purchase order
Correct answer: An order to buy or sell at a specified target price
A limit order instructs an exchange to buy or sell cryptocurrency only when the price reaches a specified target, giving traders control over their execution price.
Question 3: What does HODL mean in crypto investing culture?
- Hold On for Dear Life—a strategy of holding crypto long-term regardless of price swings (Correct answer)
- A high-frequency algorithmic trading strategy
- An acronym for hardware-offline-device-ledger
- A type of leveraged trading position
Correct answer: Hold On for Dear Life—a strategy of holding crypto long-term regardless of price swings
HODL stands for 'Hold On for Dear Life' and describes the long-term buy-and-hold strategy of retaining cryptocurrency through market volatility without selling.
Question 4: What is dollar-cost averaging (DCA) in cryptocurrency investing?
- Buying cryptocurrency only at market price dips
- Investing a fixed dollar amount at regular intervals regardless of price (Correct answer)
- Converting all available fiat into crypto in a single purchase
- Rebalancing a portfolio based on dollar value changes
Correct answer: Investing a fixed dollar amount at regular intervals regardless of price
Dollar-cost averaging involves investing a fixed amount in cryptocurrency at regular intervals regardless of price, reducing the impact of market volatility on the average purchase price.
Question 5: What defines a bear market in cryptocurrency?
- A market with rapidly rising prices and strong investor confidence
- A prolonged period of declining prices, typically a drop of 20% or more from recent highs (Correct answer)
- A market with unusually high trading volume
- A period of low on-chain transaction activity
Correct answer: A prolonged period of declining prices, typically a drop of 20% or more from recent highs
A bear market is a prolonged period of declining cryptocurrency prices, typically defined as a drop of 20% or more from recent highs, characterized by widespread pessimism.
Question 6: What is slippage in cryptocurrency trading?
- A delay caused by network congestion
- The difference between the expected trade price and the actual execution price (Correct answer)
- An exchange platform outage
- An error in a limit order configuration
Correct answer: The difference between the expected trade price and the actual execution price
Slippage is the difference between the expected price of a trade and the actual price at which it executes, commonly occurring in volatile or low-liquidity markets.
Blockchain and Crypto Cryptocurrency Trading & Wallets 2
How is cryptocurrency market capitalization calculated?