Crypto Trading and Exchanges Flashcards

What is a 'maker' in the context of cryptocurrency exchange order books?

Answer: A trader who adds liquidity by placing limit orders that rest on the book

A maker adds liquidity to the order book by placing limit orders that are not immediately filled, earning lower fees on most exchanges.

Which order type guarantees execution but not price in cryptocurrency trading?

Answer: Market order

A market order executes immediately at the best available price, guaranteeing execution but not the exact price received.

What does 'slippage' mean in crypto trading?

Answer: The difference between the expected price and the actual execution price

Slippage is the difference between the expected trade price and the actual price at which the order is filled, often due to low liquidity or volatile markets.

On a centralized exchange (CEX), who holds custody of user funds?

Answer: The exchange itself

On a CEX, the exchange holds custody of user funds, meaning users must trust the exchange with their private keys and assets.

What is the purpose of a 'stop-loss' order?

Answer: To automatically sell an asset if its price falls to a specified level

A stop-loss order automatically triggers a sell when the asset price drops to a set threshold, limiting potential losses.

What does 'KYC' stand for in the context of crypto exchanges?

Answer: Know Your Customer

KYC (Know Your Customer) is an identity verification process exchanges use to comply with AML regulations and verify user identities.

In futures trading on a crypto exchange, what is 'funding rate'?

Answer: A periodic payment between long and short positions to keep perpetual contract prices near spot

The funding rate is a periodic fee exchanged between long and short holders of perpetual futures contracts to anchor the contract price to the underlying spot price.