Cryptocurrency Trading & Investment Flashcards
7 cards from real CCE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cryptocurrency Trading & Investment flashcards as text
What is 'wash trading' in cryptocurrency markets?
Answer: Simultaneously buying and selling to artificially inflate volume
Wash trading involves a party simultaneously buying and selling the same asset to create the illusion of high volume and market activity, which is manipulative and illegal in regulated markets.
Which Fibonacci retracement level is most widely watched as a key support/resistance zone?
Answer: 61.8%
The 61.8% retracement level, derived from the golden ratio, is considered the most significant Fibonacci level and often acts as strong support during pullbacks in uptrends.
What risk does 'concentration risk' describe in a crypto portfolio?
Answer: Risk from over-allocating to a single asset or correlated group
Concentration risk arises when a portfolio is heavily weighted in one asset or a group of highly correlated assets, making it vulnerable to a single adverse event.
In a bull market, what is 'profit taking' and how can it affect price?
Answer: Selling appreciated holdings to realize gains, creating downward price pressure
Profit taking is when investors sell rising assets to realize gains; widespread profit taking creates sell-side pressure that can cause temporary price pullbacks even in uptrends.
What does 'liquidity' refer to in the context of a cryptocurrency exchange order book?
Answer: The ease with which an asset can be bought or sold without significantly moving its price
Liquidity describes how quickly and efficiently an asset can be traded; a deep order book with tight bid-ask spreads indicates high liquidity and minimal price impact per trade.
Which tax treatment applies to cryptocurrency held for more than one year in the United States?
Answer: Long-term capital gains tax rates
In the US, crypto assets held longer than one year before sale qualify for long-term capital gains tax rates (0%, 15%, or 20%), which are lower than ordinary income rates.
What is 'market capitalization dominance' (e.g., BTC dominance) used to assess?
Answer: Bitcoin's market cap as a percentage of total crypto market cap
BTC dominance measures Bitcoin's share of the total cryptocurrency market capitalization; rising dominance often signals risk-off rotation into BTC, while falling dominance may indicate altcoin season.