CCE Crypto Trading and Exchanges 4

Question 1

What is 'impermanent loss' for a liquidity provider on a DEX?

Accepted Answer

The opportunity cost from price divergence of pooled assets compared to simply holding them

Answer

Impermanent loss occurs when the price ratio of pooled tokens changes after deposit, causing the LP to hold less value than if they had simply held the tokens.

Question 2

Which exchange type requires no account registration and allows peer-to-peer trading directly from wallets?

Accepted Answer

Decentralized exchange (DEX)

Answer

DEXs enable non-custodial, permissionless trading directly from users' wallets via smart contracts, with no account or identity verification required.

Question 3

What does 'open interest' measure in crypto futures markets?

Accepted Answer

The total number of outstanding futures contracts that have not been settled

Answer

Open interest is the total number of active, unsettled futures or options contracts, used as an indicator of market participation and trend strength.

Question 4

What is 'front-running' in the context of decentralized exchanges?

Accepted Answer

Exploiting mempool transaction visibility to insert a trade ahead of a pending transaction for profit

Answer

Front-running on DEXs occurs when bots (MEV bots) detect pending transactions in the mempool and pay higher gas fees to insert their own transactions first for profit.

Question 5

In crypto trading, what does a 'long' position mean?

Accepted Answer

Buying an asset expecting the price to rise

Answer

A long position means buying an asset with the expectation that its price will increase, allowing you to sell at a higher price for a profit.

(CCE) Certified Cryptocurrency Expert Practice Test

(CCE) Certified Cryptocurrency Expert Practice Test

CCE Crypto Trading and Exchanges 4