CCE Cryptocurrency Trading & Investment 5

Question 1

What is 'wash trading' in cryptocurrency markets?

Accepted Answer

Simultaneously buying and selling to artificially inflate volume

Answer

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.

Question 2

Which Fibonacci retracement level is most widely watched as a key support/resistance zone?

Accepted Answer

61.8%

Answer

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.

Question 3

What risk does 'concentration risk' describe in a crypto portfolio?

Accepted Answer

Risk from over-allocating to a single asset or correlated group

Answer

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.

Question 4

In a bull market, what is 'profit taking' and how can it affect price?

Accepted Answer

Selling appreciated holdings to realize gains, creating downward price pressure

Answer

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.

Question 5

What does 'liquidity' refer to in the context of a cryptocurrency exchange order book?

Accepted Answer

The ease with which an asset can be bought or sold without significantly moving its price

Answer

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.

(CCE) Certified Cryptocurrency Expert Practice Test

(CCE) Certified Cryptocurrency Expert Practice Test

CCE Cryptocurrency Trading & Investment 5