Cryptocurrency Crypto Trading and Markets 2 — Questions and Answers
Question 1: What does the term 'slippage' mean in crypto trading?
- The difference between expected and actual execution price (Correct answer)
- A fee charged by the exchange for large orders
- The delay between placing and filling an order
- A penalty for canceling an open order
Correct answer: The difference between expected and actual execution price
Slippage occurs when market movement or low liquidity causes a trade to execute at a different price than quoted.
Question 2: Which order type guarantees execution but not price in crypto markets?
- Limit order
- Stop-limit order
- Market order (Correct answer)
- Take-profit order
Correct answer: Market order
A market order executes immediately at the best available price, guaranteeing fill but not the exact price.
Question 3: What is a 'funding rate' in perpetual futures contracts?
- The annual interest paid to the exchange for holding a position
- A periodic payment between long and short traders to anchor price to spot (Correct answer)
- The fee for rolling a futures contract to the next expiry
- A daily commission charged on leveraged positions
Correct answer: A periodic payment between long and short traders to anchor price to spot
Funding rates are periodic payments exchanged between longs and shorts to keep the perpetual contract price close to the underlying spot price.
Question 4: What is 'wash trading' in the context of cryptocurrency exchanges?
- Converting crypto to fiat and back to reset cost basis
- Simultaneously buying and selling to inflate reported volume (Correct answer)
- Trading across multiple wallets to avoid tax reporting
- Closing all positions before a market downturn
Correct answer: Simultaneously buying and selling to inflate reported volume
Wash trading involves a party buying and selling the same asset to create artificial volume, often to mislead other traders.
Question 5: In crypto markets, what does 'open interest' measure?
- The total number of buy orders waiting to be filled
- The total value of all unsettled futures or options contracts (Correct answer)
- The 24-hour trading volume across all exchanges
- The number of unique wallets holding a given token
Correct answer: The total value of all unsettled futures or options contracts
Open interest represents the total number of outstanding derivative contracts that have not been settled, indicating market activity and sentiment.
Question 6: Which metric best represents the ease of buying or selling a cryptocurrency without affecting its price?
- Market capitalization
- Liquidity (Correct answer)
- Volatility index
- Circulating supply
Correct answer: Liquidity
Liquidity measures how quickly an asset can be bought or sold near its current price without causing significant price movement.
Question 7: What does a 'death cross' signal in crypto technical analysis?
- The 50-day MA crossing below the 200-day MA (Correct answer)
- The RSI dropping below 30 on a daily chart
- A bearish engulfing candle at a resistance level
- The price breaking below the lower Bollinger Band
Correct answer: The 50-day MA crossing below the 200-day MA
A death cross occurs when the 50-day moving average crosses below the 200-day moving average, signaling potential long-term bearish momentum.
Cryptocurrency Crypto Trading and Markets 2
What does the term 'slippage' mean in crypto trading?