AMM (Automated Market Maker): Eliminates the need for centralized authorities (like exchanges and other financial entities), allowing two users to transact their assets without any intermediary facilitating the exchange.
Arbitrage: A strategy used by traders to take advantage of small price discrepancies across exchanges. A trader buys a token on one exchange and quickly sells it on another exchange for a higher price.
Ask: Price at which sellers are willing to sell. See also: Bid
Bear Market: A prolonged downtrend in the market. Opposite of a Bull Market.
Best Ask: This is the lowest price at which sellers want to sell an asset. See also: Ask
Best Bid: This is the highest price at which buyers want to buy an asset. See also: Bid
Bid: Price at which buyers are willing to buy. See also: Ask
Bull Market: A prolonged uptrend in the market. Opposite of a Bear Market.
Centralized Exchange (CEX): A centralized exchange is a marketplace in which the exchange itself functions as a middleman between traders, similar to an equity exchange in a traditional financial market. The centralized exchange maintains a digital order book, which posts all the open buy and sell orders, and matches buyers and sellers. Centralized exchanges are “custodial” in that they hold and transfer traders’ funds and process all transactions.
Day Trading: A strategy in which you buy and sell assets in the same day. The idea is to pay attention to price fluctuations over the course of a day and act quickly on them in order to turn a profit.
Decentralized Exchange (DEX): A decentralized exchange is a marketplace that functions on a peer-to-peer model in which traders swap or trade cryptocurrencies directly with one another. In a DEX, there is no institution serving as a middleman to manage either custody and/or transfer of funds. Additionally, traders maintain control over their own wallet keys and security.
DeFi: Short for “Decentralized Finance.” DeFi is an evolutionary step beyond TradFi (traditional finance) in that it eliminates intermediaries, allowing people to transact peer-to-peer.
Derivative: A security whose value is derived from its underlying asset. Derivatives include, among others, futures, options, and indexes.
Funding Rate: Funding rates are a mechanism that exchanges use to ensure that perpetual futures trade at a price that is close to the price of the underlying spot markets.
Governance Tokens: Governance tokens entitle holders to voting rights on proposed changes to a blockchain network or protocol.
HODL: A simple long-term investment strategy. You buy a cryptocurrency and you hold it until it reaches your desired price.
Leverage: Leverage is a mechanism used in trading which involves borrowing funds to increase your purchasing power.
Limit order: A limit order is a type of order sent to the exchange to buy or sell an asset at a specified price or better. A Buy Limit Order is executed at the limit price or lower, whereas a Sell Limit Order is executed at the limit price or higher.
Liquidity Mining: When users lend tokens to a decentralized exchange so the exchange can increase its liquidity, the users get token rewards or a percentage of trading fees or tokens.
Liquidity Protocol: Provides liquidity to protocols through digital assets locked in smart contracts. See also: AMM
Long: Going “long” means to enter a trading position in the hopes for, and benefits from, an increase in the price of an asset. Opposite of Short.
Market order: An order sent to an exchange to buy or sell an asset at the current market price.
Multisig Wallet: A crypto wallet that operates with multi-signature addresses, requiring more than one signature to approve any transaction. Used by exchanges, brokers, and crypto companies to provide security.
Oracle: Oracles are entities that connect blockchains with off-chain data, allowing the associated smart contract(s) to execute at specified data inputs/outputs. Essentially, oracles allow off-chain and on-chain data to connect and interact.
Perpetual Futures: An agreement to buy or sell an asset at a predetermined price at some point in the future. Unlike in traditional financial markets, perpetual futures do not have specified expiry dates. This allows a trader to hold a contract for an indefinite period of time.
PnL: An abbreviation for “profit and loss.” It’s the consolidated data of your portfolio which reflects your current financial position.
Sell Order: When you place a sell order in an order book, you are telling the exchange that you want to sell an asset at a certain price (or higher, if possible). Opposite of Buy Order.
Short: Going “short” means to enter a trading position in the hopes for, and benefits from, a decrease in the price of an asset. Opposite of Long.
Slippage: Slippage is the difference between an order’s expected price and the price when the order is actually filled. Since crypto is highly volatile, slippage occurs regularly on less liquid exchanges. Liquidity plays a major role in slippage, as more liquidity decreases slippage.
Spread: Spread is the difference between the highest bid and the lowest ask offer prices quoted for an asset.
Trading: Speculation on an asset’s price to make a profit.
TVL: An acronym for Total Value Locked, which is the sum of all assets locked in a particular protocol.
Whale: A person(s) or entity who holds such a large amount of a type of cryptocurrency that it is potentially large enough to affect the currency’s price