The cryptocurrency industry is at the crack of dawn, so as its glossary. Being tightly correlated with the traditional finance and high-tech, its vocabulary is novel and unique. The language we use speaking of crypto is at its early stage of development, thus requires to be explained and polished. The BTCMEX Blog is dedicated to simplify complex notions, define and explain concepts related to crypto investment, blockchain, and digital asset trading in order to foster the industry and improve crypto accessibility.
Auto-Deleveraging (ADL): A loss covering system, that automatically deleverages opposing traders’ positions by profit and leverage priority. It is triggered when the Insurance Fund is insufficient to cover the loss.
Bankruptcy: A condition when a trader loses all his Initial Margin during the event of Liquidation.
Halving: A process of dividing the generated reward for mining the cryptocurrency like Bitcoin block in half.
Bitcoin Taproot/Schnorr upgrade: A Soft Fork proposed for the Bitcoin blockchain to improve fungibility, functionality of Smart Contracts, and privacy by making all transactions appear the same to external blockchain observers.
Conditional Order: An instruction to buy or sell that is executed at a trigger price and is used to take profit, limit loss or open a position at a desired price.
Dual-Price Mechanism: A condition when Liquidation is triggered by an average market price and not the Last Traded Price of the exchange.
Ethereum: An open-source network with its own Internet browser, a coding language built on a decentralized blockchain which serves as a platform for building applications (DApp). Ethereum has its native cryptocurrency – Ether (ETH).
Ethereum Ice Age
Ethereum Ice Age: A mining difficulty adjustment that was proposed to ensure the whole Ethereum blockchain community switches from Proof-of-Work to Proof-of-Stake consensus mechanism.
Funding and Funding Rate
Funding: The periodic interest payments between traders which aim to keep the Last Traded Price as close to the Index Price as possible.
Insurance Fund: A balance on the exchange, filled by the Remaining Margin of a position liquidated at a price better than the Bankruptcy Price, and used to cover the loss from a position closed at a price worse than the Bankruptcy Price.
Leverage: A multiplication of the Initial Margin by x to give the total position value.
Lightning Network: The second layer protocol on a blockchain like Bitcoin that solves scalability issue enabling users to make fast and small cryptocurrency transactions.
Limit Order: An instruction to buy or sell on an exchange at a specific pre-set price or better.
Liquid Network: A parallel network that runs as a sidechain of Bitcoin enabling fast and confidential transactions of large amounts of cryptocurrency.
Liquidation: An automatic closing of the position due to a significant Margin loss.
Litecoin (LTC): The first altcoin – cryptocurrency other than Bitcoin – created as a result of the first successful Hard Fork of the Bitcoin blockchain.
Maintenance Margin: A minimum amount of a trader’s money he needs to keep his position open.
Margin, Isolated and Cross-Margin
Margin: A part of the total position value that belongs to the trader.
Margin Trading: 100x Leverage
Margin (Leveraged) Trading: Purchase and sale of a financial asset, like cryptocurrency, using Leverage to open larger positions with a small collateral amount in order to profit from the market swings.
Mark Price and Index Price
Mark Price: The average market price (Index Price) + a decaying Funding Basis.
Index Price: The average price index of a cryptocurrency on major exchanges.
Market Order: An instruction to buy or sell “right now” at the market price.
Mining: Using computational power to solve complex cryptographic algorithms on a blockchain in order to get block rewards in a form of digital coins.
Perpetual Contract: A type of Futures Contract which doesn’t have an expiration date or settlement.
Profit and Loss (PNL)
Profit and Loss (PNL): A calculation of a possible or actual profit or loss of a position on the exchange.
Relative Strength Index (RSI)
Relative Strength Index (RSI): One of the momentum price chart indicators that serves to predict the future Bitcoin price movements and determine the bullish and bearish trends.
Security Token: A digital representation of a tradable asset or a utility on a blockchain that derives its value from that asset.
Smart Contracts: A computer protocol on a blockchain that regulates the terms of an agreement between two parties. The contract is controlled by the code and is only triggered by the circumstance of execution, which eliminates the third party from participation.
Stop Loss: An automatic order to fully or partially close the position at a certain pre-set price better than the Liquidation Price to prevent further loss.
Take Profit: An automatic order to fully or partially close the position at a pre-set price with an acceptable profit.
Tether (USDT): A fiat collateralized stablecoin which value is backed by the US dollar issued by Tether Limited.
Time in Force (TIF)
Time in Force: A special instruction used when placing an order to indicate how long it will remain active before it is executed or expires.
Wallet: A storage for private and public blockchain keys to access, receive, or spend cryptocurrencies.