CCE Crypto Trading and Exchanges 2 — Questions and Answers
Question 1: What is a 'maker' in the context of cryptocurrency exchange order books?
- A trader who takes liquidity by filling existing orders
- A trader who adds liquidity by placing limit orders that rest on the book (Correct answer)
- The exchange operator who sets trading fees
- A market participant who holds assets for long-term investment
Correct answer: A trader who adds liquidity by placing limit orders that rest on the book
A maker adds liquidity to the order book by placing limit orders that are not immediately filled, earning lower fees on most exchanges.
Question 2: Which order type guarantees execution but not price in cryptocurrency trading?
- 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 execution but not the exact price received.
Question 3: What does 'slippage' mean in crypto trading?
- The time delay between order placement and execution
- The difference between the expected price and the actual execution price (Correct answer)
- The fee charged by an exchange for each trade
- A technical error that cancels a pending order
Correct answer: The difference between the expected price and the actual execution price
Slippage is the difference between the expected trade price and the actual price at which the order is filled, often due to low liquidity or volatile markets.
Question 4: On a centralized exchange (CEX), who holds custody of user funds?
- The user via their private keys
- A decentralized smart contract
- The exchange itself (Correct answer)
- A government-regulated custodian bank
Correct answer: The exchange itself
On a CEX, the exchange holds custody of user funds, meaning users must trust the exchange with their private keys and assets.
Question 5: What is the purpose of a 'stop-loss' order?
- To lock in profits when a price target is reached
- To automatically sell an asset if its price falls to a specified level (Correct answer)
- To buy more of an asset when its price drops
- To prevent an exchange from freezing your account
Correct answer: To automatically sell an asset if its price falls to a specified level
A stop-loss order automatically triggers a sell when the asset price drops to a set threshold, limiting potential losses.
Question 6: What does 'KYC' stand for in the context of crypto exchanges?
- Keep Your Crypto
- Know Your Customer (Correct answer)
- Key Yield Calculation
- Keychain Your Credentials
Correct answer: Know Your Customer
KYC (Know Your Customer) is an identity verification process exchanges use to comply with AML regulations and verify user identities.
Question 7: In futures trading on a crypto exchange, what is 'funding rate'?
- The annual interest rate charged on margin loans
- A periodic payment between long and short positions to keep perpetual contract prices near spot (Correct answer)
- The fee paid to the exchange for opening a futures position
- The minimum margin required to hold a leveraged position
Correct answer: A periodic payment between long and short positions to keep perpetual contract prices near spot
The funding rate is a periodic fee exchanged between long and short holders of perpetual futures contracts to anchor the contract price to the underlying spot price.
CCE Crypto Trading and Exchanges 2
What is a 'maker' in the context of cryptocurrency exchange order books?