Finance and Crypto Glossary

Market capitalization is the total market value of an asset's units in circulation: the current price multiplied by the circulating supply for a cryptocurrency, or by the shares outstanding for a stock.

Circulating supply is the number of coins or tokens that are available to trade on the market right now. It leaves out units that are locked, still vesting, held in reserve or burned.

Max supply is the largest number of coins or tokens that can ever exist for a cryptocurrency, as set by its protocol rules. Once it is reached, no new units can be created.

Fully diluted valuation (FDV) is what a cryptocurrency's market cap would be if its entire max supply were in circulation at today's price: price × max supply.

Trading volume is the total value of an asset traded during a set period, most often the past 24 hours, usually shown in US dollars and added up across the markets where the asset trades.

Bitcoin dominance is bitcoin's share of the total cryptocurrency market cap, expressed as a percentage. It shows how much of the crypto market's total value sits in bitcoin compared with all other coins.

An altcoin is any cryptocurrency other than bitcoin. The word combines "alternative" and "coin" and covers everything from large blockchain networks to very small tokens.

Altcoin season is an informal name for a period when a large share of altcoins perform better than bitcoin. It has no single official definition, and different trackers measure it in different ways.

A stablecoin is a cryptocurrency designed to keep a stable value against a reference asset, most often the US dollar, so that 1 token aims to stay worth about $1.

The bitcoin halving is a built-in protocol event that cuts the number of new bitcoin paid to miners for each block in half. It happens every 210,000 blocks, which works out to roughly every four years.

A blockchain is a shared digital ledger in which transactions are grouped into blocks and each block is linked to the one before it, making the record very hard to change once it is added.

Proof of stake (PoS) is a way for a blockchain to agree on new blocks in which validators lock up the network's coins as collateral and are chosen to propose and confirm blocks in proportion to their stake.

Staking is locking cryptocurrency to help secure a proof-of-stake blockchain in return for rewards, which are usually paid in the same token.

APR (annual percentage rate) is a simple yearly rate that ignores compounding, while APY (annual percentage yield) includes interest earned on interest, so APY is higher whenever interest compounds more than once a year.

A gas fee is the fee paid to process a transaction or run a smart contract on Ethereum and similar blockchains. It covers the computation and storage the network uses and is paid in the network's native coin.

Decentralized finance (DeFi) is a set of financial services, such as trading, lending and borrowing, that run on blockchain smart contracts instead of through a bank, broker or other central intermediary.

A decentralized exchange (DEX) is a platform where users swap tokens directly from their own wallets through smart contracts, without depositing funds with a central operator.

Impermanent loss is the shortfall a liquidity provider has compared with simply holding the same tokens, caused by a change in the price ratio of the tokens in the pool.

A crypto wallet is software or a device that stores the private keys needed to control cryptocurrency and sign transactions; the coins themselves stay recorded on the blockchain.

A whale is an individual or entity holding a very large amount of a cryptocurrency, large enough that its trades or transfers can noticeably move the price or market sentiment.

HODL is crypto slang for holding a coin through price swings instead of trading in and out; it began as a misspelling of “hold” in a 2013 Bitcoin forum post.

A fear and greed index is a sentiment score from 0 to 100 that summarizes market mood, where 0 means extreme fear and 100 means extreme greed.

Leverage means controlling a position larger than your own capital by using borrowed funds or a margin deposit, so that gains and losses are multiplied relative to the money you put in.

Liquidation is the forced closing of a leveraged position by an exchange or protocol when the account's margin falls below the required maintenance level.

Perpetual futures are futures contracts with no expiry date that let traders go long or short on an asset's price, usually with leverage, while periodic funding payments keep the contract price close to the spot price.

The funding rate is a periodic payment exchanged between long and short traders of a perpetual futures contract, set so that the contract price stays close to the spot price.

A market order buys or sells immediately at the best prices currently available, while a limit order trades only at a price you set or better and may not fill at all.

A stop-loss is an order that automatically closes a position when the price reaches a level you set in advance, to limit the loss on a trade.

A take-profit is an order that closes all or part of a position automatically when the price reaches a target level, securing a gain without the need to watch the market.

Slippage is the difference between the price you expect when you place a trade and the price at which the trade actually executes.

Liquidity is how easily an asset can be bought or sold quickly without moving its price much. A liquid market has many buyers and sellers, a narrow bid-ask spread and plenty of orders near the current price.

Maker and taker fees are trading fees charged as a percentage of trade value. A maker adds an order to the order book that waits to be filled; a taker fills an order that is already there and usually pays a higher rate.

Dollar-cost averaging is investing a fixed amount of money at regular intervals, such as every week or month, regardless of the price. Because the amount stays the same, it buys more units when the price is low and fewer when it is high.

Cost basis is the total amount paid to acquire an asset, including fees. Divided by the quantity held, it gives the average cost per unit, the reference point for measuring profit or loss and for tax reporting.

Profit and loss (PnL) is the gain or loss on a position. Realized PnL comes from positions that have been closed, while unrealized PnL is the paper gain or loss on positions that are still open.

The risk-reward ratio compares how much a trade could lose if the stop-loss is hit with how much it could gain if the target is reached. A ratio of 1:3 means risking $1 for a potential $3.

Position sizing is deciding how many units to buy or sell in a trade so that the loss, if the stop-loss is hit, equals a planned share of the account. It controls risk per trade rather than predicting the outcome.

Drawdown is the decline from a peak in value to a later low, usually shown as a percentage. Maximum drawdown is the largest such decline over a given period for an account, portfolio, strategy or asset.

Short selling is selling an asset you have borrowed in the hope of buying it back later at a lower price. The short seller profits if the price falls and loses if it rises.

A bull market is a prolonged period of rising prices, and a bear market is a prolonged period of falling prices. The terms describe the broad direction of a market, an asset class or a single asset over months rather than days.

Diversification is spreading money across different assets whose prices do not move perfectly together, so that a large loss in one holding has a smaller effect on the whole portfolio.

The price-to-earnings ratio (P/E) compares a company's share price with its earnings per share, showing how many dollars investors pay for each $1 of the company's yearly profit.

Earnings per share (EPS) is the part of a company's net profit that belongs to each common share, calculated by dividing the profit available to common shareholders by the number of shares outstanding.

Dividend yield is a stock's yearly dividends per share divided by its current share price, expressed as a percentage, showing the cash income the dividend represents relative to the price.

The ex-dividend date is the first trading day on which a stock trades without the right to its next declared dividend; buyers on or after that day do not receive that payment.

An exchange-traded fund (ETF) is an investment fund whose shares trade on a stock exchange like a single stock, while the fund itself holds a basket of assets such as stocks, bonds or commodities.

An index fund is a mutual fund or ETF that aims to match the return of a market index by holding the same securities, or a representative sample, in roughly the same proportions.

Volatility measures how widely an asset's returns swing around their average over a period, usually expressed as the annualized standard deviation of returns.

Beta measures how sensitive an asset's returns have been to the returns of a market benchmark: a beta of 1 means it moved in line with the market on average, above 1 more, below 1 less.

The 52-week high is the highest price an asset reached during the past 52 weeks, used as a reference point for where the current price stands within its range over the last year.

A stock split increases the number of a company's shares by dividing each existing share into several, lowering the price per share in the same proportion without changing the company's total value.

A moving average is the average price of an asset over a set number of recent periods, recalculated each period so that it moves along with the chart and smooths out short-term swings.

The relative strength index (RSI) is a momentum indicator that scores recent price gains against recent losses on a scale from 0 to 100, usually over 14 periods.

An exchange rate is the price of one currency expressed in another. A EUR/USD rate of 1.10 means 1 euro costs 1.10 US dollars.

The bid-ask spread is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller will accept (the ask). It is the cost of buying and then selling immediately.

A pip is the standard unit for measuring a change in a currency exchange rate. For most currency pairs it is 0.0001, the fourth decimal place; for pairs quoted in Japanese yen it is 0.01.

Inflation is the general rise in the prices of goods and services over time. As prices rise, each unit of money buys less, so inflation is also described as a loss of purchasing power.

The consumer price index (CPI) tracks the average change over time in the prices households pay for a fixed basket of consumer goods and services, and is a standard measure of inflation.

An interest rate is the price of borrowing money, or the reward for saving it, expressed as a percentage of the amount borrowed or saved per year.

Compound interest is interest calculated on both the original amount and the interest already added to it, so a balance grows faster over time than with simple interest.