Crypto Glossary: The Essential Terms Every Investor Should Know

Crypto has its own vocabulary, and much of it is confusing at first. This glossary explains the terms you will meet most often on exchanges, in tax guides and across this site, grouped by topic.

Market and trading terms

• Ask — the lowest price a seller is willing to accept.
• Bid — the highest price a buyer is willing to pay.
• Spread — the gap between the bid and the ask; a hidden trading cost.
• Market order — buy or sell immediately at the best available price.
• Limit order — buy or sell only at a specified price or better.
• Maker / taker — makers add liquidity with resting orders; takers remove it. Makers usually pay lower fees.
• Slippage — the difference between the expected price and the price actually filled.
• Liquidity — how easily an asset can be traded without moving its price.
• Volatility — how much and how quickly the price changes.
• Candlestick — a chart bar showing open, high, low and close for a period.
• Wick — the thin line of a candle showing the period's high or low; sudden wicks often trigger stops and liquidations.
• Bull / bear market — a sustained rise or fall in prices.
• ATH — all-time high.
• Market cap — price × circulating supply. See market cap explained.

Profit and investing terms

• Cost basis — what you paid for an asset, including fees.
• Average buy price — total spent ÷ total coins. See average buy price.
• ROI — return on investment, as a percentage of what you put in.
• Break-even price — the price at which selling returns exactly what you spent.
• Realized / unrealized gain — profit locked in by selling, versus profit on paper.
• DCA — dollar-cost averaging: investing a fixed amount on a fixed schedule.
• Lump sum — investing all at once.
• HODL — slang for holding long-term rather than trading.
• Rebalancing — restoring a portfolio to its target allocation.

Trading with leverage

• Leverage — controlling a larger position than your margin; 10× means $1 controls $10.
• Margin — the collateral backing a leveraged position.
• Maintenance margin — the minimum margin before liquidation.
• Liquidation — forced closing of a position when margin runs out.
• Isolated / cross margin — risk limited to one position vs shared across the account.
• Perpetual futures — futures contracts without expiry.
• Funding rate — periodic payment between longs and shorts on perpetuals.
• Long / short — betting on a rise / a fall.
• Stop-loss — an order that closes a position at a set loss.
• Take-profit — an order that closes a position at a set gain.
• Risk-reward ratio — potential loss compared with potential gain.

Tax terms

• Disposal / disposition — selling, swapping or spending crypto; usually taxable.
• Capital gain — profit from a disposal.
• Short-term / long-term — in the US, held one year or less vs more than one year.
• FIFO — first in, first out, a cost basis method.
• Section 104 pool — the UK's average cost pool for tokens.
• ACB — adjusted cost base, Canada's average cost method.
• Inclusion rate — the share of a capital gain that is taxable in Canada (50%).
• Annual exempt amount — the UK tax-free gains allowance (£3,000).
• Tax-loss harvesting — realizing losses to offset gains.
• Form 1099-DA — the US broker form reporting digital asset sales.

Mining and network terms

• Blockchain — a shared ledger of transactions grouped into blocks.
• Proof-of-work — security through computational work (Bitcoin).
• Hashrate — mining computing power. See what is hashrate.
• Difficulty — how hard it is to find a block; adjusts every 2,016 blocks on Bitcoin.
• ASIC — a machine built for one mining algorithm.
• Block subsidy — new coins paid per block (3.125 BTC since 2024).
• Halving — the four-yearly cut in Bitcoin's subsidy.
• Mining pool — miners combining hashrate to receive steadier payouts.
• Gas — the fee unit for computation on Ethereum and similar networks.

Staking and DeFi terms

• Proof-of-stake — security through locked collateral.
• Validator — a node that proposes and confirms blocks on a proof-of-stake chain.
• Staking — locking tokens to help secure a network and earn rewards.
• APR / APY — annual rate without / with compounding.
• Slashing — a penalty that removes part of a validator's stake.
• Unbonding period — waiting time to unlock staked tokens.
• Liquid staking token — a tradable receipt for staked assets.
• DeFi — decentralized finance: financial apps running on smart contracts.
• Smart contract — code that runs on a blockchain.
• Stablecoin — a token designed to track a currency such as the US dollar.
• Impermanent loss — the cost of providing liquidity when prices diverge.

Security terms

• Wallet — software or hardware that holds your private keys.
• Private key / seed phrase — the secret that controls your funds. Never share it.
• Hot / cold wallet — internet-connected vs offline storage. See hot vs cold wallets.
• Custodial — a third party holds the keys for you.
• 2FA — two-factor authentication.

Put the terms into practice

The best way to learn these concepts is to use them. Start with the crypto profit calculator to see cost basis, fees, ROI and break-even working together on a real trade.

CryptoMathly provides educational estimates only and is not financial, investment or tax advice. Crypto assets are volatile and you can lose money. Always verify figures with a qualified professional.