Financial terms, explained from first principles.

Exchange-forced closure of profitable opposite-side positions to absorb cascade losses when insurance fund is depleted. The worst-case scenario for profitable traders.

Long spot + short futures (or perp) to capture the futures premium — earns the basis/funding with no directional exposure. The flagship neutral crypto strategy.

Cross-margin: all positions share account balance as margin. Isolated: each position has its own dedicated margin, capped at the allocated amount.

Decentralized Finance - financial applications running on blockchains.

Periodic payment between perpetual-futures longs and shorts that anchors perp price to spot. Positive = longs pay; negative = shorts pay. Cleanest leverage-sentiment gauge in crypto.

Bitcoin's pre-programmed 50% reduction in mining rewards every ~4 years.

Exchange-maintained pool that absorbs losses when liquidations execute below the bankruptcy price. Buffer between cascade losses and socialised losses on profitable traders.

Linear perp: collateral and PnL in USDT (stablecoin). Inverse perp: collateral and PnL in the crypto asset itself (BTC for BTC perp). Different risk profiles.

Maximum leverage decreases as position size increases. A $1k BTC perp position can use 125x; a $10M position is capped at 10-25x. Protects exchange and limits cascade risk.

Self-reinforcing chain of forced liquidations: each liquidation moves price further, triggering more liquidations. The structural cause of crypto's flash crashes.

Index price = volume-weighted spot price across reference exchanges. Mark price = smoothed index price used for liquidations and PnL — protects against flash-crash liquidations.

Total outstanding leveraged-derivatives positions across all participants. The dominant flow indicator in crypto. Rising OI + rising price = healthy long buildup; rising OI + falling price = short buildup.

Futures contract with no expiration date. Price tracked to spot via the funding mechanism. The dominant crypto trading instrument — 80%+ of crypto volume.

Realized PnL = profit/loss from CLOSED positions. Unrealized PnL = paper profit/loss on OPEN positions. Only realized PnL is bookable; unrealized can evaporate.

A cryptocurrency designed to maintain a stable value, typically pegged to the US dollar.

Total Value Locked - the dollar value of assets deposited in a DeFi protocol.