Glossary
Currency & crypto glossary
Conversion comes with its own vocabulary. Here are the terms you are most likely to run into, explained in plain English and free of jargon.
A
- Appreciation
- When a currency rises in value relative to another. If the euro appreciates against the dollar, each euro buys more dollars than before.
- Arbitrage
- Profiting from the same asset being priced differently in two places by buying low in one market and selling high in another. In efficient markets these gaps are small and short-lived.
- Ask price
- The price at which the market is willing to sell a currency to you. It is slightly higher than the bid price, and the gap between them is the spread.
B
- Base currency
- The first currency in a pair, the one being priced. In EUR/USD, the euro is the base currency and the quote tells you how many dollars one euro is worth.
- Bid price
- The price at which the market will buy a currency from you. It sits just below the ask price.
- Bid-ask spread
- The difference between the bid and ask prices. A narrow spread signals a liquid, actively traded market; a wide spread signals the opposite.
- Blockchain
- The shared, tamper-resistant digital ledger that records cryptocurrency transactions across a network of computers, with no central operator.
C
- Cross rate
- An exchange rate between two currencies derived through a third reference currency, usually the US dollar. It keeps a large web of pairs internally consistent.
- Cryptocurrency
- A digital asset that uses a blockchain to record ownership and transfers, without relying on a bank or government to issue or settle it.
D
- Depreciation
- A fall in a currency's value relative to another through normal market forces. The opposite of appreciation.
- Devaluation
- A deliberate, official reduction of a currency's value by a government or central bank, usually under a fixed or managed exchange-rate system.
E
- Exchange rate
- The price of one currency expressed in another. If GBP/USD is 1.27, one British pound is worth 1.27 US dollars.
F
- Fiat currency
- Government-issued money, such as the US dollar, euro, or yen, that is not backed by a physical commodity but by trust in the issuing authority.
- Foreign exchange (Forex / FX)
- The global market where currencies are traded against one another. It is the largest and most liquid financial market in the world.
H
- Hedging
- Reducing the risk of unfavorable currency moves, for example by locking in a rate ahead of a future payment so a swing does not raise your costs.
I
- Inflation
- The rate at which prices rise over time, reducing the purchasing power of money. Persistently high inflation tends to weaken a currency.
- Interbank rate
- The rate at which large banks trade currencies with one another. It is very close to the mid-market rate and far better than retail rates.
L
- Liquidity
- How easily an asset can be bought or sold without moving its price. Major currencies are highly liquid; thinly traded assets are not.
M
- Market capitalization
- For a cryptocurrency, the price per unit multiplied by the number of units in circulation. It is the fairest measure of a coin's overall size.
- Mid-market rate
- The midpoint between the buy and sell prices of a currency pair, and the fairest snapshot of its value. Most providers add a margin on top of it.
P
- Pip
- The smallest standard increment by which a currency pair's price moves, traditionally the fourth decimal place for most pairs. Used to measure tiny rate changes.
Q
- Quote currency
- The second currency in a pair, the one used to price the base currency. In EUR/USD, the dollar is the quote currency.
R
- Remittance
- Money sent across borders, often by workers supporting family in another country. Exchange-rate margins and fees make a real difference to how much arrives.
S
- Spot rate
- The rate for exchanging a currency right now, for near-immediate settlement. It is effectively today's market price, as opposed to a future agreed rate.
- Spread
- The margin a provider adds over the mid-market rate. It is the main, and often hidden, cost of exchanging money.
- Stablecoin
- A cryptocurrency designed to hold a steady value, usually pegged to a fiat currency like the US dollar, so one unit aims to stay worth about one dollar.
T
- Ticker symbol
- The short code used to identify a currency or coin, such as USD, EUR, BTC, or ETH.
V
- Volatility
- How much and how quickly a price moves. Cryptocurrencies are far more volatile than major fiat currencies, which is why crypto figures change so fast.
- Volume
- The amount of an asset traded over a period, often 24 hours for crypto. High volume makes a quoted price more reliable and easier to act on.
W
- Wallet
- Software or hardware that stores the keys needed to access and move cryptocurrency. The coins live on the blockchain; the wallet holds the keys to them.
Put the terms to work
Head to the converter, or read the full guide to how conversion works.