Glossary
Drawdown
The peak-to-trough fall in price or account value from the highest point reached.
Drawdown is the decline from the highest value an account or asset has reached to its subsequent low. It measures how bad it got, which is the number that determines whether a position survives.
It is asymmetric on the way back. Recovering a 50% drawdown needs a 100% gain, and a 20% drawdown needs 25%, so losses stay in the account long after the recovery is complete.
Because leverage resets the math, a drawdown on a leveraged position ends in liquidation rather than recovery. Sizing positions so a large drawdown is survivable is more useful than predicting where the peak was.
Related terms
Airdrop
Free tokens distributed to wallet addresses, usually to reward early users of a protocol.
AMM
Automated Market Maker — a protocol that prices assets with a formula instead of an order book.
APR vs APY
APR is the yearly rate without compounding; APY includes compounding and is always higher.
ATH
All-Time High — the highest price an asset has ever traded at.
Bear Market
A prolonged decline, conventionally 20% or more from recent highs.
Bull Market
A prolonged rise driven by new demand, easy credit and rising confidence.