Free lesson · Crypto markets

Base, quote and instrument identity

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A price states how many quote units buy one base unit. Multiplying by base quantity gives quote notional, not automatically US dollars.

Write the pair, settlement asset, venue and contract type on an instrument card. BTC/USDT spot is ownership or a custodial claim in BTC purchased with USDT; a BTC perpetual is a derivative position.

Convert to a reporting currency using a time-aligned quote. Trading fees may be charged in base, quote or a third token, so record their actual asset and quantity.

Apply it in a strategy

• Prevent stablecoin and inverse-quote unit errors in portfolio exposures and trade ledgers.
• Record the input timestamp, executable quantity, currency and horizon. Reconcile the result with a cash-flow or state table.
• Stress this failure condition: A mark is not a guaranteed liquidation value and can be stale or unredeemable.

Research deliverable

Build and explain a base, quote and instrument identity worksheet. Prevent stablecoin and inverse-quote unit errors in portfolio exposures and trade ledgers.

Evidence boundary: Synthetic arithmetic and scenarios illustrate mechanics. They are not historical returns, a paper replication, or evidence of an executable edge. Research sources and their access limitations are recorded at the end of this module.

Research sources, review dates and limitations

# Python 3.10+; standard library unless NumPy is imported below.
# Inputs and outputs use the units defined in this lesson. Synthetic teaching example.
def dollar_notional(base_units,quote_per_base,dollars_per_quote):
    if min(base_units,quote_per_base,dollars_per_quote)<0: raise ValueError("Nonnegative mark inputs required")
    return base_units*quote_per_base*dollars_per_quote

print(dollar_notional(.2,50000,.98))