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Cryptocurrency 101: Terms to Know

Aug 26, 2020
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byNDAX Labs

Cryptocurrency 101: Terms to Know

       


               

The first thing people tend to notice once they start trading cryptocurrency is the number of terms the cryptocurrency community has. FOMO, Moon, HODL? They all have different meanings than what you might initially think. Read on for an introduction of commonly used terms that will get you up to speed & feel confident in cryptocurrency.

A Digital Zoo of Sorts

While the world of cryptocurrency is not a real-life zoo, it is a fan of using animal terminology to represent different types of investors. They also represent current market activities and trends – so understanding the meaning of what a bull is versus a whale is important in cryptocurrency trading.

Bear

An investor who has a negative outlook on the market believes prices will go down.

Bull

A bear’s opposite, or an optimistic investor who has a positive outlook on the market and believes the price will go up.

Fish (or minnow)

An investor who buys and sells cryptocurrency in small quantities, usually 10-50 Bitcoin.

Whale

A whale is a large investor in the market who has enough weight to sway price. Whales sometimes use this influence to manipulate the market.

             


                                     

It’s a Block…It’s a Chain… It’s Blockchain


Blockchain is a fundamental aspect of cryptocurrency, learning how cryptocurrency is developed, will help you understand the bigger picture behind it.

Blockchain

A data structure in which a digital ledger is used. It can be an open ledger (public) or closed (private). It consists of ‘blocks’ that contain data relevant to each transaction which has been processed by miners on the blockchain. Each block builds on the previous one by including a hash from that previous block. Each node involved in processing the information receives an updated copy of the blockchain which is automatically downloaded.

Forks

There are two types of forks – soft and hard. A hard fork is when the code of a cryptocurrency is changed and the chain breaks away and continues on from the old code, this results in a new and an old version (ie. Bitcoin and Bitcoin Cash). A soft fork is more of an improvement to the chain and all users adopt the change.

Node

A computer that connects to the cryptocurrency network. Nodes can be either full, which checks the consensus rules have not been violated; or lightweight, which follow whichever the majority of the mining power is doing.

Sharding

Spreads blockchain data out to make the blockchain more efficient and faster.

Smart Contracts

A computer protocol for contracts made on the blockchain whereby they execute performance on their own.


             


                 

It’s Go Time: Making a Trade

Buying and selling coins is the core of cryptocurrency. Here’s a primer to get you started trading.

Arbitrage

The difference in price between buying an asset and selling the asset for another price.

Ask

The price a seller is willing to accept for an asset ‘ask price’ or ‘ask’.

Bid

The price offered by a buyer for an asset.

Spread

The difference between the Ask price and the Bid price.

Market Order

This type of order is a buy or sell order to be executed immediately at the current price.

Order Book

An electronic list of buy and sell orders on an exchange for a particular digital asset. A.k.a. your trading activity.

Volume

The total number of securities or digital assets traded in a given period of time. It is usually based on a daily measure.

               


                             

The Funny, the Random and Miscellaneous

Cryptocurrency has borrowed terms from the everyday world, here are some of the best.

Bagholder

In a pump and dump scheme, the person who buys an asset at the top of the market (peak of the pump) before the price suddenly crashes (dumps) is referred to as a bagholder.

FOMO

An acronym for Fear Of Missing Out. This is the internal fear of an individual that others may be smarter, making more money or in possession of something better than they have.

FUD

An acronym for Fear, Uncertainty, Doubt. It is known as a marketing tool by a stronger competitor to cast doubt on an up and coming competitor.

HODL

Commonly interpreted to mean ‘Hold On for Dear Life’. A.k.a. not buying or selling.

Wallet

A secure digital wallet that is used to store cryptocurrency. Each wallet has its own address to receive and send funds. There are two types, hot storage (the wallet is connected to the internet) and cold (storage is offline and away from the internet).

               

If this list sparked your curiosity, there are more terms for you to improve your crypto knowledge at our glossary support page.

               



                                               

If you are based in Canada and looking for a Canadian Bitcoin exchange, then take a look at  NDAX. NDAX is an easy-to-use, beginner-friendly exchange that can give you easy access to trade Bitcoin and other cryptocurrencies like Ethereum, XRP, Litecoin, Cardano, Dogecoin, EOS and Stellar.