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.

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): A smaller market participant who trades relatively small amounts compared with large holders.
• Whale: A large holder whose trades can influence price in certain markets, especially where liquidity is limited.
   

Blockchain is a foundational technology in many crypto networks. Understanding how it works can help explain how transactions are recorded and verified.

• Blockchain
  A distributed ledger where transactions are recorded in blocks linked together cryptographically. In public blockchains, many nodes maintain copies of the ledger and validate new blocks based on the network’s consensus rules.
• Forks
  A fork is a change to a blockchain’s rules. A hard fork creates a rule change that is not backward compatible and can result in two separate chains if the network splits. A soft fork is backward compatible, meaning older nodes can still recognise new blocks under certain conditions.
• Node
  A computer that connects to a blockchain network and helps relay and validate data. Full nodes verify blocks and transactions against the network’s consensus rules; lightweight (SPV) wallets rely on full nodes for certain validation functions.
• Sharding
  A scaling method that splits blockchain data and processing across multiple shards to improve throughput.
• Smart Contracts
  Programs stored on a blockchain that can run automatically when predefined conditions are met.
   

Buying and selling is one way people interact with crypto markets. Below are common trading terms.

• Arbitrage: A strategy that aims to profit from price differences for the same asset across markets or venues.
• Ask: The price a seller is willing to accept for an asset is ‘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 for a particular asset on a trading venue.
• Volume: The total number of securities or digital assets traded in a given period of time. It is usually based on a daily measure.
   

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, and doubt, often used to describe messaging intended to create negative sentiment or confusion.
• HODL
  A slang term ‘hold on for deal life’ which is used in crypto communities that generally refers to holding an asset rather than actively trading it.
• Wallet
  A tool (software or hardware) used to manage private keys and sign transactions. Wallets can generate addresses used to receive and send assets on a blockchain.There are two types, hot storage (the wallet is connected to the internet) and cold (storage is offline and away from the internet).