Every industry has its unique terminology, definitions and acronyms that those within the industry understand. For those on the outside, however, following all those industry-specific acronyms can be a real challenge and a significant barrier to entry.
The world of cryptocurrency is no exception, and you will encounter lots of mysterious terms and strange acronyms as you go down the learning curve (especially if you frequent Reddit!) Here are some of the most commonly used terms in the cryptocurrency market, along with their everyday English translations.
Let’s start with the most basic definition – cryptocurrency. The term cryptocurrency refers to a type of digital asset that is designed to be a medium of exchange. This kind of exchange medium uses cryptography to keep transactions secure. Cryptography is also used to control the creation of additional units of currency.
In cryptocurrency terms, an address is a code used to send, receive or store cryptocurrency. These addresses consist of 26-35 characters, a combination of letters and numbers. The address can also refer to the public key, a pair of keys needed to sign their digital transactions.
The term altcoin refers to any digital cryptocurrency other than Bitcoin (and to some extent, Ethereum). Bitcoin is the most popular cryptocurrency, but there are also more than 1,000 others. Each one of those more than 1,000 cryptocurrencies is known as an alt coin, short for alternative coin.
The blockchain is what makes cryptocurrencies like Bitcoin possible. It is a list of every block that has been mined since the creation of the cryptocurrency.
Cryptocurrencies are not printed – they are mined. Every time a miner successfully hashes a transaction block, they receive a blockchain reward.
You may hear the U.S. dollar and other traditional currencies referred to as fiat currencies, but what does that mean? A fiat currency is used to describe any physical paper currency. Governments and central banks typically issue fiat currencies, and they are fully regulated and centralized.
When an investor is holding on to a cryptocurrency that has dropped in price, they are known to be a “bagholder” or “bag holding.”
Hard forks are typical in the world of cryptocurrencies, and this term refers to the alteration of the underlying block structure of the cryptocurrency.
The hash is a term for the mathematical process that transforms a variable amount of data into a shorter fixed-length output. This term is used in cryptocurrency mining.
Cryptocurrencies are mined, not in underground structures but with computer hardware. Mining involves using sophisticated computer hardware to solve complicated mathematical problems.
Proof of Work
Proof of work is used to tie mining capability to the computational power of the computers involved.
Cryptocurrency can be shorted in much the same way that stocks are. When a trader or investor goes short on a cryptocurrency, he or she hopes to profit from a price decrease. Shorting can be risky since a rising price could produce a huge loss.
Taking a long position is the opposite of a short. When a trader or investor goes long, they hope to profit from a price increase.
Volatility is a measure of the price movement of an investment over time. The cryptocurrency markets are well known for their high levels of volatility.
Dollar Cost Averaging. Used to reduce the volatility of market portfolios by spreading out buys and sells over a more extended period.
FOMO stands for Fear of Missing Out, and it is a common sight in a rising market. As the price of Bitcoin and other cryptocurrencies continue to rise, more and more newcomers enter the market. This feeling of FOMO can cause the demand to rise even higher.
FUD stands for Fear, Uncertainty, and Doubt, and it too is a common sight in the cryptocurrency market. There is always fear that newcomers will get into the market at the highs and that the price will plummet once they are invested. Uncertainty and doubt are also commonplace in volatile markets, and new investors should be prepared for this.
An ICO is an Initial Coin Offering, similar to an Initial Public Offering (IPO) in the stock market. An ICO is used to raise money for a new cryptocurrency project by offering a set amount of coins to the public. This initial set of coins is available at a base price, after which the price will fluctuate based on supply and demand.
TA is short for Technical Analysis. It is used by analysts to predict the price action and direction of a coin in the near future. Some people believe it is nothing short of quackery but many analysts think they can generate handsome profits with the typical volatility that occurs in crypto markets.
Understanding the terminology surrounding the cryptocurrency market is very important, especially if you are ready to jump in. Every industry has its unique vocabulary, and the understanding these terms can vastly increase your comfort level.
If we’ve left something out, please comment below, and we’ll get it added!