Crypto trading has garnered the attention of millions in the last decade, prompting many new traders to enter the market. But, many traders jump into the trend without fully getting their basics right. To become a successful crypto trader, it’s crucial that one learns the basic terms and get the fundamentals right. New trends and concepts are constantly introduced in this ever-evolving field. In this blog, let’s explore some of the most common terms that will make your crypto trading journey easier than ever.
First things first, let’s take a look at the core cryptocurrency concepts.
A cryptocurrency is a digital currency or virtual currency. It uses digital cryptography for security. Unlike traditional currencies, cryptocurrencies are decentralised. It means that cryptocurrencies are not controlled by the government or any financial institutions. Bitcoin, Ethereum, and Dogecoin are some of the popular cryptocurrencies available in the market.
Since cryptocurrencies are not regulated by the government or financial institutions, one may wonder about how secure it is. That’s where blockchain comes into play. Blockchain is a distributed database that is seamlessly shared among the nodes of a computer network. These public ledgers make it secure from being tampered, with and remain a safe place for storing as well as transferring cryptocurrencies.
Wallets are used to store cryptocurrencies, to lock them away from being stolen. There are two types of wallets. Hot wallets are connected to the internet and cold wallets are not connected to the internet. Most traders use a digital wallet to secure their purchased cryptocurrencies, and these wallets are secured by a key that’s long and hard to crack.
Private keys are used to secure the storage of cryptocurrencies in a wallet. Basically, it’s a unique code to which only the user should have access. Sharing your private key with others can give them the authority to access and use your cryptocurrencies.
Unlike private keys, public keys are meant to be shared, as they are used to receive cryptocurrencies from outside. It’s a derivative of the private key, and sharing the same does not give authority to others to control the cryptocurrencies you possess.
An exchange is a place where traders can buy, sell, or exchange cryptocurrencies. It is a platform that makes crypto trading possible for joinees. Trading fees, security features, and the number of crypto coins available to trade may vary upon the exchange you choose. Binance, Bitfinex, and Coinbase are some of the most popular crypto exchanges. The first step to start your crypto trading is to choose an exchange and sign up.
At the beginning, only Bitcoin was available as a cryptocurrency. Later, many new crypto coins started entering the market. Altcoin is the term used to collectively address all the cryptocurrencies other than Bitcoin. Some people exclude Ethereum from the list too, as most cryptos are considered as bifurcated from either Bitcoin or Ethereum. There are many categories of altcoins such as Security tokens, Stablecoins, Utility tokens, Payment tokens, Meme coins, and Governance coins.
An ICO in crypto is similar to an IPO (Initial Public Offering) in the Stock market. Basically, it’s a fundraising event in which a new cryptocurrency startup offers tokens to investors, expecting capital investment in return. The investment can be as fiat currency or other cryptocurrencies.
FOMO, or Fear of Missing Out, is basically a psychological trait in which traders may feel the urgency to invest in a particular crypto as soon as possible, so as to not miss out on the perceived profits it may generate. Most of the time, this fear is irrational and when it hits collectively, the results could be market crashes or bubbles.
FUD is the result of manipulations used by certain entities by spreading misleading negative information or rumours regarding a particular cryptocurrency, with the shady intentions of making investors sell the same. When many people feel fear, uncertainty, and doubt in holding the coin, they sell at once and the price of the crypto coin goes down. This can happen to the whole crypto market as well.
HODL, rather than an abbreviation, is the word ‘hold’ misspelt. It’s slang used to call the investors who are willing to hold on to their crypto coins, disregarding the minor price fluctuations that normally tempt investors to sell. HODLers are looking forward to long-term big profits instead of short-term gains.
Pump and dump is a market manipulation orchestrated by certain investors to artificially inflate the price of a crypto coin to attract more investors and thereby further raise the prices. Once the price is high enough, they sell off their holdings to exit with a substantial profit. The collective selling could make the prices drop from the heights and can be harmful to the new investors who jump in to invest at the sight of seeing the price going up at first.
Market cap or market capitalization is the total value of all the coins in circulation of a particular cryptocurrency. The size or popularity of a crypto coin is often measured using units like the market cap. For example, the current market cap of Bitcoin is more than $660 billion, making it the biggest crypto coin out there in the market.
Crypto coins are subject to high price fluctuations, even in a single day. All-Time High, as the name suggests, is the highest price a crypto coin has achieved during its entire run to this time. For example, Bitcoin reached its all-time high on November 10, 2021, reaching the price of $69405 for a single bitcoin. Since then, it never crossed that price again. ATH helps in determining the potential of a cryptocurrency.
Sometimes, the whole market goes down, with prices of the majority of cryptocurrencies taking a downward spiral. This sustained decline, referred to as a bear market, can be the result of a collective market sentiment, often caused by a string of factors, including but not limited to, economic recessions, regulatory crackdowns, negative news, and loss of trust due to fraud and manipulations.
The bull market is the opposite of a bear market. It’s when the prices of most of the cryptocurrencies take an upward trend, often due to a collective positive mindset instilled in the investors through various factors. The factors could include favourable news, heightened demand, institutional adoption, etc.
A whale can be an institution or an individual who either holds or has the potential to buy a large amount of cryptocurrency. Their big activity can have a significant effect on the price of the crypto coin. For example, if they sell their huge holdings, the price can have a substantial drop. Or, if they buy a big share, the prices can go much higher too.
Currencies like US dollar, Euro, Yen, etc., that are issued by governments and used as traditional money are called fiat currencies. Fiat currencies are not backed by any commodities such as silver or gold. Also, it is used as a reference point when it comes to denoting the value of cryptocurrencies.
Volatility is common in the crypto market. It’s the term used to denote the constant fluctuations of prices in a small time frame. The price going up and down constantly can be a double-edged sword for investors. It may result in huge losses or can bring in big profits for a trader, in a small interval of time.
DApps are application software that are built and run on blockchain networks. They offer various services like DeFi, gaming, gambling, etc. For example, Zed is a DApp in which you can buy virtual racing horses and make them participate in virtual races and gamble on the same. One of the advantages of DApps is its transparency since there is no central authority monopolising its regulations. Also, they are considered secure since it’s built on blockchain networks.
Security tokens in the crypto world represent ownership that is equivalent to ownership of assets such as stocks bonds or real estate in the real world. Security tokens are often traded on exchanges and are subject to legal regulations, promising ownership.
Smart contracts are self-executing contracts that can be coded and stored in the blockchain network. When predefined conditions are met as per the code, the transactions execute themselves. This discards the need for intermediaries in materialising the contract. Asset transfers, payments, and a wide variety of transactions can be automated using smart contracts.
Crypto is a world that is constantly undergoing change with new coins and trading strategies entering the scene every other day. To tackle this ever-evolving market, knowledge can be your best ally. With this blog, you’ll be equipped with knowledge regarding the basic crypto terms every trader must know. But, knowledge doesn’t stop there. You need to continuously upgrade your knowledge to navigate this field. We at Seven Capitals have a bunch of educational content and blogs to help you learn on the go. All you have to do is HODL onto your curiosity to learn everything.
If you are new to crypto trading, or experienced, we at Seven Capitals offer you the most advanced trading platform to get started. Try your luck with hundreds of crypto coins in the market, and explore the 24-hour open crypto market with our 24/7 customer support. Join Seven Capitals today.