Although it’s been in existence for over a decade now, for many, the word ‘cryptocurrency‘ has been nothing more than a term they’ve heard mentioned in the media every now and then.
But following the hype that many cryptocurrencies have stirred up across traditional, social and alternative media platforms throughout 2020, there’s a good chance that many of you out there might have started to take a lot more notice of the discussions taking place around cryptocurrency of late.
Indeed, as the global economy continues to feel the full force of the Covid-19 pandemic, cryptocurrencies on the whole are going from strength to strength in terms of their financial value – and the trend seems set to continue in 2021.
If you are someone who’s considering investing some of your time and effort into learning more about all things cryptocurrency, then let me offer a helping hand by providing you with a little guidance in terms of understanding cryptocurrency terminology.
Understanding Cryptocurrency Terminology – Top 10 Trading Terms
When it comes to understanding cryptocurrency terminology, perhaps the most logical place to start is in the vicinity of cryptocurrency trading.
Because let’s face it – if you’ve already shown an interest in understanding cryptocurrency terminology, then there’s a very good chance you’re going to be interested in learning how to trade in this valuable commodity!
So without further ado, let’s take a look at ten of the most commonly used cryptocurrency trading terms…
1. ALL-TIME HIGH (ATH)
This is by no means a new term – in fact, the phrase all-time high is pretty common amongst currency traders and stock market analysts. All-time high quite simply refers to the highest price that a particular currency has achieved on a crypto trading exchange. The all time high of bitcoin was just over $63,000.
2. ALL-TIME LOW (ATL)
If there’s a specific term to mark the highest trading price, then it should come as no surprise to learn that there’s also a term for the lowest trading price. And that’s exactly what the term all-time low refers to.
3. CRYPTOCURRENCY EXCHANGE
There’s no hidden meaning here – a cryptocurrency exchange does exactly what it says on the tin. Just as we have exchanges for our traditional currencies, we also have exchanges for cryptocurrencies. Because cryptocurrencies are digital assets, so too are crypto exchanges. They are digital marketplaces you can visit to either trade cryptocurrencies or buy or sell crypto assets in exchange for traditional fiat currency.
4. DUE DILIGENCE (DD)/DO YOUR OWN RESEARCH (DYOR)
When it comes to the world of cryptocurrency, due diligence and doing your own research is crucial. There’s so much conflicting information out there in the media about cryptocurrency (not to mention fear mongering!) and it’s impossible to know who you can trust. The only way to be certain about what investments you should make is by doing your own research and thoroughly investigating the different options available to you.
5. FEAR OF MISSING OUT (FOMO)
Cast your mind back to when you were younger for a few seconds. Do you recall ever having that feeling that all of your friends were going somewhere or doing something and you were going to be the one who missed out? Well, the same meaning applies here. To put it simply, fear of missing out refers to the knee-jerk reaction many crypto traders and investors often have when a particular cryptocurrency spikes in value. It’s an emotional reaction you have when you make a rash investment decision because you were scared that you might otherwise miss out on making a big profit on your investments. Needless to say, I’d highly recommend against this sort of investment tactic because it’s based purely on your feelings and emotions rather than on sound logic and rationale!
6. FEAR, UNCERTAINTY AND DOUBT (FUD)
The term fear, uncertainty and doubt refers to some of the more unethical and underhand tactics that certain individuals or organisations might deploy to try and deter you from investing in a particular cryptocurrency. And although ‘FUD’ is by no means a new concept – having been first coined in the 1920s – it’s certainly seen a resurgence in the 21st Century in the world of cryptocurrency. Put simply, when individuals or organisations circulate or spread misinformation about a specific cryptocurrency, they do so with the aim of causing fear, uncertainty and doubt. Their overarching goal is to deter you from investing or trading in a particular crypto asset by making you question its credibility, value or true worth.
7. HOLD ON FOR DEAR LIFE (HODL)
That’s right – I said hold on for dear life! And while it might at first seem like we’re talking about something you might do when you’re on a scary rollercoaster ride, it most definitely applies to the rollercoaster ride that the world of cryptocurrency can be too! In layman’s terms, HODLing simply means sitting tight and not making any rash decisions just because your crypto investments may have seen a sudden or unexpected drop (or rise!) in price.
8. INITIAL COIN OFFERING (ICO)
In many ways, an initial coin offering is similar to the concept of crowdfunding. Just like crowdfunding, the aim of initial coin offering is to raise funds. But an ICO relates more specifically to raising digital funds (via cryptocurrencies such as Bitcoin or Ethereum, for example) in order to ‘back’ or ‘fund’ the development of a new cryptocurrency project. You could call the individuals who offer early funding support to these new and innovative crypto projects early investors – just as you might call those individuals who support new and emerging technologies early adopters.
9. INITIAL EXCHANGE OFFERING (IEO)
Whereas an initial coin offering is fundraising that’s carried out directly by the individual or organisation developing the new cryptocurrency project, an initial exchange offering is one that’s managed by a cryptocurrency exchange platform. Instead of supporting the project directly by donating your crypto assets, with an IEO you would trade your crypto funds in exchange for ‘tokens’. The transaction would be exactly the same as any other transaction you’d normally make via a cryptocurrency exchange – the only difference being that you’d receive tokens instead of an actual cryptocurrency.
When it comes to the term ‘mining’, there are actually two different definitions that relate to the same word. The first definition refers to the creation and introduction of new coins into the wider cryptocurrency system. Mining is the process that takes place in order to produce new crypto coins. The second definition relates to activities and processes that occur at the opposite end of the system. That is, whenever a transaction or trade is made using cryptocurrency, it first needs to be verified before it can be recorded on the official Blockchain ledger. The term mining therefore relates to the process of verifying and recording a cryptocurrency transaction after it’s taken place.
Understanding cryptocurrency terminology might seem a bit daunting at first, but I hope you’ve found this top ten list of common crypto trading terms useful as a starting point.