We’ve recently published an article in our blog How do I start buying crypto and shared our tips on how not to get lost right at the start of your investment career. Today we want to talk more about basic terms that every crypto newbie needs to understand. The cryptocurrency world may seem very complex and confusing, especially for those who have no experience in finances or trading. However, everything becomes more clear if you can operate and differentiate between crypto words and notions.
Check out the first part of our cryptocurrency glossary:
A special alphanumerical code that serves as a sender’s or receiver’s identificator in any cryptocurrency transaction. Basically, it’s a virtual location where coins can be sent or received and can be compared to bank account details. A crypto address consists of 26-35 symbols deriving from the private key and indicates a part of a blockchain network. That’s why any transaction with a cryptocurrency token requires specific address because it belongs to a particular blockchain network. When Bitcoin only appeared, one could send coins with the help of an IP address.
A marketing technique to promote new cryptocurrency projects. New companies announce crypto airdrops on their websites or social media to attract attention to newly created coins. Usually, people need to do something to receive crypto, such as follow social media channels, record a video, etc. Remember that you can receive only a small amount of cryptocurrency within an airdrop.
One of the most influential groups of investors in cryptocurrency trading. To put it simply, bears are the people who follow a bear strategy in crypto investments – they sell coins to decrease prices. A bear market is when the supply is higher than the demand. This term is also used in stock trading and real estate.
Blockchain is a shared database that ensures decentralized and reliable information storing about cryptocurrency transactions. In the blockchain, all the data is saved as chunks or blocks. When there’s no more space in one block, another one is created and linked to a previous one. As a result, we receive a timeline made of interconnected blocks with information.
One more type of cryptocurrency marketing strategy that is usually adopted during an ICO stage. Bounty programs can be divided into two broad categories: pre-ICO and post-ICO. Pre-ICO bounties are targeted at social media influencers, bloggers, and the general public too. For instance, a blogger can receive some NFTs for talking about the new coin and its ICO on their platform. The range of such rewards and steps needed to receive them vary from project to project.
Post-ICO bounties are mostly connected with fixing bugs. That is, a company encourages people to look for bugs in code and report them. In such a way, a project can fix more issues and make a product more appealing to larger audiences. That’s why it makes sense to give small rewards to encourage people to report bugs.
A skeptical viewpoint that some coin, for example, is not worth its price. In other words, if a coin has an unreasonably huge value, it’s believed to be a speculative bubble. However, it’s quite difficult to figure out which cryptocurrencies are bubbles, and which ones aren’t. Sometimes, even the most experienced crypto investors cannot say whether a bubble will burst.
These are another large investor group that is mostly buying coins. Bull market is the one always rising, which is caused by huge demand and low supply. A bull markets are typical for prospering rising economies.
Wallets are software or devices for holding cryptocurrency. In cold wallets, private keys are generated offline, while hot wallets have access to the Internet.
In the cryptocurrency industry, liquidation is a forced position closing because of the trader’s loss of the initial margin. This can happen when an investor cannot meet the margin requirements for their leveraged position. Then, the exchange automatically closes out such position, and a trader loses their investment. There are partial (partial position closure) and total liquidations (closing a position with almost all initial margin).
It’s money not backed up by any physical commodity. In the past, gold, silver, and other precious metals or stones were used as money because they had physical value and could be easily traded for other needed things (weapons, food, etc.). Fiat money is issued by governments and its value/price depend entirely on a government’s stability, as well as on the relationship between demand and supply. It means that the value of euro, dollar, British pound, and most modern currencies (because they’re are all fiat money) can change because of inflation or hyperinflation, for example. In most cases, you’d need to pay with fiat currency to purchase crypto coins.
This was the first part of our crypto glossary but we will continue to introduce more crucial terms in our future blog posts.
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