We find it important to make the potential crypto market as transparent and clear as possible. Please find an explanation of the frequently used financial terms below.
A bear market is a rate that bears a dropping trend for a long time. It is derived from a bear whacking its prey down to the ground.
A market full of potential. Large investors are optimistic and are expecting to make a large profit in the future. It is derived from the bull that often sways its horns upwards.
A 51% attack is a situation in which more than half of the computer power within a certain blockchain comes from one person or one concentrated group. It makes sure the group has complete control over this blockchain. They can therefore stop mining, stop all transactions or endlessly spend every coin of this specific blockchain.
With the increasing number of online transactions and increasing distrust in banks after the financial crisis of 2008, the demand for a new digital payment method rises. This payment method should be parallel to the current financial system. This new system has to be decentral so there is no single point of failure.
Bitcoin is the answer to the demand for a new digital payment method. Bitcoin can be considered a digital form of cash money; a way of value exchange from person to person without a third party being involved. This is what we call peer-to-peer.
What is blockchain technology exactly? Let’s use a wholesaler in fruits and vegetables as an example. The financial administration of the company is in a ledger, which contains all information about the purchase and sales of fruits and vegetables. If the company cooperates with another party, it appeals to a trustworthy intermediary to validate the transaction, for example a notary or a bank.
Blockchain is actually a public database with the ledger of every transaction ever made. A new transaction is therefore chained to the current data blocks of transactions. That’s why it’s called blockchain.
What makes blockchain so attractive and popular is that the technology can be used for every type of agreement or transaction.
Buy the rumour, Sell the news
?Buy the rumour, sell the news? is a sentence we often hear in the trade world, also in the cryptocurrency world. But what does it mean?
We use a Bitcoin news release as an example. Bitcoin releases an update. The exact details of the update are not available yet. Rumour goes it’s quite a development. The hype is big. Everyone starts buying Bitcoins, so the currency rises. Three things can happen at this point:
- The details of the update are released. The update is good, but many people sell the Bitcoins because they are convinced it is smart to purchase at first announcement of the update and the hype that follows. It is impossible to preserve the hype.
- The worst scenario would be that the details of the update flop and Bitcoin collapses completely.
- The update details are tremendous. A new value addition has been developed! The hype preserves and Bitcoin rises further.
Crypto money is value in the form of an amount in cryptocurrency. The latter is a type of digital currency, which is often used as alternative money system to the regular types of money. Bitcoin is the world’s most well-known cryptocurrency.
Bitcoin found a way to add value in a digital way, directly from person to person, and Ethereum does things differently. The Ethereum network is intended as the spine of a new kind of internet. It has to form the basic layer that decentralized applications (DAPPs) and smart contracts can be launched on. In comparison with the current decentralized internet applications, DAPPs should be a lot safer, more privacy friendly and uncensorable.
You need quite some programming knowledge and experience to create a DAPP or smart contract. Ethereum developed its own programming language: Solidity. Solidity should make it easier to program DAPPs and smart contracts.
When a currency of a certain coin increased significantly, one often thinks: ?This is the new Bitcoin/Ethereum!?. At that moment, there is a Fear Of Missing Out. One cannot rationally think about the purchase then. The recent increase may be the highest point? Will it drop the next couple of days? Always consider things well and think about it!
FUD stands for Fear Uncertainty and Doubt, we know this as fear, insecurity and doubtful. These are emotions and feelings that a trader could have when a market is insecure in a negative sense.
For example when there are rumours or speculations of a possible price drop of a certain coin. A good trader keeps his/her emotions under control, also when he makes a loss on his trade.
A fork happens when an alternative operational version of the current blockchain parts permanently. This can happenin three different ways:
- By a 51% attack.
- By a bug in the program.
- Because new substantial changes in the current blockchain have to be made.
Fiduciary money is money of which the value is purely based on the trust people have in it. It is not related to fixed matter such as gold or silver. That is how it gives banks and the government the chance to, depending on the need, print more of they need it.
For governments, this poses quite an advantage, because they control the economy and possible currency changes. The disadvantage is that we – as civilians – pay a large price for it. We pay this price in the form of inflation and decreased purchasing power.
Take your grandfather as an example, he saved all his life and stopped working in 1957. He then thought the 1 million Euro under his bed would be enough to live a happy life himself and a next generation. Unfortunately, grandfather did not take inflation and the CPI, Consumer Price Index, into account. Consumer Price Index.
The million Euro from 1957 is now only worth a little over a hundred and eleven thousand Euro. That means the value of the money dropped 89% in 62 years.
ICO stands for ?Initial Coin Offering?, or the first coin release. IEO stands for ?Initial Exchange Offering.?
An ICO is actually the crypto version of crowdfunding. As an investor, they purchase tokens from a blockchain startup. The value of coins increases if a startup achieves success. An IEO is almost the same, but the crowdfunding is organized via an exchange.
Pump and dump groups
If the value of a relatively small coin suddenly increases significantly, there is a big chance this is caused by so-called ?pump and dump groups’.
These are financially strong and influential groups that buy large amounts of a coin and will also promote these. That could lead to a significant increase of the currency of this coin. If the increase is sufficient, they dump the coins they bought earlier en mass, and gain quite a profit. The currency will then decrease quickly.
Pump and dump groups anticipate to the feeling of startup investors that see a coin increase significantly. Because they don?t want to miss out, they also get on board, but the increase has already taken place so the later investors will eventually experience a loss after the dump.
POW and POS
If no coins are purchased via an exchange, there are still two common ways to get coins.
This can happen by mining coins (PoW) or by keeping coins in the own wallet (PoS). A ?strike? takes place when the coins are held in the wallet. Everyone periodically receives ‘free? coins from the network. The reason for this is that the developer of the coin also likes the wallet to be actively connected to the internet. After all, that contributes to the health of the network of the relevant coin.
The hashrate is the mathematical difficulty in which cryptos are mined. The more active miners within a network, the higher the hashrate.
An ASIC (Application Specific Integrated Circuit) is task-focused hardware only focused on mining crypto, so it is more effective and efficient. This leads to an increase of the hashrate, because the processing power of ASICs is higher.
Master nodes are servers that keep full copies of the blockchain. It can be compared to miners, but the Proof-of-Stake version. Keeping a master node intact is based of a strike of coins, in which (often) a large amount of coins is allocated and therefore stands still and is inactively traded on the market. This is not the essence of a master node, but a consequence.
The goal of locking large amounts of coins is to increase the threshold of facilitating a master node, so it gets more expensive for a malicious party to abuse the master node. If a master node misbehaves, the coins on strike could be seized.
Small coin owners can often allocate their coins to master nodes by choosing certain master nodes. These master nodes therefore get the strike rights of these coins, but not the rights to move these coins and such. A master node is often chosen based on the compensation they made available.
A string of letters and numbers that is kept secret by the user. It is specifically designed to sign a digital transfer, at which a public key is used. In Bitcoin?s case, this is a private key that has to be able to work with a public key.
With a private key, you can perform all transactions. They confirm the identity of the owner of a public key, it is therefore important the private key of a blockchain wallet is never with third parties.”
A public string of letters and numbers, so it can be viewed by everyone. When combined with a private key, it can be used to sign a digital transaction in combination It can be considered an banking account number.
Everyone can see it, but only the account holder (private key) can initiate actions.
A stop loss order, or a conditional order, is an order that makes sure coins are sold against a certain price when the price drops, to prevent extra loss.
Let’s say altcoins have been bought for 0.0005 BTC per piece and the loss has to be limited, in this case the coin is automatically sold for 0.0004 BTC.
If this scenario would be used under a normal order, the offer is directly sold to the highest bidder. A stop-loss prevents this, so you can set when the sales order is only created if a certain price is offered – a ?trigger?.
In this example, the owner buys for 0.0005 and the trigger is 0.00045, so the system automatically places a sell-order for 0.0004. There is still loss in this scenario, but the risk of further loss is limited.
In short: a stop-loss order is an order activated by a condition.
A whale is a person that possesses a large percentage of a certain cryptocoin. It often occurs that a whale can therefore affect the price of this cryptocoin.
A document that describes the protocol of the cryptocoin.
We often hear this term, and it first looks like the term ?HOLD? is meant here. And that?s true indeed. The term HODL took on a life on its own after a forum post got opened in 2013 that contained this term. The post itself seemed to be written by a drunk bitcoin fanatic.
He wrote: ?I am Hodling?. From that moment on, everyone copied this incorrectly spelled term and invented a written term for it. HODL written out: Hold On For Dear Life. If people use this term, they mean a certain coin will be profitable some day.
ATH stands for ?All Time High?. This term indicates a certain cryptocoin is at its highest point ever concerning price. The coin then reached its highest point.
The terms ?bear? and ?whale? are combined in this term. In short: a bearwhale is a wealthy person focusing on the decrease of a cryptocoin or market.
This is a term used by a trader that takes HODL very seriously. So this is someone that keeps his coins in his wallet for an indefinite time.
To the moon
We often see this term on social media. People possessing a certain cryptocoin and hoping there will be a moment the price of the coin increases to unseen heights. Or an increase to the moon.
Rekt is spelled incorrectly, just like HODL. Rekt is derived from the English word wrecked. With Rekt, we mean a person that has seen his portfolio decrease because of a currency drop.
Yield is the profit of a capital investment. The profit of a capital investment is expressed in a percentage. The profit comprises of dividend or interest.
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