Guide To Bitcoin Trading: HODL, Whale & Other Cryptocurrency Jargons Explained
When it comes to investing in cryptocurrency, jargons are aplenty, and things can get pretty confusing for the new investor. With homonyms aplenty like ‘Whale’, ‘HODL’, ‘sats’ and many, many more, new investors might find navigating the cryptocurrency landscape a mind-boggling experience. To help both new investors and Millennials quickly get into the swing of things, we pen down a list of common and not-so-commonly used terms, along with a handful of applications. The drum rolls:
- Sats or Satoshis
- Bull and Bear Markets
- Margin Trading
What is Bitcoin Mining?
Bitcoin mining is the process by which bitcoins are released into circulation. Generally, mining requires the solving of computationally difficult puzzles in order to discover a new block, which is added to the blockchain. Mining adds and verifies transaction records across network.
Rewarding Bitcoin Miners:
As compensation for their efforts, miners are awarded a few bitcoins whenever they add a new block of transactions to the blockchain, it is called the "block reward". The reward is halved every 210,000 blocks. On 11th May 2020, the third halving occurred, which brought the reward for each block discovery down to 6.25 bitcoins.
HODL - Hold On for Dear Life
What is HODL?
HODL is a term derived from the misspelling of “hold” that refers to buy-and-hold strategies in the context of bitcoin and other cryptocurrencies. Originated in 2013, with a post to the bitcointalk forum, the price of bitcoin had surged from under $15 in January 2013 to over $1,100 at the start of December 2013. Peter Saddington, an early bitcoin investor who runs a bitcoin community called The Bitcoin Pub explained HODL as “hold on for dear life” when prices are highly volatile. HODL became a byword for an approach to cryptocurrency investing that shuns trading based on short-term price moves.
What does FUD mean?
An acronym that stands for “fear, uncertainty and doubt”. It is a strategy to influence perception of certain cryptocurrencies or the cryptocurrency market in general by spreading negative, misleading or false information. Usually used in the form of "xxx speaking FUD again." Example: JPMorgan’s Dimon spread FUD by saying Bitcoin is a fraud that will eventually blow up.
Sats or Satoshis
Sats, also known as Satoshi is the smallest unit of bitcoin with a value of 0.00000001 BTC. Sats derived from the first name of, Satoshi Nakamoto. Instead of looking at bitcoin in terms of dollar value, traders look at sats or satoshis.
What is a Crypto Whale?
A whale is a cryptocurrency term that refers to individuals or entities that hold large amounts of cryptocurrency. Whales hold enough cryptocurrency that they have the potential to manipulate the currency valuations.
How do Whales affect us?
If a “whale” sells a lot of their stake, it can cause the price of a cryptocurrency to dip by flooding supply.
What is a Bagholder?
A bagholder is an investor who continues to hold large amounts of a specific coin and or token, regardless of performance. Bagholder do not sell their assets, even if its price drops to zero.
Why do they "bag-hold"?
Bagholders may simply be too time poor (or lack the interest or enthusiasm) to keep up with the performance of the assets they hold. Because of that, they miss the opportunity to sell, leaving him/her with coin that have very little or no value.
Bull and Bear Markets
In the investing world, the terms "bull" and "bear" are frequently used to refer to market conditions. And understanding how each of these market conditions is important as the may impact your investment.
What is the Bull Market?
A Bull market is a market that is on the rise and where the economy is sound. The term "Bull" is used when a person is optimistic that market prices will increase, this person is known to be “Bullish” about the market or price.
What is the Bear Market?
A Bear market exist in an economy that is receding, where most stocks are declining value. Bear markets occur when prices in a market decline by more than 20%. And it is often accompanied by a negative investor sentiment and declining economic prospects.
How long do Bear Market last?
Bear markets can be cyclical or longer-term. the former lasts for several weeks or a couple of months and the latter can last for several years or even decades.
What is the Bottom Line for both of the markets?
Both bull and bear markets will have a large influence on your investments. So it is a good to take some time to determine what the market is doing when making an investment decision. Lastly, remember that over the long term, the stock market has always posted a positive return.
What does 'going to the moon' mean in cryptocurrency?
'Going to the moon' in cryptocurrency terms means that the price of a particular coin is rising off the charts. Therefore, a coin can be also described as 'mooning'- which means that its price has hit a peak.
When do we use the term 'moon'?
A token is considered to be "mooning" when its price experience a drastic spike. when used in a phrase like "to the moon" it means that the coin is expected to skyrocket, as if to head to the moon.
Arbitrage is a trading strategy in which an assets is purchased in one market and sold immediately in another market at a higher price. Crypto arbitrage takes advantage of the fact that cryptocurrencies can be priced differently on different exchanges. Arbitrage opportunities in cryptocurrency are mainly employed by short-term day traders and professional investors looking to make short-term profits. When other investors employ arbitrage strategies, the price of cryptocurrencies across exchanges actually become more aligned.
What are Altcoins?
The term 'Altcoins' refers to all cryptocurrencies other than Bitcoin. They share characteristic with Bitcoin, but are also different from them in other ways.
Are Altcoins good investments?
Altcoins like stablecoins can potentially fulfill Bitcoin's original promise of a medium for daily transactions. And certain Altcoins, such as ETH have already gained traction. investors can choose from wide variety of altcoins that perform different functions.
Margin trading with cryptocurrency allows traders to open a position with leverage and trade without putting up the full amount. It increases your buying power through leverage on existing positions/funds and allows you to buy more cryptocurrencies than what you usually can.
Example: You have a capital of USD 10,000 and have received a 300% leverage on Bitcoin. Now you can buy/short up to USD 30,000 worth of Bitcoin.
Now you know the few jargons for cryptocurrency, as with any investment, cryptocurrency investment is always going to be a risk. To minimize these risks, never invest money you are not willing to lose. Digital assets such as cryptocurrencies are in their infancy stages and can be incredibly volatile. This article seeks to help minimize risks and provide the knowledge you need and to help you understand these terminologies as you come across them when you read blogs, watch videos and join forums. The more you know, you will see that it can be quite a ride.
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You should be aware that cryptocurrencies are subject to high price-volatilities. You are solely responsible for determining whether any investment, investment strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. ABCC reserves the right to rescind and terminate our services to users in countries and jurisdictions where relevant laws and regulations apply.