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:
- Rising of Cryptocurrency prices
- Sats or Satoshis
- Margin Trading
Rising of Cryptocurrency prices
Presently, many cryptocurrency prices have been on the rise, and investors are wondering why. Here are three reasons why cryptocurrency prices are rising:
- Institutional Adoption:
Due to institutional adoption, more private companies such as MicroStrategy, Square etc. are investing in cryptocurrencies, especially Bitcoin.
- Paypal & Cryptocurrencies:
Paypal has also launched crypto buying and or selling features, further allowing crypto transactions. Paypal is known to have 350 million users who are capable of using crypto as a payment means. 30 million merchants will have the option of receiving payments in crypto. Apart from Paypal, Venmo will expose another 40 million users to crypto payment.
- Countries Taking a Positive Stance:
Countries such as Japan, USA, and Germany have taken a positive stance towards cryptocurrencies.
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.
Whale is someone who owns a lot of cryptocurrencies. If a “whale” sells a lot of their stake, it can cause the price of a cryptocurrency to dip by flooding supply.
A bagholder is an investor who continues to hold large amounts of a specific coin and or token, regardless of performance. This term typically refers to a trader who previously invested at a high and missed the opportunity to sell, leaving him/her with coins that have very little and or no value.
Bear is defined as someone who believes that prices in a given market will decline over an extended period. Such a person might be referred to as “bearish”.
On the other hand, bull is a person that is optimistic that market prices will increase, this person is known to be “bullish” about the market or price.
A situation where there is a continuous upward movement in the price of a cryptocurrency. Often used in communities to question when a cryptocurrency will experience such a phenomenon, saying “when moon?”. “Mooning” is when a coin’s price is experiencing a spike.
The act of buying and selling on different exchanges to earn the difference in the spread. Arbitrage opportunities occur due to differences in exchange reputation, community coin preferences and ease of bank funding.
As the terminology suggests, “Alternate Coin” refers to any other types of coin other than Bitcoin (BTC). Some well-known examples include Ether, Ripple and Tether.
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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