12/21/2024
Crypto glossary
The 411 on the most common terms in cryptocurrency trading
Are you looking to begin trading cryptocurrency and need a refresher or a crypto glossary?
If you want to begin cryptocurrency investing or trading, then you will need to know the lingo for cryptocurrencies so you can be an expert researcher! You’ll want to know about centralized exchanges, and how they are different from decentralized exchanges. You’ll also want to know about terms like “altcoins” and “address,” and phrases like “HODL” to help you understand the markets.
A crypto exchange is a platform where traders can exchange crypto for fiat, and cryptocurrency for other cryptocurrencies. The vast majority of these exchanges run 24/7, unlike other traditional markets. In a traditional market, there is an established open and close time for trading hours Monday through Friday.
As you begin your cryptocurrency investing or trading journey, here are the 20 crypto exchange terms you will need to know if you want to understand the sector.
Address
In this case, an “address” does not refer to a physical address. Instead, an address refers to a string of characters where one can send and receive cryptocurrency. Addresses may be public, but that does not mean that their owners’ identities are known.
In some cases, the addresses are known because they belong to a high-profile cryptocurrency founder or investor. This is the case with Mark Cuban, a well-known billionaire investor and entrepreneur, who has made his Ethereum address public.
Altcoin
The “alt” here stands for “alternative,” and the concept is quite simple. An altcoin refers to any cryptocurrency that isn’t Bitcoin, but they still exist thanks to blockchain technology.
There are thousands of altcoins today. Some examples include Ethereum, Litecoin, and Cardano.
Arbitrage
One of the interesting things about cryptocurrency exchanges is that prices are not always the same, whether you are trading on a centralized exchange or not. This presents some opportunities where individual traders could potentially purchase a cryptocurrency on one exchange and sell it on another exchange for a much higher price.
Arbitrage is a well-known Wall Street term, but many investors and traders implement arbitrage strategies when trading and investing in cryptocurrency. In short, arbitrage allows traders to take advantage of market discrepancies.
Bitcoin
Bitcoin is the world’s largest and most important cryptocurrency, and it was invented in 2009 by Satoshi Nakamoto. Their identity has never been revealed, but there has been speculation of the years about the real identity of Satoshi Nakamoto.
The price of Bitcoin has a massive impact on cryptocurrency markets in general. You shouldn’t be crypto trading if you don’t understand what Bitcoin is! Read here for a more in-depth explanation on Bitcoin.
Bear market
cryptocurrency exchange terms bear in water looking at camera for decentral publishingA bear market refers to a market where there is a prevailing negative sentiment about an asset or a class of assets. In a bear market, the prices of these assets are declining. A market is technically not considered a “true” bear market until the market has fallen 20% from its highs.
It’s also important to note that “bear market” is not a term limited to cryptocurrency. It has been used in the past for stocks and assets of all kinds.
Bull market
A bull market refers to a market where there is a prevailing positive sentiment about an asset or a class of assets, causing the prices of those assets to continue to rise. The 2017 cryptocurrency bull market, for example, saw Bitcoin rise from below $1,000 to almost $20,000. If you believe that the price of Bitcoin is going to rise, for example, you would be “bullish” on Bitcoin.
It’s also important to note that “bull market” is not a term limited to cryptocurrency. It has been used in the past for stocks and assets of all kinds.
Burn
There are some coin creators that want to incentivize investors/traders to invest in their token. To this end, they might “burn” millions of their tokens, with the goal of increasing the value of the remaining tokens available. The price of various tokens have increased, in the past, due to a token “burn.” The “burned” tokens are no longer in circulation, and are unusable.
There are many cryptocurrencies where tokens are burned. These tokens will no longer be in circulation, and many traders/investors see a cryptocurrency burn as a positive catalyst. A
CeFi
CeFi is a term referring to “centralized finance.” CeFi usually refers to traditional financial institutions such as banks, but it can also refer to centralized exchanges. Find out more about the difference between a centralized exchange and a decentralized exchange here. Binance and Coinbase are two of the most well-known centralized exchanges in the world.
The term refers to financial institutions and/or organizations that adhere to global and local financial laws and regulations.
Cold wallet
You are probably familiar with a cryptocurrency wallet if you are ready to invest in a centralized exchange. However, you should know the difference between a hot wallet and a cold wallet. Many cold wallets are actual hardware crypto wallets.
A cold wallet is a type of cryptocurrency wallet that is offline. It’s obviously much less convenient for those who want to trade on a centralized exchange frequently, but this also means that a cold wallet is technically more “secure” than a hot wallet.
DeFi
The DeFi sector aims to recreate traditional financial goods and services, but offer those same goods and services on the blockchain. The goal of DeFi is to enable and empower these services through smart contracts rather than intermediaries or third parties. DeFi includes the concept of a DEX, as well, since decentralized exchanges do not involve a central authority.
The DeFi sector is growing quite rapidly, and time will tell whether decentralized exchanges will eventually overtake centralized exchanges.
Deflationary
A “deflationary” cryptocurrency is one where the supply actually decreases over time. If there are less tokens circulating in the market, it makes that token more valuable over time. Many investors/traders specifically look for deflationary tokens since they can offer more value.
How does this occur? Often, this occurs thanks to cryptocurrency “burns” where tokens are essentially destroyed. The Binance token has risen in value significantly over the years, partially due to the fact that they have quarterly burns of BNB tokens.
Fiat
cryptocurrency exchange terms person holding many large currency bills for decentral publishingRemember the world before crypto? The currency that you are familiar with is referred to as a “fiat currency” in the crypto world. Fiat money includes currencies such as the dollar, the Euro, or the yuan. If you are hoping to exchange crypto for fiat, or vice versa, then you should be aware of the term.
All “fiat” money refers to money that is regulated by a government of any kind. Many in the cryptocurrency world refer to “fiat” negatively, as cryptocurrencies hope to solve some of the issues caused by fiat currencies. Fiat currency is backed by central banks, but is not backed by a commodity.
Fixed supply
The “fixed supply” of a token refers to the maximum amount of tokens that can be on the market. The same way that stock investors want to know the float of a stock, to understand how many available shares there are, cryptocurrency investors should remain aware of the fixed supply.
Bitcoin has a fixed supply of 21 million. The idea here is that this makes Bitcoin an effective store of value, since more Bitcoin cannot be created or minted out of nowhere. Many investors are interested in finding cryptocurrencies with fixed supplies due to this advantage.
FOMO
“FOMO” is a term used to describe the “fear of missing out.” The concept here is that many investors/traders choose to invest in a particular project because they see that the token’s value is increasing, without thinking about a real strategy about when and where to take profits. Instead, they invest because they don’t want to miss out on a price rally.
The term “FOMO” extends beyond the cryptocurrency community, as many stock traders also use the phrase. Many experts and analysts regularly warn traders about the dangers of FOMO investing.
FUD
cryptocurrency exchange terms man in red shirt with distressed look in his face and his hand covering half of his face for decentral publishing“FUD” is another acronym, and it refers to “Fear, Uncertainty, and Doubt.” Many investors and traders have spread fear/doubt about specific cryptocurrencies on social media, and the community refers to this as “spreading FUD.” Some investors describe any sort of skepticism about cryptocurrency as FUD, while others believe that FUD refers more to those purposely spreading false information for personal gain.
For example, a major cryptocurrency community figure might insult a cryptocurrency publicly, so that they can purchase more of that cryptocurrency at a centralized exchange, but now at a lower price. This would be an example of FUD.
Many centralized exchanges are susceptible to FUD, and China has been a major source of FUD in recent years. The Chinese government regularly announces that they will crack down on the cryptocurrency sector, most recently in September 2021.
HODL
This is not a technical term that you will need to understand to begin crypto trading, but it is certainly a phrase you will see over and over in various cryptocurrency communities. The term HODL is an acronym for the phrase “Hold On for Dear Life,” encouraging investors to hold a cryptocurrency for the long-term vision rather than for short-term profit.
The term originated from a crypto-related forum back in 2013.
Hot wallet
A hot wallet is always online, which makes it much more convenient for those who plan on regularly investing or trading in cryptocurrency. The vast majority of web-based wallets, desktop wallets, and mobile wallets are considered “hot wallets.”
This also unfortunately means that a hot wallet is less secure than a cold wallet, since it is connected to the Internet. Hot wallets are more susceptible to online attacks, which is something you should consider before investing in a centralized exchange or a DEX.
Market capitalization
The market capitalization of a cryptocurrency is easy to determine. You simply take the value of a cryptocurrency and multiply it by the number of coins that are currently in circulation.
Let’s say that there is an interesting crypto token that has been gaining traction. There is a fixed supply of 1 million tokens, and the token price recently skyrocketed from $10 to $50. An analyst would say that the market capitalization of that token jumped from $10 million to $50 million.
The market capitalization can be thought of as the total value of a cryptocurrency. While the price of Bitcoin may currently be around $50K, the entire market capitalization of Bitcoin is over $1 trillion.
Stablecoin
A stablecoin is a token which pegs its value to a real-world asset, whether it’s a fiat currency, or a precious metal such as gold or silver. Stablecoins were created and designed to maintain a fixed value. A dollar-backed stablecoin, for example, is expected to always have a $1 value.
Stablecoins play a critical role in the liquidity of the cryptocurrency markets. With the growth of DeFi, stablecoins also are important because they provide much-needed stability.
Whale
cryptocurrency exchange terms whale jumping out of water for decentral publishingA “whale” is an investor or trader that has a large amount of tokens. Many traders often refer to whale trades, since massive purchases or selloffs can influence the cryptocurrency markets.
Some have debated about what exactly constitutes “a whale,” since there are many millionaires who regularly trade and invest, either through DeFi or at a centralized exchange. The general consensus is that a whale is an individual holding around or over 1,000 BTC. As of press time, this would mean that the typical whale holds over $50 million in Bitcoin.
