Glossary of Cryptocurrency Terms
Accumulation:
The process by which a market participant increases the size of their position, usually involving either incremental, periodic buying or volatile, high-volume buying action.
Address:
The string of characters used to identify where a user can send and receive cryptocurrency.
Airdrop:
A marketing tool often used by new projects to garner attention, whereby a token or cryptocurrency is deposited for free to users’ addresses en masse.
Arbitrage:
The process of profiting from differing prices for the same asset on different exchanges.
Ask/Bid:
An order to sell an asset at a specified price is an ask order. An order to buy is a bid.
ATH/ATL:
All-Time High and All-Time Low, referring to the most expensive and cheapest prices in the history of an asset.
Average Down:
The process of lowering the average entry cost of one’s position by buying at cheaper prices incrementally.
Bag:
A position in a specific asset.
Bagholder:
A market participant that holds a position that is underwater, where current prices are below their average entry price.
Bear/Bearish:
A sentiment suggestive of lower prices in a specific asset – one is considered to be bearish on Bitcoin if they expect its price to decline.
Bear Trap:
A scenario where the price of an asset declines, causing bears to begin actively selling their positions or going short (see further down the glossary). This is followed by a sharp recovery, thus trapping those market participants in their short positions.
Bitcoin Dominance:
A metric used to determine how much of the cryptocurrency market is attributed to Bitcoin, taken by dividing the market capitalisation of Bitcoin by the market capitalisation of the entire market. For reference, the current Bitcoin Dominance is 68%.
Block Explorer:
A tool that allows users to view transaction data, block data, network hash rate and, sometimes, address balances for a specific cryptocurrency.
Block Reward:
The amount of a cryptocurrency provided to miners on that specific network for solving a mathematical problem; thus, an economic incentive for securing the network.
Bots:
A form of automated trading on exchanges, often allowing for near-instant order execution and manipulation of the orderbook.
BTFD:
Buy The Fucking Dip; used by traders when the price of an asset declines but is expected to recover quickly.
Bubble:
A period of excessive growth for a market, fuelled by speculation and frenzy, usually by retail investors. Bubbles then burst, causing a prolonged period of decline in asset prices.
Bull/Bullish:
A sentiment suggestive of higher prices in a specific asset – one is considered to be bullish on Bitcoin if they expect its price to rise.
Bull Trap:
A scenario where the price of an asset rises, causing bulls to begin actively buying or going long (see further down the glossary). This is followed by a sharp decline, thus trapping those market participants in their long positions.
Buyback-and-Burn:
The mechanism by which a token is bought on the market and later burned, which here means sent to an address from which it cannot be recovered, thus artificially decreasing supply. This is often used as a deflationary economic policy by projects.
Buy Wall:
An order of significant size to buy an asset, often noticeably larger than the orders closest to it. These are often used to manipulate price, where a buy wall is positioned, causing inexperienced traders to expect higher prices and begin buying that asset. The buy wall is then removed, causing panic; those that bought will often sell back at lower prices.
Circulating Supply:
The amount of a given cryptocurrency that is currently available for transacting among the general public.
Coin:
A synonym for cryptocurrency; a shortening of altcoin.
Cold Storage:
The process of storing cryptocurrencies offline, hence cold. This is often facilitated by hardware (physical) wallets or paper wallets.
Dead Cat Bounce:
A scenario where an asset that has been experiencing declining prices for a prolonged period temporarily recovers, only to continue its downtrend shortly thereafter.
Deflation:
This is where the supply of a cryptocurrency declines over time rather than increases, relieving pressure on the supply-side of the market and often allowing for price growth. This is often artificially engineered by projects for economic purposes.
Depth Chart:
A tool provided by exchanges that displays the amount of a given cryptocurrency currently placed in the orderbook, on both the bid (buy) and ask (sell) side of the market. Depth charts are useful in determining current demand against supply, though they are not static and are liable to change as new orders enter the market.
Derivative:
A tradable contract that derives its value from an underlying asset. For example, the BitMex Perpetual Swap for BTC/USD is a derivative of Bitcoin.
Distribution:
The process by which a market participant decreases the size of their position, usually involving either incremental, periodic selling or volatile, high-volume selling action.
Dump:
The action where an asset price declines due to a market participant selling part (or all) of their position.
DYOR:
Do Your Own Research.
Emission:
The process of increasing the supply of a cryptocurrency over time as it is continually created, often by providing network rewards, most commonly via Proof-of-Work or Proof-of-Stake mechanisms.
ERC-20:
This is a token standard on the Ethereum network used by projects to seamlessly create new tokens for their projects with programmable specifications. Most commonly, ERC-20 tokens are used for Initial Coin Offerings (see further in the glossary).
Escrow:
An intermediary between two users seeking to transact that holds the assets for both parties to ensure delivery.
Exchange:
A platform that facilitates the transacting of cryptocurrencies for other cryptocurrencies of fiat currencies. These are used by traders who seek to profit by speculating on the falling or rising prices of the assets offered by the exchange.
Fiat:
A currency that holds no intrinsic value but is deemed legal tender by governments, who control the production of the currency through central banks. This is often found in the form of paper notes but is increasingly represented digitally.
FOMO:
Fear Of Missing Out.
Fractal:
A pattern of price-action that is observed to be repeating (or have repeated) on any scale.
FUD:
Fear, Uncertainty and Doubt.
Fundamental Analysis:
The evaluation of a cryptocurrency based on its intrinsic properties, value proposition, utility, community and developmental progress, as well as macroeconomic factors, such as the state of the entire cryptocurrency market or a specific sector. Here, you can find a free 13-page guide to my fundamental selection process.
Futures:
These are tradable contracts that necessitate the market participant’s obligation to buy or sell an asset at a predetermined price at a future date.
HODL:
Originally, this was a misspelling of ‘hold’ that caught on among traders that would hold onto positions in cryptocurrencies for a long period of time. It later became an acronym for Hold On for Dear Life.
ICO:
Initial Coin Offering; the process by which capital is raised in exchange for a token, usually during the launch of a new cryptocurrency project.
Inflation:
This is where the supply of a cryptocurrency increases over time due to supply emission. This is often calculated as the percentage increase of the supply over the subsequent year. For example, a cryptocurrency with a supply of 1,000,000 might have annual emission of 250,000, thus its annual inflation rate would be 250,000 / 1,000,000 = 25%. High inflation is often disastrous for asset prices, as supply outweighs demand and drives prices lower.
Intraday/Intraweek/Intramonth:
These are time-periods within which trades are resolved, with intraday referring to the entry and exit of a trade occurring inside one day; intraweek for trade completion inside one week; and intramonth for completion inside one month.
Largecap:
A large cryptocurrency project, determined so by its market capitalisation. I personally deem a cryptocurrency a largecap if it has a market capitalisation of 25,000 BTC or more.
Leverage:
The ability to borrow capital against your initial capital in order to magnify your exposure. High leverage significantly amplifies both the risk of loss and the profit potential.
Limit Order:
A limit order is simply an order set at a predetermined price that is only executed if the asset being traded reaches that price.
Liquidity:
The degree to which one is able to buy or sell a cryptocurrency without moving price. Illiquid markets suffer from greater volatility.
Long/Short:
Where a market participant opens a position in a market with the expectation of profiting from rising prices (long) or falling prices (short). This is most commonly used by traders in leveraged markets.
Lowcap:
A small cryptocurrency project, determined so by its market capitalisation. I personally deem a cryptocurrency a lowcap if it has a market capitalisation of 250-2,500 BTC.
Margin:
The minimum capital requirements for opening a leveraged position in a market.
Market Capitalisation:
The market capitalisation of a cryptocurrency is calculated by multiplying its price by its circulating supply. This is a somewhat crude metric used to rank cryptocurrencies by perceived value, deriving its formula from that of shares for a given stock.
Market Maker:
A liquidity provider in the market. Market makers are those that set limit orders within the orderbook, thus increasing the liquidity of the market. Often used colloquially by traders in reference to market participants that are able to manipulate prices.
Market Order:
An order to buy or sell an asset at the current price, executed immediately.
Market Taker:
A market participant requiring immediate liquidity, executing orders at current market prices (market orders) by taking liquidity from the orderbook (from those that have set limit orders – the market makers).
Masternode:
The collateral used as a means of securing a cryptocurrency’s network, which provides rewards for the owner of the collateral periodically, for as long as the masternode is online. This is often a predetermined amount of the given cryptocurrency. I wrote an extensive guide on masternodes that can be found here.
Maximum Supply:
The maximum amount of a given cryptocurrency that will ever be created. For example, if Coin X has a maximum supply of 1,000,000, no more than that amount of Coin X will ever come into existence. For reference, the maximum supply of Bitcoin is 21,000,000.
Microcap:
A tiny cryptocurrency project, determined so by its market capitalisation. I personally deem a cryptocurrency a microcap if it has a market capitalisation of less than 250 BTC.
Midcap:
A moderately-sized cryptocurrency project, determined so by its market capitalisation. I personally deem a cryptocurrency a midcap if it has a market capitalisation of 2,500-25,000 BTC.
Mining:
The process of verifying transactions on a network, often simultaneously creating new amounts of the cryptocurrency as new blocks are added to the blockchain. This is achieved by miners using hardware with high processing power to solve computations.
Moon:
A phrase used by altcoin traders in reference to the expectation of extreme returns on their positions. If an altcoin is “going to the moon“, it is expected to experience significant price growth.
OTC:
Over The Counter; where transactions occur between users without an exchange acting as the intermediary.
Pattern:
A suggestive formation of price-action.
Premine:
An amount of a given cryptocurrency created in the genesis block (the first block of the blockchain) that is often allocated to the founders of the project, most commonly used to fund development.
Proof-of-Stake:
A consensus mechanism that allows for transactions to be verified on a network by holding any amount of the cryptocurrency in a wallet. Stakers are rewarded with portions of the block reward.
Proof-of-Work:
A consensus mechanism that allows for a cryptocurrency to be mined by solving complex mathematical problems, in the process of which new transactions are validated.
Pump-and-dump:
The artificial engineering of significant price growth, followed by volatile selling. In this space, almost every market cycle of every altcoin is a heavily-manipulated pump-and-dump, rather than based on growth of underlying fundamentals.
REKT:
When a market participant takes a significant loss on a trade, he is considered to be wrecked, or rekt.
Resistance:
An area of price-action that has historically been met with significant selling, causing price to decline.
Rich-List:
The list of addresses found in a block explorer that displays the balances of all holders of that cryptocurrency and their transactional data. Here, you can find a detailed case-study including my approach to analysing the rich-list of a cryptocurrency.
Risk:
Risk is multi-faceted, but for the purposes of speculation, it is defined as either, the percentage of your portfolio occupied by a position (capital at risk), or, the level of volatility in the market for any given asset (inherent risk).
ROI:
Return On Investment; the growth experienced on the principal amount of capital invested. For example, the ROI of a $1,000 investment that returns $10,000 is 10x or 1000%.
Satoshis:
A single unit of Bitcoin, or 0.00000001 BTC, is called a satoshi.
Sell Wall:
An order of significant size to sell an asset, often noticeably larger than the orders closest to it. These are often used to manipulate price, where a sell wall is positioned, causing inexperienced traders to expect lower prices and begin selling that asset. The sell wall is then removed, causing panic; those that sold will often buy back at higher prices.
Shilling:
The act of promoting a project, often with the intention of driving prices up.
Shitcoin:
A cryptocurrency with no real value proposition or utility.
Smart Money:
In the context of altcoins, smart money is what manipulates price, causing market cycles. These are often the largest holders of any given cryptocurrency, who, using their control of supply, push prices around to profit. Traditionally, these are investors who hold privileged information about an underlying market.
Spoofing:
The act of placing orders in a market that are not intended to be filled in order to manipulate price.
Spot:
Direct transacting of the underlying asset with physical (digital, in the case of cryptocurrencies) delivery of the asset. These markets are settled immediately. For example, buying spot Bitcoin means you are buying the cryptocurrency itself, not a derivative.
Stablecoin:
A cryptocurrency that is commonly pegged to a fiat currency or commodity in order to engineer low volatility.
Stop-Loss:
An order to exit a position when price trades through the order level, limiting losses to the amount specified in the order. These are used to more accurately determine capital at risk in trading.
Support:
An area of price-action that has historically been met with significant buying, causing price to increase.
Technical Analysis:
A method of evaluation that is entirely dependent upon the price chart of a cryptocurrency, using historical price and volume data to determine future price-action.
Ticker:
The abbreviation used to identify cryptocurrencies, particularly on exchanges for transactional purposes. For example, the ticker for Bitcoin is BTC.
Token:
A synonym for cryptocurrency or altcoin, although often most commonly used in reference to cryptocurrencies that exist on another’s blockchain, rather than independently. For example, those created on the ERC-20 standard are deemed tokens.
Volatility:
The range of deviation from the average price of a cryptocurrency across a predetermined time-period. Highly-volatile assets have extreme price ranges; those that are deemed low-volatility experience price-action within a narrow range. Volatility is an important consideration for the inherent risk of an asset.
Volume:
The amount of a given cryptocurrency traded with a predefined time-period.
Wash Trading:
The process that an exchange utilises to artificially increase volume on a market by simultaneously buying and selling their own orders, as opposed to legitimate volume coming from the orders of actual market participants. This is a form of market manipulation.
Whale:
A market participant that owns a significant position in the specified cryptocurrency; one of the largest holders.