The following 15 points help beginners quickly understand cryptocurrency knowledge; essential terms you must know when entering the cryptocurrency circle (a must-read for beginners).
1. What is fiat currency? Fiat currency is legal tender, issued by a country and government, and guaranteed only by government credit, such as the Renminbi, US Dollar, etc.
2. What does Token mean? Token is usually translated as 'certificate'. Token is one of the important concepts in blockchain; its more widely known name is 'cryptocurrency', but in the eyes of professionals in the 'blockchain circle', its more accurate translation is 'certificate', representing a proof of rights on the blockchain, rather than currency. In traditional value systems, only things that can be recorded in ledgers can be exchanged for value and circulated. Therefore, record-keeping is the foundation of wealth generation. However, in the real world, the vast majority of things cannot be quantified, and the things that can be recorded in ledgers are extremely limited. But 'Token' can. The amazing thing is that Token can digitally record both physical assets and virtual digital assets.
3. What does airdrop mean? Airdrop is currently a very popular cryptocurrency marketing method. To provide potential investors and cryptocurrency enthusiasts with token-related information, token teams often distribute unknown tokens to the accounts of participants in the cryptocurrency circle, in proportion to the quantity of existing tokens. To receive more airdrops, one must purchase more tokens; this is a very effective marketing promotion method.
4. What are candies? Candies are various digital currencies that are issued for free to users during their initial issuance (ICO), which is a way for the issuing party of the virtual currency project to promote and publicize the project itself.
5. What does breaking the issue price mean? The issue price refers to the issuance price of a cryptocurrency; breaking the issue price means that a certain cryptocurrency has fallen below its issuance price.
6. What does private placement mean? It is a way to invest in cryptocurrency projects and is also the best way for the founders of cryptocurrency projects to raise funds for platform operations. Private Placement is in contrast to Public Offering; in simple terms, it refers to raising funds privately, which means selling stocks (cryptocurrencies) to a small number of qualified investors without going through the public market to obtain funds.
7. What does ICO mean? Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market, is a financing activity in which blockchain projects exchange their own issued virtual currencies for commonly used virtual currencies in the market.
8. What are the current trading platforms in the cryptocurrency circle? Binance, OKEx, Poloniex, Bittrex, Bitfinex, Kraken, Huobi Pro, Gate, etc. 1. Basic characteristics of virtual currency trading: (1) Trading time: 24/7, all year round without market closure. (2) No price limits: Virtual currency trading does not have price limit restrictions, while stocks have price limit restrictions; for example, on May 28, Bitcoin's single-day increase exceeded 20%. (3) Trading units: The minimum buy is 0.0001 BTC (approximately 0.6 RMB), with no minimum buy limit like stocks (100 shares). (4) Anytime trading: This means T+0 trading; stocks are T+1 trading, meaning if you buy stocks today, you can only sell them on the next trading day. However, virtual currencies are T+0 trading, meaning you can sell the same day you buy. (5) No time restrictions on withdrawals and cashing out: You can withdraw and cash out at any time, with high liquidity of funds.
9. What is the concept of a wallet? In simple terms, it is equivalent to a personal bank card. If you are worried about storing virtual currencies on a trading platform, you can store them in your personal wallet. There are many types of wallets, some corresponding to a single currency, such as a wallet that can only store EOS, and others that can store multiple cryptocurrencies, like imToken, TokenPocket (referred to as TP Wallet), the latter being more versatile.
10. Positive/Negative News Various news that is favorable for stimulating price increases is called positive news. Conversely, various news that causes coin prices to fall is called negative news, such as hacking incidents where trading platforms are breached, stealing coins, or adverse information such as government crackdowns.
11. Public Chain / Private Chain / Consortium Chain A public chain refers to a blockchain in which anyone can participate in transactions and transactions can receive valid confirmations. Currently, most blockchain systems belong to public chains, such as Bitcoin and Ethereum. Public chains are suitable for applications where everyone can join and maintain them, such as mutual insurance. A private chain refers to a blockchain where writing permissions are only directed at a specific organization or entity. Reading permissions can be open to the outside or restricted to any degree. Developing enterprise-level applications based on private chains helps enterprises realize on-chain business, and the immutable nature of on-chain information enhances corporate social credibility, boosting investor and investment institution confidence. Consortium chains refer to blockchains where the consensus mechanism is jointly controlled by several institutions. The credit mechanisms among them are maintained collectively. The legitimacy of all transactions needs to be confirmed by a majority or all institutions before being written into the blockchain as valid block records. Imagine in the financial industry, a blockchain alliance formed by several socially credible financial institutions, each operating a mining node, representing all participants to exercise consensus rights and maintain the normal growth and operation of the blockchain.
12. Bounce / Consolidation / Pullback A price increase occurring during a downward trend of digital currencies is called a bounce, where the increase is smaller than the decrease. A pullback is the opposite, where a temporary decline occurs during a general upward price trend. Consolidation refers to the entire coin price being relatively stable, with small changes, not fluctuating wildly. 1. Arbitrage refers to transferring the same cryptocurrency from a trading platform with a low price to a trading platform with a high price, profiting from the price difference.
13. Leverage Leverage trading, as the name suggests, involves using a small amount of capital to make investments several times greater than the original investment, hoping to obtain returns that are several times the volatility of the investment target, or to incur losses; it is somewhat similar to gambling.
14. Basic principles of virtual currency transactions.
(1) Market Price Trading: Transactions are executed at the current market price, which can ensure that investors' buy and sell orders are executed in a timely manner to some extent. However, at the same time, investors cannot predict the trading price before placing a market order, which carries a certain degree of uncertainty. Generally speaking, the more intense the market fluctuations, the greater the uncertainty risk of the execution price in market trading.
(2) Limit Order Trading: Investors can set a buy price below the market price or a sell price above the market price. When the market price fluctuates to the set price, the transaction is completed. When the set price deviates significantly from the market price, it may easily result in an inability to execute the transaction.
(3) Basic principles of transactions: 'Price priority, Time priority' principle. A higher buy price is prioritized over a lower buy price for execution, and a lower sell price is prioritized over a higher sell price for execution. When the order prices are the same, the order placed earlier takes priority over the one placed later for execution.
15. Common professional terminology explained during transactions.
【Turnover Rate】 Refers to the frequency of buying and selling a certain cryptocurrency in the market within a certain period, and is one of the main indicators to evaluate the liquidity of a cryptocurrency.
【Market Price Trading】 means buying and selling at the current price. Market price trading has priority in trading; if you complete the transaction first and faster, you can use market price trading.
【Limit Order Trading】 means buying or selling at a specified price, also called delegated trading or pending order trading.
【Wash Trading】 is a trading technique used by market makers. The specific operation method is to open accounts simultaneously at multiple exchanges and quote trades between various exchanges in a tug-of-war manner to manipulate coin prices.
【Washout】 is a method used by market makers to manipulate coin prices, intentionally lowering prices. The specific method is to raise the price first and then sell for a profit. During this period, the main force often intentionally places large sell orders to pressure the market, forcing low-price buyers to sell their digital currencies to alleviate upward pressure, making it easier to raise prices.
【Market Support】 When prices are sluggish and the popularity of a cryptocurrency is insufficient, large holders buy a significant amount of that coin to prevent its price from continuing to decline.
【Bull Market】 refers to a market trend showing a general rise, with a sustained upward trend and optimistic prospects. (In the cryptocurrency circle, this mainly refers to the rise of BTC leading other major coins and the rise of altcoins.)
【Bear Market】 Exactly the opposite of a bull market; it refers to a market trend that continues to decline, with market sentiment appearing depressed and a persistent downward phenomenon. (What you are currently experiencing is a bear market. During this phase, the most important thing is to survive. Then comes further action, such as hoarding coins or bottom-fishing operations.)
【Monkey Market】 This is something I believe many people do not understand; it exists in the stock market. Why is it called the monkey market? Monkeys like to jump around, which corresponds to our market jumping up and down. In the monkey market phase, the market is not easy to grasp. (Today, mainstream coins may rise, tomorrow they may fall, and some altcoins may rise while others crash.)
【Main Uptrend】 Originating from wave theory, it refers to the wave in a price increase that lasts the longest. This is also a common market trend in a bull market; if you catch the main uptrend, you will make a big profit. The opposite market trend is also called the 'main downtrend'.
【Continued Downtrend】 The overall market shows a downward trend, but the trend often rises for two days and falls for one day, always giving people hope, yet consistently disappointing them.
【Waterfall】 Refers to a sudden and significant drop in the market, with several large bearish candles appearing in a short time, resembling a waterfall, cascading down, causing viewers to feel pain and heartache. It is also referred to as 'plunging'.
【Geyser】 The market is influenced by negative factors and has been sluggish for a long time. During this period, the market will be very suppressed. When the negative factors are exhausted or removed, the market will show explosive growth.
【Washout】 Large financial groups, such as market makers or project parties, manipulate the market through funds, making the market rise and fall, scaring out those hesitant investors, reaching the goal of making huge profits.
【Accumulation】 Generally, this involves wash trading to scare out inexperienced investors, and then market makers take over the coins sold by those investors, allowing them to hold more chips and achieve market control (typically, accumulation operations occur at low prices).
【Market Control】 Simply put, if I have a lot of money (my holdings account for a large proportion of circulation), I can easily manipulate the market to make prices rise or fall. The goal is very straightforward: to earn more and trap more inexperienced investors. 【Cutting Leeks】 A portion of traders lose money and exit, while another portion of newcomers enters, like cutting leeks, harvesting them time and again. The happiest is the market maker.
【Fake Signals】 Market makers use candlestick charts to create upward or downward trends, prompting us to buy or sell, in order to achieve their goal of harvesting inexperienced investors.
【Positive News】 Also called good news. It mainly involves news, usually referring to good news. In most people's eyes, good news will definitely lead to price increases, but this is not the case; positive and negative news do not have a proportional relationship with market increases, they only have a certain influence and may stimulate the market.
【Negative News】 Also refers to news, mostly indicating unfavorable news for the market. However, there is also a saying in the market: when negative news is exhausted, it turns into positive news.
【Baiting Longs】 The coin price has been consolidating for a long time, with a high possibility of falling. Most shorts have sold their virtual currencies; suddenly, the bears raise the coin price to lure the bulls into thinking the price will rise, prompting them to buy, only for the bears to suppress the price, trapping the bulls. 【Baiting Shorts】 After the bulls buy virtual currencies, the price is intentionally suppressed, causing the bears to believe the price will fall, prompting them to sell, resulting in a trap for the bears.
【Position】 This is very simple; it is the ratio of the funds in your account to the funds you used to buy coins. 【Full Position】 All funds in the account are converted to coins. What you often refer to as 'fully investing' or 'all-in' means full position. 【Average Down】 For example, if you hold BTC, and then BTC drops, you buy more BTC to lower your cost. 【Add Position】 If you hold BTC and are optimistic about BTC's development, you buy more BTC while it is rising. 【Build Position】 Also called opening a position. It refers to converting account funds into a certain number of cryptocurrencies.
【Reducing Positions】 Selling part of the cryptocurrencies held, anticipating risks in the future market. 【Locking Positions】 Those who engage in futures leverage should know this. It’s simple; if you do EOS futures leverage, you buy a long position of 10,000, then open a short position of 10,000. Think carefully about your position. 【Empty Positions】 Not trading anymore, just watching. In the cryptocurrency circle, this can be understood as having only USDT in your account, no other coins. 【Light Positions】 The funds used to purchase coins occupy a very small proportion of the total funds. 【Heavy Positions】 The funds used to purchase coins occupy a large proportion of the total funds. 【Half Positions】 The funds used to purchase coins occupy half of the total funds. 【Clearing Positions】 Not playing anymore, sold all coins, preparing to hold an empty position and observe. 【Take Profit】 After obtaining a certain profit, selling all virtual currencies to secure the profit. 【Stop Loss】 After losses reach a certain extent, selling the held virtual currencies to prevent further loss expansion. 【Sideways Market】 Market fluctuations are small, with rises and falls around a certain range. 【Bounce】 The coin price, during a downtrend, receives technical support or capital intervention, causing the market to turn from falling to rising. 【Reversal】 The coin price falls to the bottom and cannot fall further, turning from a downtrend to an uptrend. Commonly seen as a 'V-shaped reversal'. A bounce is the basis for a reversal, and the reversal amplitude far exceeds that of a bounce. 【Arbitrage】 A simple understanding is to look for price differences between platforms and cross-platform to earn the difference. Care must be taken with the speed of currency transfer, as sometimes the speed can affect your earnings. 【OTC Trading】 Many platforms also refer to this as fiat trading. The platform guarantees that merchants or individuals can directly trade using Renminbi to buy or sell mainstream coins or USDT they hold. The trading is similar to certain online shopping platforms (you know what I mean). 【Cutting Losses】 More politely referred to as 'liquidating positions'. This is something some of you often do; selling at a loss, fearing further decline. 【Stuck】 You bought coins, they dropped, and you can't bear to sell. Congratulations, that's called being stuck. 【Unsticking】 You bought coins, and they dropped, making you very sad. After a while, they rise again, and you have unstuck yourself, making you very happy. 【Missing Out】 The market is not good, you buy. As the market rises, you observe again. Perfectly missed out, that's called missing out. 【Roller Coaster】 The coin you bought rises, and you are very excited, even bragging to friends, but a few days later it drops back down. You feel like you've been on a roller coaster, just a thrilling experience with no follow-up. 【Hoarding Coins】 You see good prospects for this coin's future development, wanting to make tenfold, hundredfold, or thousandfold profits to achieve financial freedom, so you buy a large amount of this coin to hoard. 【Going Long】 Also known as 'bullish', the buyer believes that the coin price will rise in the future, buys coins, and sells at a high price after the price rises. 【Going Short】 Also known as 'bearish', the seller believes that the coin price will fall in the future, sells the coins held (or borrows coins from the trading platform), and buys back at a lower price to profit. 【Mining】 The process of using computers, mobile phones, and other devices to run calculation programs to obtain digital currencies. Note: Mining may shorten the lifespan of the equipment. 【ICO】 Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market. It is a financing activity in which blockchain projects exchange their own issued virtual currencies for commonly used virtual currencies in the market. 【Private Placement】 Private placement refers to fundraising targeted at a specific group of people, as opposed to public offerings which involve raising funds from a wide, unspecified audience, such as bank-sold funds.
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