The following 15 points will help beginners quickly understand the knowledge of the crypto circle.
Key terms in the crypto circle that you must know (a must-read for beginners) A glossary of terms in the crypto circle for friends who are just getting started.
1. What is fiat currency? Fiat currency is legal tender issued by the state and government, with only government credit as a guarantee, such as the Chinese Yuan, US Dollar, etc.
2. What does Token mean? Token is typically translated as 'certificate.' It is one of the important concepts in blockchain; its more commonly known name is 'token,' but in the professional 'chain circle,' a more accurate translation is 'certificate,' representing a type of rights proof on the blockchain rather than currency. In the traditional value system, only things that can be recorded on a ledger can exchange value and circulate. Therefore, bookkeeping is the foundation of wealth creation. However, in reality, most things cannot be quantified; the things that can be recorded are very limited. But 'Token' can. The magical aspect is that Token can digitally represent both physical assets and virtual digital assets.
3. What does airdrop mean? Airdrop is a very popular marketing method in the cryptocurrency space. To allow potential investors and crypto enthusiasts to obtain information about tokens, token teams regularly distribute unknown tokens to the accounts of participants in the crypto circle, with the quantity proportional to the existing token amount. To receive more airdrops, one must purchase more tokens, making it a very effective marketing strategy.
4. What is a candy? Various digital currencies are distributed for free to users during their ICO stage, representing a form of promotion and publicity by the issuing party of the virtual currency project.
5. What does breaking issue mean? The issue refers to the issuance price of digital currency; breaking issue means a certain digital currency has fallen below its issuance price.
6. What does private placement mean? It is a way to invest in cryptocurrency projects, and it is also the best way for the founders of a cryptocurrency project to raise funds for platform operations. Private placement refers to fundraising conducted privately, selling stocks (cryptocurrencies) to a small number of qualified investors, thereby obtaining capital.
7. What does ICO mean? Initial Coin Offering, originating from the concept of the Initial Public Offering (IPO) in the stock market, is a fundraising behavior where blockchain projects issue their own virtual currency in exchange for commonly used virtual currencies in the market.
8. What are the current trading platforms in the crypto circle? Binance, OKEx, Poloniex, Bittrex, Bitfinex, Kraken, Huobi Pro, Gate, etc. 1. Basic characteristics of virtual currency trading: (1) Trading hours: 24/7, all year round without a market break. (2) No price limits: Virtual currency trading has no price limit restrictions, whereas stocks do, e.g., on May 28, Bitcoin's daily increase exceeded 20%. (3) Trading units: The minimum purchase is 0.0001 BTC (approximately 0.6 yuan), with no minimum purchase limit like in stocks (100 shares). (4) Anytime trading: This is T+0; stocks are T+1, meaning you can sell stock the next trading day after buying it. In contrast, you can sell virtual currency on the same day you buy it. (5) No time limits on withdrawals and cashing out: You can withdraw and cash out at any time, with high liquidity.
9. Wallet concept, in simple terms, is equivalent to a personal bank card. If you are worried about storing virtual currency on trading platforms, you can store it in your personal wallet. There are various types of wallets, some correspond to a single currency, such as a wallet that can only store EOS, while others can store multiple types of currencies, such as imToken and Tokenpocket (abbreviated as TP wallet), the latter being more versatile.
10. Positive / Negative News Any news that stimulates a price increase is called positive news. Conversely, any news that leads to a price drop is called negative news; for example, a trading platform being hacked and losing Bitcoin or a country imposing restrictions.
11. Public Chain / Private Chain / Consortium Chain A public chain allows anyone to participate in transactions and obtain valid confirmations. Currently, most blockchain systems are public chains, such as Bitcoin and Ethereum. Public chains are suitable for applications where everyone can join and maintain, like mutual insurance. Private chains refer to blockchains where write permissions are limited to a specific organization or entity. Read permissions can be externally available or limited to any degree. Developing enterprise-level applications based on private chains helps enterprises achieve on-chain business; the unalterable nature of on-chain information enhances corporate social credibility and boosts investor confidence. Consortium chains are blockchains controlled by several organizations through a consensus mechanism, where the credit mechanism is maintained collectively. All transaction legality needs confirmation from the majority or all organizations before being written to the blockchain.
12. Rebound / Consolidation / Pullback The temporary rise in price during a general downward trend of digital currency is called a rebound, where the rise is smaller than the fall. A pullback is the opposite; it refers to a temporary decline in the overall upward trend. Consolidation refers to a relatively stable coin price with minor fluctuations, not volatile. 1. Arbitrage refers to transferring the same coin from a trading platform with a lower price to one with a higher price, profiting from the price difference.
13. Leverage. Leveraged trading, as the name suggests, is using a small amount of capital to make investments several times the original capital, hoping to achieve returns that are multiples of the fluctuations of the investment target, or losses, akin to gambling.
14. Basic principles of virtual currency transactions.
(1) Market Order Trading: Executing transactions at the current market price, ensuring that investors’ buy and sell orders are filled in a timely manner to some extent. However, before placing a market order, investors cannot predict their transaction price, which involves certain uncertainties. Generally, the more volatile the market, the greater the risk of uncertainty in transaction prices.
(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. If the set price deviates significantly from the market price, it may result in a failure to execute.
(3) Basic principles of transactions: 'Price priority, time priority.' Higher buy prices are prioritized over lower buy prices for execution; lower sell prices are prioritized over higher sell prices. When the order prices are the same, earlier placed orders take precedence.
15. Common professional terms in trading explained in detail.
[Turnover Rate] Refers to the frequency of a certain coin being bought and sold in the market within a certain period, one of the main indicators to evaluate the liquidity of a coin.
[Market Order Trading] This means buying and selling transactions at the current price. Market orders have priority in transactions; if you complete a transaction faster, you can use market orders.
[Limit Order Trading] This is trading at a specified price for buying or selling, also known as delegated trading or order trading.
[Wash Trading] A trading technique used by market makers. The specific operation involves opening accounts on multiple exchanges and quoting trades back and forth between these exchanges to manipulate the coin price.
[Washing] A means of manipulating coin prices by the market makers, intentionally pushing prices down. This involves first raising the price and then profiting from the sale. During this period, the main player often places large sell orders to pressure the market, forcing low-price buyers to sell their digital currencies and reduce upward pressure, making it easier to raise prices.
[Market Support] When prices are low and the coin's popularity is insufficient, large holders buy a lot of that coin to prevent its price from continuing to fall.
[Bull Market] Refers to a market condition where the overall market is rising with a continued upward trend, and the outlook is optimistic. (In the crypto circle, this mainly refers to the rise of BTC leading other major coins and the rise of altcoins.)
[Bear Market] The opposite of a bull market, it refers to a sustained decline in the market, with market sentiment remaining low and a continuous downward trend. (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, bottom fishing, and similar operations.)
[Monkey Market] I believe many people don’t understand this; it exists in the stock market as well. Why is it called the monkey market? Monkeys like to jump around, which corresponds to our market fluctuating up and down. In the monkey market stage, the market is not easy to grasp. (Today mainstream coins may rise, but tomorrow they may fall, and some altcoins may rise while others crash.)
[Main Uptrend] Originating from wave theory, it refers to the longest wave during an upward market trend. This is also common in bull markets; catching the main uptrend means significant profits. The opposite trend is sometimes referred to as the 'Main Downtrend.'
[Steady Decline] The overall market shows a downward trend, but the trend often fluctuates with two days of rise followed by one day of drop, always giving hope but ultimately disappointing.
[Waterfall] Refers to a sudden and significant drop in the market, with several large bearish candles appearing in a short period, resembling a waterfall, flowing straight down, causing pain and heartbreak for viewers. It is also referred to as 'plummeting.'
[Explosive Growth] The market is affected by negative factors and has been low for a long time. During this period, the market will be very suppressed. Once the negative factors are exhausted or removed, the market will show explosive growth.
[Washing] Large financial groups such as market makers or project parties manipulate the market, causing price fluctuations to scare away hesitant investors, aiming to earn huge profits.
[Accumulating] Generally done through washing out investors, then the market maker will take over the coins sold by them, increasing their holdings to achieve market control (such accumulation is generally done at low prices).
[Controlling the Market] Simply put, if I have a lot of money (the proportion of my coins in circulation is large), I can manipulate the market just by shifting a little bit. The goal is simple: to make more money and trap more investors. [Cutting Leeks] A portion of investors loses money and leaves, while another portion of newcomers enters, similar to cutting leeks—harvesting them repeatedly. The ones happiest are the market makers.
[False Signals] Market makers use candlesticks to create upward or downward trends, prompting us to buy or sell, thus achieving their goal of controlling the market.
[Positive News] Also known as positive news. Mainly using news to refer to good news. In most people's eyes, positive news will definitely lead to a rise; however, this is not the case; positive and negative news do not have a direct proportional relationship with market uptrends, but do have a certain impact and can stimulate the market.
[Negative News] Also related to news, usually referring to unfavorable news for the market. However, there’s also a saying in the market: negative news out often leads to positive news.
[Inducing Buying] After a long period of price consolidation, with a high probability of a drop, most shorts have sold their virtual currency. Suddenly, the bears raise the price, inducing the bulls to believe prices will rise and buy in, only for the bears to suppress prices and trap the bulls. [Inducing Selling] After the bulls buy virtual currency, they intentionally push the price down, leading the bears to think prices will fall and sell off, falling into the bulls' trap.
[Position] This is simple; it’s the ratio of your account funds to the funds you use to buy coins.
[Full Position] All account funds have been converted into coins. What you often refer to as 'fully invested' or 'all in' is a full position.
[Averaging Down] For example, you hold BTC, and then BTC falls. To lower the average cost, you buy more BTC.
[Increasing Position] You hold BTC, are optimistic about its development, and then buy more BTC while it’s on the rise.
[Building Position] Also known as opening position. It refers to using account funds to purchase a certain amount of a cryptocurrency.
[Reducing Position] Selling part of the held coins in anticipation of risks in the future market.
[Locking Position] Those who trade futures with leverage should know this. Simply put, if you do EOS futures with a 10,000 long position, then open a 10,000 short position. Think it through and consider your position. [Empty Position] Not doing anything, just watching. In the crypto circle, this means the account only has USDT and no other coins. [Light Position] The funds used to buy coins are a small proportion of total funds. [Heavy Position] The funds used to buy coins occupy a large proportion of total funds. [Half Position] The funds used to buy coins occupy half of total funds. [Clear Position] No longer playing, sold all coins, preparing to remain in an empty position and observe.
[Take Profit] After making a certain profit, selling all virtual currencies to secure the profits.
[Stop Loss] Selling the virtual currency held after losses reach a certain extent to prevent further losses. [Sideways] Market fluctuations are minimal, with rises and falls centering around a specific range.
[Rebound] During a price decline, the price receives technical support or capital intervention, transitioning from a decline to a rise.
[Reversal] The coin price falls and hits a bottom, with nowhere to fall further, transitioning from a downward trend to an upward trend. The common occurrence is a 'V-shaped reversal.' A rebound is the basis for a reversal, and the extent of the reversal far exceeds that of the rebound. [Arbitrage] Simply put, it means spotting the price difference on a platform and making profit by trading across platforms. One needs to pay attention to the speed of currency transfer, as sometimes the speed can affect your returns.
[Over-the-Counter Trading] Many platforms also call it fiat trading. The platform acts as a guarantor, allowing merchants or individuals to directly trade with RMB, buying or selling mainstream coins or USDT they hold. The trading process is similar to that of certain online marketplaces (you know what I mean). [Cutting Losses] A euphemism for 'liquidation.' A common practice among some people—they sell when prices drop, fearing further declines.
[Being Trapped] You buy coins, the price drops, and you can't bear to sell. Congratulations, you are trapped.
[Untrapped] You bought coins and they fell, leaving you disheartened. After a while, they rise again, and you've untrapped yourself, feeling happy again.
[Missing Out] When the market is poor, you buy. When the market starts to rise, you just watch. Perfectly missing the opportunity is called missing out.
[Roller Coaster] You bought a coin and it surged, you’re thrilled, bragging to friends, then a few days later it crashes again. You feel like you’ve been on a roller coaster ride—just a quick thrill, and then nothing more.
[Hoarding Coins] If you believe in the future development of this coin and want to achieve financial freedom with tenfold, hundredfold, or thousandfold returns, you buy a lot of this coin and hoard it.
[Going Long] Also known as 'bullish,' the buyer believes that the coin price will rise in the future, buys coins, and sells at a higher price after the price rises.
[Short Selling] Also known as 'shorting,' it is the opposite of going long. The seller believes the coin price will fall in the future, sells the coins they hold (or borrows coins from the platform), and buys back at a lower price to profit.
[Mining] The process of using computers, phones, and other devices to run computational programs to obtain digital currency. Note: Mining can shorten the lifespan of devices.
[ICO] Initial Coin Offering, originating from the concept of the Initial Public Offering (IPO) in the stock market, is a fundraising behavior where blockchain projects issue their own virtual currency in exchange for commonly used virtual currencies in the market.
[Private Placement Round] Private placement refers to fundraising targeted at specific groups, whereas public offerings target the general public, like banks selling funds.
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