A list of the most popular crypto terms and acronyms

  • Address – A string of code that refers to the wallet of an individual who is sending or receiving cryptocurrency. The address is an individual’s digital avatar in a cryptocurrency network.
  • Altcoin – A term for any other cryptocurrency besides Bitcoin and sometimes Ethereum. Many altcoins are illegitimate and have little trust in the broader public. They are sometimes hard to transfer and may also be outright scams. 
  • Arbitrage – A trading strategy where a trader takes advantage of different prices for the same product on different exchanges. While arbitrage is most common for stocks and currencies, it can also be applied to cryptocurrencies. 
  • ATH – All-time high. This term refers to the highest-ever price of an asset like a cryptocurrency. Bitcoin has hit this number repeatedly over the past two years. 
  • Bagholder – A term for the individual who is left with a worthless stock after the successful completion of a pump-and-dump scheme. They are the victims of these scams. 
  • Bear market – A market where the long-term prices of an asset such as a cryptocurrency are decreasing. Investors during a bear market are more cautious and pessimistic than usual. 
  • Bearish – A negative attitude about an asset that the price will soon drop or continue to drop. 
  • Bitcoin – The original form of cryptocurrency proposed in 2010. Bitcoin is so popular that its name has become shorthand for all forms of cryptocurrency. 
  • Block – The collection of data (transactions) that are grouped together for verification and eventually added to the blockchain.
  • Block reward – This term refers to the reward that a miner receives for processing a part of the blockchain that verifies a transaction. Block rewards are the way in which miners receive cryptocurrency. 
  • Blockchain – A system of ledgers protected by cryptography that computers in a network can access. The blockchain is the technological backbone of cryptocurrencies. 
  • Bull market – A market where the value of an asset has increased and is projected to increase in the future. This market causes investors to become more optimistic and go long more than usual. 
  • Bullish – An attitude about any kind of asset that the asset will increase in value over the short-term and the long-term. 
  • Circulating Supply – A best guess of the total number of token or coins in circulation. This is usually used when computing the coin’s “market cap”. I say best guess because it’s almost impossible to calculate accurately.
  • Coin – A representation of an asset that resides on its own blockchain (like bitcoin).
  • Coinbase – One of the largest and most trustworthy cryptocurrency exchanges available today. A sign of legitimacy in the world of cryptocurrency is listing a currency on this exchange. 
  • Cold storage – The way by which individuals take their cryptocurrency out of online systems so it can be kept away from possible hacking. The easiest way to do this is to print a QR code onto a piece of paper and keep track of that paper. 
  • Cryptocurrency – An anonymous, decentralized form of currency based off of lines of code that make up a blockchain. 
  • Cryptojacking – A process where a computer is taken over and surreptitiously used to mine cryptocurrency. Cryptojacking often uses only a small amount of processing power from several hundred or thousand computers for illicit mining. 
  • DAO – Stands for Dentralized Autonomous Organization. It was a venture capital fund built on the Ethereum network that was hacked in 2016, losing almost a third of its funds. The DAO is often referred to in the news when highlighint the risks of cryptocurrency.
  • Dapp – Stands for Decentrazlied Application. This is an application that uses blockchain technology.
  • Decentralized – A system in which there is no central authority or entity that holds control, but rather the system’s resources and processes are distributed among many entities.
  • DYOR – Stands for “do your own research”. This term refers to the need for research and information in the often opaque world of cryptocurrencies. 
  • ERC-20 – The token standard of Ethereum. ERC-20 tokens are easily exchangeable. Most ICOs use the ERC-20 standard.
  • Ether – The term that refers to the units of the crytpocurrency Ethereum. 
  • Ethereum – One of the leading cryptocurrencies on the market today after Bitcoin. Ethereum is poised to become larger and more prominent than Bitcoin because of its applicability and adoption by corporate entities. 
  • Exchange – A website or other venue where an individual can buy or sell cryptocurrency. Cryptocurrency exchanges vary widely in their reliability. 
  • Fiat – A shorthand term for traditional currency. Traditional currencies are fiat in the sense that their value is not backed by material goods such as gold. They are the main alternative currently to cryptocurrencies. 
  • FOMO – Short for “fear of missing out”. The fear of missing out creates a bandwagon effect on assets like cryptocurrencies and is one of the major motivating factors for cryptocurrency purchases. 
  • Fork – The splitting of a cryptocurrency into different currency approaches with different network rules. Bitcoin first forked nearly seven years after its introduction in 2017. 
  • FUD – An acronym that stands for “fear, uncertainty, and doubt”. This term refers to the forces that can either intentionally or unintentionally bring down the price of an asset. They can be helpful for individuals looking to short an asset. 
  • Gas – A fee in Ethereum in ether for every transaction made through the cryptocurrency. 
  • Going long – Refers to an investment strategy where investors buy a particular asset like a cryptocurrency with the hopes that the investment will increase in value and that they can sell it later for a profit. This strategy is often employing during a bull market. 
  • Going short – An investment strategy where an individual borrows a certain amount of an asset to sell to a buy in hopes of paying it back at a later date and lower price. Shorting an asset is a bet that the asset will lose money in the future. This strategy is most effective during a bear market. 
  • Gwei – Another denomination of Ether. Gas prices are usually paid in measurements of Gwei. 1 Ether = 1,000,000,000 Gwei.
  • Hardware wallet – A secure device for storing cryptocurrency that is particularly effective for cold storage. Hardware wallets are more secure and less flexible than software wallets. 
  • HODL – It started out as a misspelling by an inebriated reddit user and grew from there. Here’s the original post it came from – https://bitcointalk.org/index.php?topic=375643.0
  • ICO – Short for initial coin offering. An ICO is the process by which a cryptocurrency introduces its methodology and starts the process of building a network and verifying a blockchain. 
  • Lambo – Short for “lamborghini”. Lambo is a term for what cryptocurrency investors will buy when the investment makes them millionaires. 
  • Limit order – An asset arrangement where an individual agrees to buy an asset if its price falls below a certain range and sell an asset if it rises above that range. Limit orders help to minimize risk for investors of any asset including cryptocurrency. 
  • Margin trading – Trading any kind of asset by borrowing money to increase the amount of volume being traded. This approach to trading is one of the riskiest possible. 
  • Market cap – The total value of an asset. In the world of cryptocurrencies, market capitalization is devised by multiplying the number of crypto coins in circulation by its current price.
  • MEW – Stands for MyEtherWallet. A great site that has lots of useful and free tools for Ethereum users, including creating free wallets.
  • Miner – An individual who mines cryptocurrency. After several years of expansion, miners almost never work on their own and often pool their resources. 
  • Mining – The processing of the blockchain in order to verify transactions and earn units of cryptocurrency. Mining is the way in which more cryptocurrency is created. 
  • Mining rig – Any device that an individual uses for cryptocurrency mining. For most individuals, a mining rig is a computer optimized for mining with extra graphics cards. However, mining rigs can be any computer of almost any size or strength. 
  • Mooning – A crypto asset with a price that has gone up massively in a recent period of time. 
  • Node – A computer that possesses a copy of the blockchain and is working to maintain it.
  • PoS – An acronym that is short for “proof of stake”. This will be the future model of Ethereum where owners of ether will be able to make decisions about the currency and have their votes rewarded with more ether. 
  • PoW – An acronym for “proof of work”. This approach is the traditional way in which individuals mine cryptocurrency. PoW involves individuals showing their work in mining and verifying the blockchain and being rewarded with cryptocurrency. 
  • Pump and dump – A scheme where a group of investors place a large amount of money in an asset above its known worth. This “pump” lures in other investors who see the asset gain in value. The original investors then “dump” the stock and its price craters. 
  • Satoshi – The smallest fraction of a Bitcoin that can currently be sent. 1 Satoshi = .00000001 Bitcoin
  • Sharding – A strategy for scaling upwards where different nodes on a cryptocurrency network already have large stretches of the blockchain to work from. Storing strings of blockchain through sharding helps optimize processing power and cuts down on the time required to process new parts of the blockchain. 
  • Shilling – An individual illicitly or blatantly advertising a cryptocurrency. Shilling is seen as more obvious and transparent than normal advertising. 
  • Shitcoin – Exactly what it sounds like.
  • Smart contract – A contract that governs cryptocurrency transactions and cannot be altered or cancelled. Smart contracts often have conditions and stipulations attached to different transactions. 
  • Software wallet – A program that stores certain public and private keys used to buy, sell, and hold cryptocurrencies. The software wallet is the application that ensures cryptocurrency users can transfer and make purchases with his or her cryptocurrency. 
  • Stable coin – Stable coin is a term for trusted cryptocurrencies that are not small, untrusted upstarts like altcoins. 
  • The Flippening – The moment when Ethereum becomes larger than Bitcoin. There are websites that currently count down to this moment. 
  • Token – A representation of an asset or utility that resides on top of another blockchain (like Ethereum). Tokens are different from coins in that coins typically operate on their own blockchain (like Bitcoin or Ethereum).
  • Two Factor Authentication or 2FA – A second layer of identity verification to secure your account when logging in. It usually requires you to enter a unique code sent to your mobile phone during log in. This prevents hackers from accessing your account with a stolen username and password since they would need your phone to authenticate the log in.
  • Wei – The smallest denomination of Ether. 1 Ether = 1,000,000,000,000,000,000 Wei.
  • Whale – An individual who owns a large amount of an asset such as a cryptocurrency. Whales have a disproportionate impact on the price and volatility of an asset. 

Ethereum, along with almost every cryptocurrency, has been experiencing large price drops the past few days. This is due to a variety of reasons. The US stock market, the SEC and global events are all contributing to the downward pressure on crypto prices.

ICOs Selling Ethereum?

Many have pointed to ICOs being the main culprit in the sudden price decreases of Ethereum. However, this spreadsheet created by Diar says otherwise.

Are ICOs Selling Their Ethereum?

Diar has been monitoring the ETH balances of the largest ICOs. As you can see on the table they provide, ICOs have not been selling as much of their ETH as the public thinks. While there has been some major withdrawals, most notably the 71,000 ETH withdrawal made by DigiDAO in September, only 19% of the total ETH has been moved from ICO wallets in 2018.

The SEC & US Stock Markets

The SEC passed judgement on two ICOs recently, which spooked cryptocurrency investors. The popularity of ICOs created large inflows of new capital into the crypto market. Unfortunately, that looks as though it has come to an end.

Stock & Crypto Market Have Entered Into Correction

The US stock market looks as though it is entering into a state of correction, which is pulling the crypto market down with it as well.

While the stock market always recovers, cryptocurrency investors are also hoping a recovery is in the near future. While we most likely will never see the mania that occurred at the end of 2017, we firmly believe that cryptocurrencies are not going anywhere.

Diagram of the top 5 things to consider when buying cryptocurrency

While the crypto markets have been in a bear trend the last several months, interest in cryptocurrency is still high. Every day, new investors are taking the leap into crypto assets. As the market continues to stabilize, investments in cryptocurrency will only increase.

When investing in digital assets like cryptocurrencies, it is important to follow a strict strategy and focus on understanding the key drivers to a coin’s value.

Crypto vs Stocks

While many equate cryptocurrencies to stocks or bonds, they really are different kinds of animals.

Most seasoned investors know how to evaluate a stock based on standard metrics like the price to earnings ratio, debt to equity or beta. But these types of metrics don’t exist in the crypto world.

So what do crypto traders look at when choosing an investment? The top 5 things are:

  • The business proposition. What need does it fill? Is it disrupting an industry or solving a problem?
  • Total & circulating supply. The max supply of coins that can be mined and the total amount that have been mined thus far.
  • Price history. How long has the coin been available on exchanges and what has the price done?
  • Developer activity. Does the coin have an active developer community behind it?
  • Community activity. Does the coin have a passionate and active community of supporters?

Understanding Cryptocurrency

Before considering an investment in crypto, it is crucial that one has a good understanding of what they’re investing in. This is the #1 error made by newcomers to crypto.

Most crypto investors know very little if anything about the technology behind it. They’re simply speculating on price action and hype, which is a terrible way to invest.

Learn the Basics

Learn about the blockchain first.  This is the underlying technology behind every crypto project.

After gaining an understanding of how the blockchain works, look for a good guide on cryptocurrency. A Google search will turn up several great resources.

Is the coin a security token or a utility token? There’s a huge difference between the two. Is the coin mined using Proof-of-Work or Proof-of-Stake? This is another important factor to consider.

After learning everything possible about the inner workings of the blockchain and the function of cryptocurrency, it’s time to look at the investment criteria.

1. The Business Proposition

Crypto projects are like any other business or startup. Good businesses solve big problems and fill needs. The same goes for crypto startups. Are they solving a problem?

When investing for the long term, it’s important to evaluate the team behind the project, their mission, their plan to accomplish that mission and their overall enthusiasm. Focus on prospects with real value and stay away from questionable projects with shady founders.

This is also a good time to look at the function of the cryptocurrency they’re selling. Is it a security token? This means anyone that owns a coin also owns a piece of the company, much like a stock. Or is it a utility token? These types of tokens are redeemed for services on the blockchain.

Considering the project’s business proposition will prevent investors from succumbing to hype or “fomo”.

2. Total & Circulating Supply

Total supply of a coin represents the maximum amount of coins that can be mined or enter the market, while circulating supply represents the current amount of coins in the market. Since most coins are mined, or a percentage of them are held by the founders, there is usually a difference between the two figures.

These figures become important when evaluating the value of a crypto project. Due to the basic principle of supply and demand, the supply of coins has a large influence on the price of the coin. For instance, Ripple’s current value metrics are:

  • Price – $.46
  • Total supply – 100 billion coins
  • Market cap – $46 billion.

Many would argue that such a high supply of coins prevents Ripple from increasing much more in value. A $.10 increase would increase the projects value by $10 billion, which seems unrealistic.

Bitcoin’s total supply is only 21 million coins. This is one of the factors that drives its value up. Lower supply means higher demand.

3. Price History

Cryptocurrencies are highly volatile. This is due to speculation, hype, pump and dump schemes and a lack of regulatory oversight. Looking at a coin’s price history tells a story.

Generally, the cheaper coins with lower market caps are more susceptible to pump and dump schemes. Investors that recognize this can avoid unnecessary losses.

A coin’s price may also correlate to other coin prices, stock market moves or world events. For example, when Bitcoin’s price increases rapidly, most altcoins drop in price. This is due to the fact that Bitcoin is the primary coin used to trade other altcoins. An increase in the buying of Bitcoin leads to an increase in the selling of altcoins. This drives Bitcoin’s price up and altcoins down.

Another important factor to consider is the number of exchanges the coin is currently being traded on. Is the coin available on most major exchanges or only the smaller exchanges? Announcements about coins being added to major exchange platforms like Binance can affect the price significantly.

Just like stocks, understanding why a coin’s price moves up and down is key to evaluating its long-term value.

4. Developer Activity

Strong projects have high developer activity. If the activity is low or down trending, that is cause for concern. The easiest way to measure this is by viewing the project on GitHub.

All work done on GitHub is public, and so are the activity metrics of that project. The number of updates it has received, how many watchers there are, how many forks have been created and the total stars are great metrics to gauge the project’s activity.

Diagram of developer activity of crypto project on Github

Are issues being identified and bugs being fixed? Are more contributors joining the project? If developer activity is going up rapidly, that’s a great sign of a strong project.

5. Community Activity

A project with a strong community is just as important as high developer activity. The larger and more involved the community is, the more valuable the coin should be.

Twitter profile for Bitcoin

One of the easiest ways to gauge the community size is to check out the coin’s twitter page. How many followers does the project have? How much activity is occurring in the account?

Reddit is another good place to check. Reddit has become ground zero for crypto related news, announcements and general conversation about coins. Are there a lot of subreddits related to the project? Are they highly active?

Conclusion

Evaluating cryptocurrencies takes time and effort to do right. It is a brand-new industry and its rapid growth has created many opportunities but also many dangers for investors.

By considering the five items covered in this article when choosing coins, investors can reap significant gains. There are many more metrics that can be evaluated but the key principle to remember is: Buy into value, not hype.  

I taped this up at my desk. It always reminds me of how irrational the markets can be, especially crypto. And it makes me laugh on those red days.

funny comic of irrational crypto market

The crypto market is under attack from FUD, rumors and emotional investors.

Tape this up on your wall, and the next time Bitcoin or Ethereum takes a 10% dip in an hour:

  • Take a look at the photo and realize the world is not ending.
  • Understand that most large crypto price movements are because of emotional traders or manipulation.
  • Stop watching the price for a week or 2.
  • If you truly believe that crypto will transform the future, you will be just fine.

 

A hand curated list of the best crypto links, resources, and tools

Links have been handpicked by our staff. Thanks to Cryptolist and Jameson Lopp for inspiring us to create this list.