The Ultimate Guide to Basic Finance & Crypto Terms
Investing can be intimidating, especially for beginners. Sometimes, you just don’t know where to start. So we thought it would be a good idea to shed a bit more light on the terms and expressions frequently used either on the ICONOMI platform or otherwise in the world of investing. Let’s start with some basics.
Welcome to the crypto world
First off: cryptocurrencies, or just crypto. A cryptocurrency is a digital asset that uses cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptography ensures that no third party accesses the information of a user.
By now, we’re sure everyone reading these lines has heard of Bitcoin. It’s the most recognisable, but there are so many other cryptocurrencies out there. And they even have a common name – Altcoins, or ‘Alts’ for short. Alts were conceived as an alternative to Bitcoin and therefore means all cryptocurrencies that are not Bitcoin.
They’re usually stored on a blockchain - a type of database with a growing list of records.
Each user or service has a blockchain address, an alphanumeric string of characters that represent a destination where crypto can be sent to and from. For example, a Bitcoin address looks like this: 3KbWWjumBGLBUWYCeidydxe1uET9QyWoEg. Harder to remember than your phone number, yes, so thank the universe for copy/paste.
An address usually involves the use of a public and private key:
But where’s that Bitcoin? Technically, Bitcoin and other cryptocurrencies are always stored on the blockchain. You just move them with the help of private keys. You then store assets in your crypto wallet.
You also might have heard of the term cold storage. It refers to preserving cryptocurrencies offline, which is generally considered a safer option, preventing your crypto funds to be stolen by hackers. This is especially important when dealing with large sums.
At the end of the day, this is still finance
Moving to the finance part, let’s start with the market price—the economic price for which a good or service is offered in the marketplace.
Apart from market prices, we also show the market cap of individual cryptocurrencies. A market cap (short for market capitalisation) is the total capitalisation of a cryptocurrency’s price. Essentially, the market price multiplied by the total number of coins that are circulating in the market.
An asset is any useful or valuable thing. Conversely, a digital asset (e.g. a cryptocurrency) is an asset that’s stored digitally and has no physical form.
In showing the performance of a crypto Strategy, we also show you its Volatility and Max drawdown. Volatility is the degree of variation of a trading price series over time. In plain English, how much the price of an asset swings up or down. Generally, the higher the volatility, the riskier the asset. Max drawdown is the highest loss from a peak (highest point) to a trough (lowest point) in a given time period.
But how do you know whether you’ve won or lost money from your investments? We’ll also show you your returns. A return, also known as a financial return, in its simplest terms, is the money made or lost on an investment over some period of time. We want to make your life easier and call this profit.
In crypto, you’ve surely heard of ATH, especially in the case of Bitcoin. ATH means All Time High, i.e. the highest price ever reached by a cryptocurrency. Conversely, ATL, or All Time Low, is the lowest price ever reached by a cryptocurrency.
Then there’s FOMO and FUD.
FOMO, or Fear Of Missing Out, is the driving force behind enormous price increases in times of bull markets.
FUD, short for Fear, Uncertainty, and Doubt, refers to very dark and unsettling times regarding the future of something. It commonly results in panic selling, leading to sometimes massive drops in prices of cryptocurrencies. Some investors regard FUD as a buying opportunity as prices tend to rebound after dramatic drops.
There’s one word you’ll never hear in the “old” world
Many say that it is best to keep calm and hodl. The word itself stems from a legendary typo on the bitcointalk forum way back in 2013 (where a crypto investor wanted to use the word “hold”, as in - don’t sell), which inadvertently lead to the formation to one of the very few words existing exclusively in the crypto vocabulary and found nowhere else. So if you hear some say they are a hodler, it simply means they are not selling their crypto investments but waiting for the price to go up.
So there you go, we hope we have made your crypto journey easier to understand, or maybe you even learned a word or two.
Many thanks also to the good people of Data Driven Investor who have compiled a massive crypto vocabulary – you can find tons more stuff here .
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