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These Cryptocurrency Terms Every New Trader Should Know

If you haven’t heard of HODL screaming at the top of a variety of crypto traders’ lungs during the Bitcoin boom in 2017, as well as right now, then you’re probably unaware of the big world of cryptocurrency terms. Admittedly, it can be rather intimidating to try and penetrate what looks to be a closed market with people who seem like they’ve known each other since kindergarten.

However, you’d be surprised at the ease of understanding the market after having a solid amount of cryptocurrency terms explained to you. So no worries, we’ve got your back. Keep on reading for our list of the top 10 terms that you’ll want to know before diving straight into the world of cryptocurrencies.

1. The King of Cryptocurrency Terms: HODL

Alright, we couldn’t really start talking about the different cryptocurrency terms on the market (and the interwebs) without starting with HODL.

In the simplest of terms, HODL is a misspelling of the word “hold.” It started as a mistake on one of the cryptocurrency forums, and it truly encapsulated the sheer panic and excitement that traders were feeling as they saw the prices of Bitcoin skyrocket.

Nowadays, the term talks about the specific trading strategy of buying and holding on to cryptocurrency. Generally speaking, those who stick to this strategy will hold on to their cryptocurrency assets for the long run, even in the midst of serious price drops.

Folks who use this strategy are known as HODLers.

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2. Blockchain

This is the name for the technology that makes cryptocurrencies possible. It’s the reason behind the high level of security that cryptocurrencies, like Ethereum, enjoy. If you’re unaware of one of the most popular types of cryptocurrencies available on the market, you can learn about Ethereum here.

3. Fiat Currencies

This is the term that crypto traders would use to talk about your traditional government-issued currencies. The U.S. dollar and the Sterling Pound is a currency that is not backed by anything physical, and they’re straightforward examples of fiat currencies.

4. Return On Investment: ROI

Interestingly enough, the abbreviation for return on investment (ROI) isn’t exclusive to the cryptocurrency world. All sorts of financial traders have been using ROI calculations to nail down whether their investments are performing well in the market or not.

Basically, you can easily calculate your ROI by deducting the value of your asset’s original value from the current value of the asset. Then, divide the result by the original cost.

It’s a simple calculation that can tell you whether your investment has grown or decreased in value as time goes by.

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5. Do Your Own Research: DYOR

This one sounds simple enough. It’s a term that asks you to do your own research before making your market decisions. In short, it’s asking you to not rely on ready-made or popular advice that you can randomly find in a variety of forums, but actually go out and do your own research.

Moreover, DYOR is used to talk about the formation of strategy, and other foundational methodologies, like Fundamental Analysis.

6. Know Your Customer: KYC

This one talks about a set of guidelines that help bigger entities and organizations better understand their customer’s identity and their persona. When it comes to cryptocurrency exchanges and trading platforms, the term KYC talks to confirming the credibility (and identity) of a potential customer before allowing them to trade.

The key driving force behind this set of guidelines is the prevention of money laundering. Traditionally, they’ll ask for documents like your social security number, passport, or even proof of address.

7. Anti-Money Laundering: AML

Other than KYC, there’s also AML to tackle the ever-growing issue of money laundering. AML stands for anti-money laundering, which is a set of overarching guidelines that aim to prevent any money laundering schemes. KYC can be considered as one of the many elements of AML guidelines.

These guidelines are usually set by regulators, who ask different trading platforms to analyze customers’ transactions, and if they detect any red flags or suspicious behavior, they’re responsible for reporting them to the appropriate authorities.

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8. Due Diligence: DD

This term is exactly what it sounds like. Due diligence refers to the regular care and investigation that are expected of a rational person, or a business to exercise before entering an agreement with a different party. For instance, if an investor wants to buy an asset, they’re expected to keep an eye out for any suspicious behavior and stop the deal if there are way too many red flags.

It’s a simple way that traders and investors can feel confident about their marketing decisions. It allows them to make a note of any risks or even potential benefits before starting the bidding process.

9. Hard Fork vs Soft Fork

This one is a bit more complex than the rest, as it’s related to blockchain technology. A hard fork is a radical update to the underlying blockchain that can impact blocks and either validate them or invalidate them.

In the majority of cases, a hard fork can lead to the creation of a new cryptocurrency. A great example would be what happened with Digital Tokens and the formation of Bitcoin.

On the other end of the spectrum, there’s the soft fork. This one is a backward-compatible change that happens in the blockchain protocol. Basically, it’s a softer version of the hard fork.

10. Fear, Uncertainty, and Doubt: FUD

This term isn’t unique to cryptocurrency trading, as it refers to a common strategy that focuses on spreading information about a specific asset or an organization.

Specifically, misinformation.

This can lead to fear, uncertainty, and doubt among traders of all kinds, which can lead to wrong market decisions being made. It’s a frowned-upon strategy.

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Errna is a leader in blockchain application development. We help businesses establish cryptocurrency exchanges and provide consulting services. Our team is made up of highly skilled and experienced experts who have worked in blockchain technology for many years, solving complex business problems and developing innovative solutions.