Dealing in Cryptocurrency?—You Need To Know These!

You could call it Cryptocurrency for Dummies.

If you’re like me, you’ve probably been wondering what cryptocurrency is all about, and why there’s so much hype around it. From Bitcoin, to Ethereum, and now Tron, there are so much buyers and sellers—not to mention publicity. Alternatively, chances are you are into this business already, even though you’re not aware of some of the major terms and jargon used.

Which is exactly why this article is just for you. I hope at the end, you are on better footing as to where you stand on this investment platform. Let’s hop into it!

1. Trading.

In secondary school, we learned that trading is the act of buying and selling, no? Put simply, trading cryptocurrency is buying and selling online money.

A specific and faster way of making money is termed Day Trading, where investors buy, and sell multiple times a day. This, however, is more suitable for experienced and seasoned traders, who are familiar with the nature and moods of the cryptomarket.

There will definitely be huge gains—and losses, but the rationale is that you win more often than not.

2. HODLing.

HODL is a purposeful misspelling of hold, which implies holding on for dear life through crypto’s difficulties. In realistic terms, it is buying the cryptocurrency and holding it, instead of selling it.

It is a general conception that HODLing is the best approach, especially for new and inexperienced traders. In truth, all strategies have their rewards and pitfalls. In holding a cryptocurrency, all you have to do is keep it for some period of time, wait for its value to increase, then sell if off.

On the other hand, it takes a lot of grit to hold on for particular periods of time (research puts it to at least one year). The road is treacherous, and filled with numerous baits to sell for a low price. Without emotional and psychological intelligence, one may end up not making profits.

3. Liquidity.

Liquidity simply means the ease with which an asset (in this case, cryptocurrency), can be exchanged for cash, without—of course—affecting the price. We can also talk about the liquidity of the overall crypto market; a liquid market is one where assets can quickly be bought or sold at stable, transparent prices.

For example, when buying or selling Bitcoin, the market is stable enough that you can place large orders without worrying about any change in price. Not so for an illiquid asset, where an actor, or a group of actors can decide to influence the price for their benefit. Liquid currencies are more resistant to this kind of manipulation.

4. Blockchain.   

Without much ado, Blockchain is the structure around which cryptocurrency is built. While the information on the internet allows several computers to access information from various servers, the information on a Blockchain is actually contained in several different computers that have the capacity to store such information.

De-centralization is the central theme of Blockchain—and cryptocurrency, meaning that there is no one body that is responsible for regulating the transactions on the Blockchain. This makes hacking it virtually impossible.

The person who reportedly created it (and Bitcoin) under the pseudonym, Satoshi Nakamoto, remains anonymous.  

5. Market Cap.

The Market Capitalization (also Market Cap), attempts to measure the relative size of a cryptocurrency. It is gotten by multiplying the current market price by the total number of coins in circulation.

In reality, this term is often criticized as a meaningless, and easily manipulated. The reason is not far-fetched; it often creates a false sense of value, when really, it’s all about price.

Market cap is more favourable to currencies that have been in circulation for longer periods. In addition; though relevant, it creates a simple answer to a question that is complex, and a market that is erratic.

I hope this article has been able to answer some, if not all, of your questions concerning the much-debated world of cryptocurrency. I do not seek to dissuade you, neither am I gunning for you to enter before you are ready. My objective is for you to ask the right questions, and make proper research before venturing into a business.

Do comment if this has been beneficial.