Long is a strategy where a trader or investor buys an asset with the intention of selling it later at a higher price. Simply put, a long position is a bet on the price of an asset going up. The trader buys the asset, expecting its value to rise, and plans to profit from the difference between the purchase and sale price.
You buy 1 Bitcoin at a price of $20,000, expecting its value to rise to $25,000. If the price does indeed increase, you sell the Bitcoin and make a profit of $5,000 (excluding fees and other costs).
Short is a strategy where a trader borrows an asset (like stocks) from a broker and sells it on the market, intending to buy it back later at a lower price. A short position is a bet on the price of an asset going down. The trader sells the asset, expecting its price to drop, and plans to profit from the difference between the sale and repurchase price.
You borrow 10 shares of a company at $100 per share and sell them, receiving $1,000. If the share price drops to $80, you buy back the 10 shares for $800 and return them to the broker, keeping the $200 difference as profit (excluding fees and other costs).
Risks
🔵 Long: The maximum risk in a long position is limited to the amount you invested in the asset. If the asset's price drops to zero, you lose your entire investment.
🔵 Short: The risk in a short position is theoretically unlimited, as the asset's price can rise indefinitely. If the price of the asset spikes, the losses can be much greater than the initial amount invested.
What is the difference between a private and a public key?
Private and public keys are two essential components of asymmetric encryption that work together to ensure data security. Here are the main differences between them:
The private key is used to decrypt data that has been encrypted with the corresponding public key and to create a digital signature.
🔵 The private key must be kept strictly confidential and accessible only to the owner. Its leakage can lead to data and asset compromise.
🔵 It is used to sign transactions, documents, and messages, confirming their authenticity and allowing the recipient to verify that the data truly comes from the owner of the private key.
The public key is used to encrypt data that can then only be decrypted using the corresponding private key and to verify a digital signature created by the private key.
🔵 The public key can be freely distributed and shared with others. Its leakage poses no threat since it cannot be used to access data by itself.
🔵 It is used to encrypt messages or data that will be sent to the private key owner and to verify the authenticity of signatures.
Token liquidity refers to the ability of a token to be quickly and easily exchanged for another asset (e.g., fiat currency or another cryptocurrency) without significantly affecting its market price.
Why is liquidity important?
🔵 High liquidity means you can easily buy or sell a token at the current market price. This is especially important for traders who want to quickly enter or exit the market.
🔵 In liquid markets, the token price is less prone to sharp fluctuations because there are enough buyers and sellers to maintain price stability. In contrast, in illiquid markets, even small trades can significantly affect the price.
🔵 High liquidity allows projects and investors to mobilize funds more quickly when needed.
🔵 Investors prefer tokens with high liquidity as it reduces the risks associated with difficulties in selling the asset in the future.
Factors affecting token liquidity:
🔵 Tokens with high trading volumes on exchanges usually have higher liquidity because there are more market participants willing to trade the asset.
🔵 If a token is traded on a large number of exchanges, this increases its liquidity as more traders have access to it.
🔵 Tokens issued by well-known and respected projects generally have higher liquidity because they are trusted more by market participants.
🔵 Tokens that are integrated into the ecosystems of other projects or platforms may have higher liquidity due to access to a larger user base.
PoW (Proof of Work) is the first and most well-known consensus algorithm used in the Bitcoin blockchain. The main idea of PoW is that network participants (miners) solve complex mathematical problems to add a new block to the blockchain.
This process requires significant computational resources.
Key purposes and functions of PoW:
🔵 Security: By utilizing computational resources, PoW ensures network security, making it extremely difficult and expensive for attackers to compromise the network (e.g., through a 51% attack).
🔵 Decentralization: PoW allows many participants to engage in the process of validating transactions, making the network more decentralized.
🔵 Creation of new coins: Miners who solve PoW problems are rewarded with new coins (such as Bitcoin), incentivizing their participation in supporting the network.
PoS (Proof of Stake) is a newer consensus algorithm that operates based on token ownership. In PoS, network participants (validators) lock or "stake" their coins as collateral for the right to add a new block to the blockchain.
The more coins a participant stakes, the higher their chance of being selected to add the block.
Key purposes and functions of PoS:
🔵 Energy efficiency: Unlike PoW, PoS does not require extensive computational resources, making it more environmentally friendly and economically viable.
🔵 Increased security: In the event of malicious actions, the validator can lose their staked coins, making attacks less likely.
🔵 Incentivizing participation: In PoS, validators receive rewards in the form of transaction fees and sometimes additional tokens, which encourages them to participate in supporting the network.
Phishing links are malicious links created by attackers with the intent to deceive users and steal their personal information, such as logins, passwords, credit card numbers, and other confidential data.
These links may appear legitimate but redirect users to fake websites where their data can be stolen.
Main threats of phishing links:
🔵 Phishing sites may request the input of personal information, such as logins, passwords, or credit card details. If the user enters this information, it falls into the hands of attackers.
🔵 Attackers can use the stolen data to access bank accounts or credit cards, which can lead to significant financial losses for the victim.
🔵 Phishing links may contain malicious software that automatically downloads onto the user's device when the link is clicked. These programs can steal data, spy on user activities, or cause other harm.
🔵 If the user enters their credentials on a phishing site, attackers can gain access to their social media accounts, email, and other online services.
🔵 Phishing attacks often use social engineering techniques, such as urgent notifications or messages about winnings, to trick the user into clicking the link and entering their data.
Pennsylvania may become the first U.S. state to establish a Bitcoin reserve.
The proposed law would allow investing 10% of state funds into Bitcoin and other crypto assets to counter inflation and strengthen financial stability.
A seed phrase is a set of random words used to recover access to a cryptocurrency wallet.
In essence, it is the key to your digital assets, allowing you to restore your wallet on any device, even if you lose access to the original device or the wallet itself.
How does a seed phrase work?
A seed phrase usually consists of 12, 18, or 24 randomly generated words. These words form a mnemonic code that allows you to recover the private keys to your wallet. The seed phrase is a crucial security element, as it grants full access to your cryptocurrencies.
Why do you need a seed phrase?
🔵 Wallet recovery: If you lose access to your wallet (for example, if your device breaks), you can restore it using the seed phrase.
🔵 Security: The seed phrase is the only way to access your cryptocurrencies if the device is lost or the wallet is deleted.
Never share your seed phrase with anyone. Anyone who knows your seed phrase can gain full access to your funds.
Fear of Missing Out (FOMO) is the fear of missing an opportunity, often experienced by traders and investors in the cryptocurrency market.
This term describes the psychological pressure when a person sees asset prices rising and fears missing out on a profit if they don't enter the market.
How does FOMO manifest in cryptocurrency?
🔵 Impulsive buying: When the price of a cryptocurrency is rapidly increasing, people may rush to buy assets, fearing that they will continue to rise and they will miss their opportunity.
🔵 Unplanned decisions: Under the influence of FOMO, investors may ignore their initial strategies and invest in assets without proper analysis, increasing the risk of losses.
🔵 Social pressure: The influence of social media and forums, where "missed" opportunities are discussed, can push people towards rash actions.
A crypto user mistakenly sent $25 million worth of Renzo restaked ether to the wrong address, locking the funds potentially forever. Instead of sending to their safe wallet, they accidentally transferred the funds to a safe module address, which they can't withdraw from without Renzo’s intervention. 🤷
👒 Desperate to recover the funds, the user appealed to hackers and white hats on social media, offering a $2.5 million reward for assistance. However, experts suggest that the only solution may be if Renzo upgrades its contract with a rescue feature—a step they have yet to respond to. 🧐
This incident is a stark reminder of the risks in crypto transactions, where even a small copy-paste error can lead to massive losses.
A no-coiner is a person who does not own any cryptocurrency. In the cryptocurrency community, this term is often used to refer to those who have not yet invested in cryptocurrencies or avoid them for various reasons, such as:
🔵 Lack of trust: Lack of faith in cryptocurrencies as a reliable store of value.
🔵 Lack of knowledge: Lack of understanding of the technologies and mechanisms behind cryptocurrencies.
🔵 Risk: Concerns about the high volatility and risks associated with investing in cryptocurrencies.
🔵 Interest: Lack of interest in digital currencies and investing in them.
The term is sometimes used in a humorous or ironic context, especially among those who are actively involved in cryptocurrencies.
Instamine is the process where a significant amount of cryptocurrency is mined in the first days or even hours after the launch of a new cryptocurrency network.
This term often has a negative connotation and is associated with the uneven distribution of coins among early participants, which can lead to market manipulation and reduced trust in the project.
Key Characteristics:
🔵 A significant amount of cryptocurrency is mined in the first hours or days after the network launch, often before most users know about the launch.
🔵 A large portion of the coins ends up with a limited number of participants, which can lead to price manipulation and concentration of power.
🔵 The community may perceive instamine as a scam, leading to criticism and difficulties in project adoption.
Prevention Methods:
🔵 Announce the exact launch time of the network and provide equal access for all participants.
🔵 Implement mechanisms that ensure an even distribution of coins among participants in the early stages.
🔵 Provide advance notice to the community about the planned network launch so that everyone can prepare.
Today's topic is the dollar-cost averaging (DCA) strategy. You will learn about its pros and cons, as well as where and how to use it.
DCA is a strategy in which an investor regularly invests in an asset, regardless of its price.
This helps reduce the impact of volatility on the overall outcome.
Advantages of DCA:
– Minimal impact of market fluctuations on your portfolio. – Consistent investment without the need to time the market.
Risks of DCA:
– No guarantee of 100% profit. – Losses are possible.
How to DCA on a CEX
Centralized exchanges (Binance, Bybit, and OKX) have convenient tools for automating the DCA strategy.
– Find the "Auto-Invest" feature on the exchange. – Choose the asset and set the amount for regular purchases. – Define the investment interval.
The advantages include easy setup and support for a large number of cryptocurrencies. However, KYC requirements and exchange fees may deter some users.
How to DCA on a DEX
Some decentralized exchanges, such as DeFi Saver on the Ethereum network, support this strategy.
– Connect your wallet to the DEX. – Choose investment parameters (asset, amount, frequency).
In this case, you will have full control over your assets. It's anonymous, and KYC is not required. However, liquidity issues may arise with large purchases.
In conclusion
DCA is a good strategy if you want to invest regularly with minimal risks and volatility.