The cryptocurrency market is growing at a fast pace and, in times of record Bitcoin prices and reasonable movement in altcoins, more and more people are becoming interested in crypto matters.
But, to navigate this ocean more safely, it is important to understand the language that its sailors usually use. With a series of specific terms, the crypto world can, at first glance, seem complex. However, some of the essential concepts can help a lot when making investment decisions.
In this article, we will introduce you to ten fundamental terms for any cryptocurrency investor.
1. HODL
HODL is an expression that was born from a typo in the word “hold” and has become a very popular term in the world of cryptocurrencies. When an investor says they are going to HODL a crypto, they are stating that they intend to hold it for the long term, regardless of market fluctuations.
This strategy aims to maximize profits by holding assets for long periods, in the hope that they will gain value over time. Ultimately, it serves as an incentive for those who hold some crypto in their portfolio, a “wait a little longer and it will be worth it”.
The term has become synonymous with an investment philosophy based on patience and resilience. Those who practice HODL typically believe in the currency's potential for appreciation, even in periods of great volatility.
It’s common to hear HODLers (followers of this strategy) saying that they will hold their cryptos “until the value goes to the moon.” If we look at the history of cryptos like Bitcoin, they’re not wrong to just buy and wait.
2. DYOR (Do Your Own Research)
“DYOR” stands for “Do Your Own Research.” This term encourages investors to dedicate time and attention, carefully and judiciously, before entering a crypto project.
In a market full of promises of quick gains, DYOR serves as an important reminder that it is essential to pay attention to the risks and opportunities of every project, not only for what they deliver to the crypto market but also in relation to what they mean for the profile of those who are investing. It is through this strategy that investors will decide whether or not a project should be in their portfolio.
Following DYOR helps investors become familiar with details such as the technology, the development team, and the project's objective, as well as helping investors who are considering investing in a particular crypto to understand market patterns such as trading volume, liquidity, and price history. This makes it much easier to make safer and more informed decisions, reducing the chance of losses due to fraud.
3. Airdrop
Airdrops are free distributions of cryptocurrencies made by projects with the intention of publicizing their tokens to people who do not yet know them or even rewarding users who have already been using the token for some time.
Normally, to receive an airdrop, it is enough to fulfill certain simple requirements, such as following the project on social media, promoting the token or having a certain amount of a specific crypto. In fact, the type of airdrop varies according to what you need to do to be rewarded.
There are basically three types of airdrops: reward (when you need to follow a certain task), Holder/Hodler (which rewards people who already had token units in their wallet) and Fork (which is when a project originates from another and, with this reward, the aim is to attract more investors to this new project).
This is a way to popularize new tokens, increasing their user base without the need for initial investment. However, it is always important to investigate the project before participating, as there are cases of fraudulent airdrops.
4. ATH (All-Time High)
All-Time High (or simply ATH) means the highest price ever reached by a cryptocurrency. When a coin reaches its ATH, it is a sign of great interest and buying by investors, which usually occurs in times of market euphoria.
This term is relevant for investors who are looking to identify market tops and can use it as a reference for selling strategies. However, it is essential to remember that the ATH does not guarantee that the asset will continue to rise — it may retreat shortly after reaching its peak.
5. CBDC (Central Bank Digital Currency)
CBDC stands for Central Bank Digital Currency. These are digital currencies issued directly by central banks and have a value equivalent to traditional currency. The goal of CBDCs is to bring the trust and stability associated with government-issued money to the digital environment.
CBDCs differ from traditional cryptocurrencies in that they are centralized and regulated, while most crypto assets are decentralized. Despite this, CBDCs represent an important step in the integration of digital currencies and traditional economies.
The debate about the presence of CBDCs is increasingly widespread around the world and, here in Brazil, DREX (or Real Digital, as it has also become known) is an initiative that should bring greater dissemination of this subject to our country.
6. Diamond Hands
When an investor has “Diamond Hands,” it means that they maintain their position on cryptocurrencies despite volatility and market crashes. This term is often used on social media to identify investors who are unfazed by fluctuations and are willing to hold onto their assets for the long term.
If the term is not very illustrative, its opposite helps to understand it better: do you know that expression “lettuce hands”, for someone who does not hold on to positions taken in the market and immediately sells them at any sign of volatility? Well: Diamond Hands (or “Diamond Hands”) is the opposite of that.
Investors with Diamond Hands are those who tend to be convinced that the price of their cryptocurrencies will rise in the future and, for this reason, choose to ignore temporary drops. This strategy is best suited for those who have a tolerance for risk and believe in the market's growth potential.
In a way, it can also be related to HODL: investors with Diamond Hands are those who put HODL into practice on an ongoing basis.
7. Fork
Fork is a technical term that indicates a division in the protocol of a cryptocurrency, generating a new version of the currency. This new version originated by a fork can be “soft” or “hard”: in a soft fork the original protocol is updated and continues to function in the same project and, in a hard fork, a new currency is created.
An example of this was what happened when Bitcoin underwent a fork to form Bitcoin Cash. Forks generally occur due to irreconcilable differences between developers (which is when a new project ends up being generated) or to update the code, bringing new features and improving the tools of the same project.
Although the fork can add value to the market, it can also generate volatility and disagreement among investors, since this would require new and careful research on the part of those who invest, to know if what is new (in the current project or in some new medium that emerges) is better or just a way to weaken the investment.
8. Fungibility
Fungibility is an important characteristic for cryptocurrencies and refers to the ability of an asset to be exchanged for another of the same type and value. In the financial world, money is fungible, as a R$10 note can be exchanged for another of the same value without any difference.
This feature is extremely important for the crypto universe because it means that a token can actually be used in transactions and that each unit of a given project has the same price. It's the same thing that happens with physical money (where any R$10 note is worth R$10), but looking at the crypto market (“any unit of Bitcoin is really worth one unit of Bitcoin”).
It is important to point out that not all digital assets, however, are fungible — as is the case with NFTs, which are unique and identifiable and, therefore, are non-fungible.
9. Tokenomics
Tokenomics is a term that combines the terms “token” and “economics” and describes the economics behind a crypto asset. This concept includes elements such as a token’s supply, distribution, utility, and governance model, helping investors understand how it appreciates or loses value over time.
Tokenization is a process that is advancing globally, serving not only the crypto universe but also the real world. Today, there are even tokenized properties and multinational shares. The big idea behind this process is to make an item unique, identifiable and tradable in a much more direct and easy way.
When evaluating the tokenomics of a project, an investor looks at whether the total supply is limited, whether there are mechanisms to increase the scarcity of the token (some “burning” process), and whether it has a specific function in the ecosystem in which it is located. Good tokenomics can increase the attractiveness and viability of a project in the long term.
And, combining this concept with another also presented here: carrying out an efficient DYOR involves clearly understanding all the tokenomics of a project.
10. Whitelist
A whitelist is a list of people who are authorized to participate in a specific sale or event of a crypto project before the general public. People on a whitelist are usually given access to exclusive benefits, such as buying tokens at a discount or participating in NFT launches.
Joining a whitelist is one way to get early access to new projects, but it may require qualification requirements, such as holding a certain amount of tokens or completing social media tasks. It does provide early entry into new projects, which can be advantageous for those looking to take advantage of promising launches.
This concept is broader than that of Airdrops, but it is important to note that one of the possible benefits of being on a whitelist is having access to some hodler airdrop.
There are so many terms… And now you know some more!
We present to you these ten terms that, with a very high probability, you will come across while sailing the seas of cryptocurrencies and other crypto assets. These terms are essential to understand the dynamics of the crypto market and to integrate with the community.
Knowing the meaning of HODL, DYOR, airdrops and others helps investors to better position themselves and make more informed choices. This makes it easier to avoid pitfalls and take advantage of the opportunities that arise in this innovative and constantly evolving market.
