It’s no doubt that ICOs are offering one of the best ways to make profits by backing cryptocurrency start-up projects. However, they also do present one of the easiest ways to lose money. But that’s the nature of any business and having knowledge of the market is just part of what every investor must possess. The other is familiarity with investor jargon. This article, therefore, gives a glossary of some of the most common terms used in the cryptocurrency world.
Let’s begin by defining an ICO.
An ICO (Initial Coin Offering) is a method by which cryptocurrency start-ups raise funds for a project by selling newly created token coins to the public. The funds are given either in fiat or other cryptocurrencies, mostly BTC and ETH. Some of the leading coins were launched in an ICO. The ever were the ones of Ethereum, Bancor, Spectrecoin, NXT, IOTA, Stratis and NEO. This glossary gives terms that I believe are closely related to investing in ICOs.
Advisory Board– members of the ICO project who only give the main team legal and technical assistance when required. They don’t play an active role in the project. A strong advisory team could help a project achieve its goals.
Airdrop– it is the practice of distributing coins to holders of certain tokens or to those that meet specified requirements. It happens when projects want to incentivize investors into adopting that coin.
ATH – it’s an acronym for “All-time high”. It refers to the highest ever price value for a given cryptocurrency.
ANN – it means “Announcement on the Announcement board”. It refers to the very first message to be released concerning an imminent launch of a cryptocurrency.
Bag holder– this term relates to an investor who holds large amounts of a cryptocurrency whose value has dropped so much that the cryptocurrency is almost worthless.
Bear market– this is a market movement that is declining, with prices dropping over a long time.
Bollinger band– refers to the price margin around a given cryptocurrency and which determines whether a coin has been oversold or overbought.
Bonus rate– this is the discount that an ICO could give investors to entice them to invest more or as a form of attracting new investors. Most of the serious ICOs don’t give bonuses as they are often oversubscribed.
Bull market– this is used to refer to the market when prices of tokens or shares constantly rise, leading to a lengthy uptrend
Coin Mixing (also called “Coin tumbling“) – this refers to the method by which coins are randomly sent to a number of addresses to increase anonymity.
Coin value– this refers to the inherent value of a token. You need to find out if the coin is tied to the product/service and therefore has value or not. It’s also called coin utility and often sets serious projects from the rest.
Deflationary coin– a deflationary coin will have its circulation volume reduce over time. They have the potential to increase in value when demand increases.
Distribution date– it is the designated date when tokens will be distributed to investors.
Emission rate– normally, this refers to the rate and stages at which some ICOs release tokens to the market.
Exchange– it is an online platform from which you can buy and sell token coins. Most of the sites do implement some form of KYC regulation. Before using a site, get to know how it works.
FOMO– “Fear of missing out”. When an investor feels that they have missed an opportunity. It can lead to irrational and poor investment decisions.
FUD– refers to “Fear, Uncertainty and Doubt” that is often a result of some rumor about a given coin. It can lead to panic-selling.
Hodl– this is an acronym for “hold on for dear life”. It generally refers to the scenario where an investor buys a crypto and holds onto it in the hope that the value will appreciate over time and translate into a healthy profit.
Hard-cap– it is the limiting of a token’s supply to a given finite number. Hard-capped tokens/coins are viewed as those whose value is likely to increase over time. Coins like Bitcoin and Litecoin are hard-capped, while Ethereum isn’t.
KYC– initials for “know your client”. Generally, these are regulations that ICOs have to comply with according to the requirements of a particular jurisdiction. Before you invest, find out if your country/state allows you to participate in coin offerings. The US, for instance, requires that all ICOs comply with KYC regulations.
Market capitalization– theoretically, market capitalization (also market cap), is the value of the total crypto coins in circulation. It is arrived at by multiplying the total circulating supply with the value (price) of a single unit of that coin. For instance, if coin X has a total of 1 million coins in circulation and priced at $100 then its market cap will be $100 million.
Minimum contribution– this refers to the least amount of investment (usually BTC/ETH) that can be exchanged for an ICO token.
MVP-It stands for “Minimum Viable Product”. It is the early form of a product released by an ICO team before the ICO sale. A good MVP is a sign that the main product could be feasible and credible long-term.
Pre-sale – it is also called a pre-ICO which is basically the first or initial round of the crowd sale. At this stage of an ICO, a small percentage of the project’s tokens are offered to the public, often via a subscription. Though it may have additional perks like bonuses and discounts, pre-sales are generally viewed as riskier. It is because investors put their money in projects that don’t have any sort of traction.
Pump and dump – it refers to market manipulation with the intention of selling for profit. It is always preceded by hype about the coin. Price inflation and increased buying give a false sense of a market on a bull run.
Team– this is one of the most important components of an ICO. A good team will often have experts and experienced industry individuals. When looking to invest in any ICO, always focus a little more time on the team’s composition.
Token– refers to the currency of any cryptocurrency project. There are several types of tokens.
Wallet – it is a software program or device that allows you to keep, receive or spend your cryptocurrency tokens/coins. A wallet can be classified as either hot or cold. Hot wallets connect to the internet and are riskier. Cold storage is more suited for holding large amounts of your crypto.
Whale – this is the reference given to investors with a lot of purchasing power or large reserves of a particular coin. A dolphin refers to a medium-size investor. The rest are called minnows.
Whitepaper – the whitepaper is the official document that sets out to explain everything about the ICO. It will state the product, explain current challenges and expound on how the ICO product will address the problem. The whitepaper should give technical, technological, and fundamental aspects of the product. If you are looking to invest in an ICO, reading its whitepaper should be the first thing you do.