All the Bitcoin Lingo You Need to Know as Crypto Heats Up
(Bloomberg) -- Bitcoin’s back, baby. The best-known and largest cryptocurrency has gained more than 130% in pandemic-ravaged 2020 and in November surpassed four separate $1,000-point barriers within a four-day span, going from $15,000 to $18,000. It’s a surge reminiscent of its wild ride in 2017-18, when it rose by 1,375% to within a whisker of $20,000 before falling by 70%. Some credit the rise to greater acceptance by Wall Street linchpins, including PayPal, which said in October it would allow customers to access cryptocurrencies, and some prominent money managers, with macro investor Paul Tudor Jones buying the coin as a hedge against potential inflation.
The run-up has also revived some Bitcoin jargon as well as crypto-specific usages of other market terms. If you’re not sure what a debate between “hodlers” and “weak hands” means, or have forgotten, here’s a guide or refresher:
The fear of missing out is a powerful force in all markets, but is especially potent in a field where there’s no such thing as fundamental value. Crypto fans often cite FOMO as one of the reasons investors might buy cryptocurrencies when they’re in the midst of a rally.
Fear, uncertainty and doubt. Another term used in other investing contexts, it was adopted by the crypto community to denounce what supporters see as the intentional spread of misinformation. Skeptics see it used as a way to brush off anything negative.
This is sometimes referred to as halvening -- a planned reduction in rewards miners receive (the term is mentioned in Bitcoin’s code). Halvings happen once every four years or so -- more precisely, every 210,000 blocks of transactions. As the name suggests, each one cuts the amount of Bitcoin miners receive per block reward in half. The practice serves to maintain scarcity. This year, Bitcoin’s halving was followed by a steady rise in its price over the subsequent weeks.
“Hold” as misspelled by a frenzied Bitcoin trader on an online forum in 2013. It’s become the mantra of cryptocurrency believers during market routs, meant to reassure nervous traders that they should ride out any given slump because of what they see is Bitcoin’s long-run advantages. Anyone willing to stomach the volatility is thought to be hodling.
This phrase is used to describe cryptocurrency newbies who, instead of hodling, nervously panic-sell their coins in response to market jitters or negative headlines that wouldn’t faze experienced traders. Some weak hands bail out of Bitcoin in favor of so-called alt coins, cryptocurrencies other than Bitcoin. There are more than 7,000 digital tokens, according to Coinmarketcap.com. Many tend to take their cues from Bitcoin, oftentimes rising or falling in tandem.
In a wide range of markets, whales are investors whose holdings are so large that their every trade makes waves. It’s a term that comes with a suspicion of market manipulation. So, too with Bitcoin whales, or people who hold a lot of Bitcoin. Some estimates show just a handful control a large percentage of the market, so they have the power to move prices. About 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency’s blockchain control 95% of the digital asset, according to researcher Flipside Crypto.
The Reference Shelf
- Bloomberg QuickTakes on Bitcoin and blockchain, on Bitcoin halving and on the 2017-18 Bitcoin boom and bust.
- Are cryptocurrencies the future of money?
- A thorough look at why central bankers got serious about digital cash and how China is closing in on its own digital currency.
- Facebook’s got plans for a digital coin.
©2020 Bloomberg L.P.