The cryptocurrency field, often called the "crypto space," has attracted increasing attention in recent years. For users with no trading experience, understanding some basic knowledge is crucial. This article will introduce you to the fundamentals of the crypto space, helping you get started quickly.
1. What is the Crypto Space?
The crypto space refers to the collective term for people, projects, and communities related to cryptocurrencies. It is also known as the digital currency circle or virtual currency circle.
2. History of the Crypto Space
The origin of the crypto space can be traced back to 2009. At that time, Bitcoin was created as the first cryptocurrency to apply blockchain technology. Subsequently, more and more cryptocurrencies were developed, and the crypto space gradually took shape.
3. Key Concepts in the Crypto Space
- Blockchain Technology: Blockchain is a decentralized distributed ledger technology characterized by security, transparency, and immutability. It is the foundation of the crypto space and the core of cryptocurrencies.
- Cryptocurrency: Cryptocurrency is a digital currency issued based on blockchain technology, using cryptography to secure transactions and control the creation of new units. Bitcoin, Ethereum, and Litecoin are the most famous cryptocurrencies in the crypto space.
- ICO (Initial Coin Offering): An ICO is similar to an IPO in traditional finance and is a common fundraising method in the crypto space.
4. Investment Strategies in the Crypto Space
- Research Projects: Before investing in the crypto space, conduct thorough research on the project. Understanding factors like the team background, technical strength, and market demand helps in making informed investment decisions.
- Diversify Investments: Investing in the crypto space carries certain risks, so it is advisable to spread your investment across multiple projects to reduce risk.
- Long-Term Holding: Crypto space investment is long-term. Short-term price fluctuations do not necessarily reflect the project's intrinsic value. Therefore, a long-term holding strategy is recommended.
5. Risks and Precautions in the Crypto Space
- Volatility Risk: Prices in the crypto space are highly volatile. Investors need to be mentally prepared and implement risk control measures.
- Project Risk: Many projects exist in the crypto space, some of which may be scams or frauds. Investors need to choose projects carefully and pay attention to risk warnings.
- Security Risk: Digital assets in the crypto space need to be stored in wallets. Investors must choose secure and reliable wallets and protect their private keys.
6. Basic Questions about Crypto Trading
What is Digital Currency Trading (Crypto Trading)?
Digital currency trading is similar to stock, real estate, and forex trading. It involves buying low and selling high to profit from the price difference. Unlike traditional assets, digital currency trading uses virtual currencies, offering more flexible trading mechanisms (24/7 trading) and greater profit potential (no price limits). Therefore, it is considered an investment method with a return rate potentially exceeding traditional stock markets, futures markets, funds, and real estate.
What is an Exchange?
An exchange is a platform for trading digital currencies. Currently, the most commonly used exchanges are Huobi, Binance, and OKX. Besides these major exchanges, there are many other smaller ones. Similar to banks having the Big Four and various other banks, some top-ranked exchanges are more secure and reliable for trading. Note that certain specific coins can only be purchased on specific exchanges.
Domestically, only OKX and Binance are reliable. OKX is suitable for beginners, while Binance is for advanced users. Other shady exchanges promising high returns or offering copy trading are just trying to scam your principal. Block them immediately. Also, many people create fake websites and apps imitating these two major exchanges to steal money. So never trust exchange addresses found via Baidu. I have listed the official registration addresses here, as follows:
OKX - World's Leading Digital Asset Exchange. Download and register on OKX to claim a free 60,000 USDT digital currency blind box reward.
OKX Registration Address 1: https://www.okx.com/join/68692950
OKX Registration Address 2: https://www.chouyi.me/join/68692950
Binance Registration Address: https://accounts.binance.com/register?ref=CPA_007QXEWR01
What is USDT?
When trading digital currencies, you need an intermediary coin, also known as a stablecoin, commonly USDT. USDT stands for Tether. It is a virtual currency pegged to the US dollar, essentially a digital form of the dollar. USDT is a token issued by Tether Limited, and its value is maintained at a 1:1 fixed ratio with the US dollar.
Exchanges themselves do not directly sell or buy virtual coins, nor can you directly buy USDT. To purchase digital currency, you first need to use fiat currency (like RMB) to buy USDT, and then exchange USDT for your desired digital currency. Similarly, to sell digital currency, you need to exchange it for USDT first, and then convert USDT back to fiat currency. Once you have USDT, you can engage in coin-to-coin trading on the exchange, meaning you can exchange USDT for any other digital currency.
7. Basic Terminology for Crypto Trading
Position: Refers to the ratio of an investor's actual investment to their total available funds.
Full Position: Using all available funds to buy virtual coins.
Reduce Position: Selling part of your virtual coins, but not all.
Heavy Position: When comparing funds to virtual coins, the proportion of virtual coins is higher.
Light Position: When comparing funds to virtual coins, the proportion of funds is higher.
Empty Position: Selling all held virtual coins, converting them entirely into funds.
Take Profit: Selling held virtual coins after achieving a certain profit to lock in gains.
Stop Loss: Selling held virtual coins when losses reach a certain level to prevent further losses.
Bull Market: A market where prices are continuously rising, with an optimistic outlook.
Bear Market: A market where prices are continuously falling, with a bleak outlook.
Long (Going Long): A buyer who believes the coin price will rise in the future, buys coins, and sells them at a higher price later to realize profit.
Short (Going Short): A seller who believes the coin price will fall in the future, sells some coins they hold (or borrows coins from the exchange), holds the position, and buys them back at a lower price later to realize profit, while also hedging risk.
Open a Position: Buying virtual coins.
Add to Position: Buying virtual coins in batches, e.g., buying 1 BTC first, then buying another 1 BTC later.
Rebound: When the coin price falls, a price recovery adjustment occurs due to the rapid decline.
Consolidation (Sideways): The price fluctuates within a narrow range, remaining relatively stable.
Slow Decline: The coin price declines gradually.
Plunge (Waterfall): The coin price drops rapidly and significantly.
Cut Losses: After buying virtual coins, the price drops. To avoid further losses, you sell the virtual coins at a loss. Or, after borrowing coins to short sell, the price rises, forcing you to buy back virtual coins at a loss.
Trapped: Expecting the coin price to rise, you buy, but the price falls instead; or expecting the price to fall, you sell, but the price rises instead.
Unwinding: After buying virtual coins, the price drops, causing a temporary paper loss, but later the price recovers, turning the loss into a profit.
Miss the Boat: Selling virtual coins due to a bearish outlook, but the price keeps rising, and you fail to buy back in time, thus missing out on potential profits.
Overbought: The coin price has risen continuously to a high level, the buying power is nearly exhausted, and the price is likely to fall soon.
Oversold: The coin price has fallen continuously to a low point, the selling power is nearly exhausted, and the price is likely to rebound soon.
Bull Trap: After a long consolidation period where a price drop seems likely and most bears have sold their coins, the bears suddenly drive the price up, tricking bulls into thinking the price will rise and buying in. Then the bears suppress the price, trapping the bulls.
Bear Trap: After bulls buy virtual coins, they deliberately suppress the price, tricking bears into thinking the price will fall and selling off, only to fall into the bulls' trap.
8. What are Mainstream Digital Currencies?
Mainstream coins are value coins. Bitcoin is the leader, Ethereum is second. Some believe only these two are mainstream digital currencies, others think only the top 10 by market cap on exchanges qualify, while some believe coins listed on major exchanges are mainstream.
Taking Feixiaohao as an example, you can see the market cap rankings of related coins. Mainstream coins rank high, for instance, Bitcoin's market cap firmly holds the top spot.
Generally, coins with higher market cap rankings have higher market recognition, better liquidity, and higher investment value. Conversely, coins with lower rankings have lower recognition, poorer liquidity, and correspondingly higher investment risk. Users are advised to be cautious when buying such coins.