Bitcoin trading - basic terminology for beginners

Any person who has decided to make an investment in cryptocurrencies and wants to be successful needs to know the lingo. Here are some of the basic crypto and trading terms that are commonly used. After reading this handy article you will be a bitFlyer professional in no time.

To help you better understand the terms below, we will not only explain them, but also use them in practice. Let’s get started!

Blockchain

Blockchain is a distributed, decentralized, public ledger. Simply put, blockchain is a database that is validated by a wider community, rather than a central authority.

Generally speaking, "the" blockchain refers to the bitcoin blockchain, which is made of the blocks mined and generates a new block every ten minutes approximately. But there are other blockchains used for different purposes (altcoins, managing business processes, etc).

By looking at Bitcoin’s blockchain, anyone around the world can get an accurate record of which transactions were made and when.

Wallet

The meaning: A crypto wallet is a secure digital wallet used to store, send, and receive digital currencies. Typically, it is composed of a string of numbers and letters that look like this: 18c177926650e5550973303c300e136f22673b74. Most coins have an official wallet, but there are also lots of multi wallets which hold many different types of currencies in one place.

A crypto wallet usually uses its id as an identification method (same as a first name and last name would identify an individual), and its private key to authenticate and prove possession of the wallet by the owner.

Private key

To carry out a transaction you need two things: a wallet, which is basically an address, and a private key. A private key is a string of random numbers, but unlike the address, the private key must be kept secret. Your private key gives you the power to digitally sign and authorize different actions on behalf of this digital identity when used with your public key.

When you're dealing with cryptocurencies, keeping your private key private and secure should be your priority. If this key is lost or stolen, you won't have any recourse to recover it.

If you're trading on bitFlyer however, you don't have to worry about your private key as bitFlyer will handle and secure it for you.

Bull market

A bull market is a period during which asset prices consistently rise. Generally speaking, users want to enter the market at the beginning (or even shortly before the beginning) of a bull market so that the assets they buy become more valuable.

Bear market

A bear market is a period during which asset prices consistently fall. However, prices falling also mean that entering the market becomes cheaper as it becomes possible to buy the same amount of assets for a lower price.

Bear markets are not specific to cryptocurrencies; any kind of tradeable asset can go through the same cycle of bear market and bull market.

Order book

The order book displays the current or 'open' orders from buyers and sellers in real-time with prices and volume.

Bid price

The bid price is the price people are trying to sell an asset at.

Ask price

The price people are trying to buy an asset for.

Spread (or bid-ask spread)

Spread is the difference between the closest bid/ask on the depth chart of bitFlyer lightning, which will impact the price that market orders are executed at. Spread also refers to the price difference between the buy price and the sell price of an asset when those are defined by the exchange.

Buy order / Sell order

Buy orders, or bids, are created when one wants to purchase an asset at a designated price. Sell orders, or asks, are created when one wants to sell an asset at a designated price.

High & low (in a 24 hour trading cycle)

High, in the context of a 24 hour trading cycle means the peak price Bitcoin or any other asset has reached in a 24 hour period. Meanwhile, low means the lowest price the particular asset has sunk to during the 24 hour trading cycle.

Slippage

Slippage refers to the difference between the price at which a trader expects the trade to execute at, and the price at which it actually executes.

Day trading

Day trading is speculation in securities, specifically buying and selling financial instruments rapidly within the same trading day.

Execution

Execution means that the trading process has been officially completed.

Cold storage

Cold storage is the name given to the practice of storing digital money in an offline wallet. Typically, it is stored on a part of a platform that is not connected to the internet, thereby, protecting the wallet from unauthorized access, cyber hacks, and other vulnerabilities that a system connected to the internet is susceptible to.

If you're trading on bitFlyer, you don't have to worry about storing your assets in cold storage as bitFlyer will do it for you.

Satoshi

Named after the original creator of Bitcoin, Satoshi Nakamoto, a Satoshi is the smallest unit of Bitcoin (BTC) recorded on the Bitcoin blockchain. Each BTC can be reduced to a share that is 1/10^8th of the size of the original Bitcoin. One Satoshi is worth 0.00000001 BTC. It’s interesting to add that before 2015 BTC had only two official units- Bitcoin and Satoshi. Today, BTC has two more units: Millibitcoin (mBTC) (1 BTC = 1,000 mBTC) and Microbitcoin (μBTC) (1 BTC = 1,000,000 μBTC).

Confirmation

Confirmation is the act of a transaction being included in a single block within the Bitcoin blockchain. All public blockchains make use of blockchain confirmations. On average, cryptocurrency exchanges require a minimum of three confirmations until a transaction is accepted. bitFlyer however uses a six-confirmation rule to validate transactions.

Digital signature

A digital signature is an e-signature created using Public Key Cryptography (PKC); it is similar to an electronic “fingerprint.” In the form of an encrypted message, the digital signature securely associates a signatory with a document in a recorded transaction. Needless to add, every transaction has a different digital signature that depends on a user’s private key.

Transaction fee

Transaction fees are incurred with each bitcoin transaction. A transaction is processed by a miner who is paid for their services, and the result is confirmed by the Bitcoin network.

By using a blockchain explorer tool such as chainFlyer, it is possible to see for each and every transaction in the blockchain the transaction amount as well as the transaction fee.