Bitcoin has experienced an up and down wave, more than doubling its value since the beginning of 2017. In the past month, though, the cryptocurrency’s price has fallen 6% this 2022 YTD ever since it hit the peak of $69,000 last November 2021.
These stats and numbers aren’t the only things that might have you scratching your head. Terms like “fork,” “market indicators,” and “trend reversal” can leave you scratching too. But don’t be intimidated — we’re here to explain how to make sense of it all.
1. Bullish Market
The cryptocurrency market is unstable, with wild fluctuations in the value of different currencies. When a market is doing well, it’s called being “bullish.” Investors start to buy more of the currency and think it will rise in value.
2. Bearish Market
When the market becomes overbought, investors become nervous and sell off their currency quickly to avoid losses. It can cause abrupt drops in value that are called “bearish.” As demand for a currency fall, so does its price.
A short seller borrows a currency from a lender and then sells it, hoping to repurchase it at a lower price. If the currency does fall in value, it doesn’t matter because the seller will pay the lender for the currency at an earlier date. The seller hopes that the price will fall soon enough.
4. Short Position
If the seller does buy back the currency, the transaction is called a “short sale.”
When someone withdraws money from an account with a blockchain that isn’t compatible with the one used by bitcoin, this is called a “fork.” Leading currencies and blockchain technologies branch off into separate chains with a fork. The fork can create two respective digital currencies.
6. All-time High
The all-time high is the highest price a currency has ever reached. When a currency hits an all-time high, investors are optimistic about its future.
A “tether” is a digital token that’s pegged to the value of a fiat currency, like the dollar or euro. You can exchange it for its equivalent in traditional money via online exchanges.
A digital currency that is not tied to any government or central banks, such as Bitcoin and Ethereum. They use blockchain technology, which allows them to be transferred and exchanged easily while secure.
It is the opposite of a “fork.” A “scam” is when an investment isn’t worth anything. The scammer may claim to have created a token that’s meant to mimic Bitcoin or another currency.
10. Resistance level
The resistance level is the peak price that a currency has reached during a given period. If a currency rises past this level, it’s more likely to keep going up until it hits the next resistance level. A “resistance level” is less rigid than an “all-time high.”
11. Support level
The support level refers to the lowest price that a currency has reached during a given period. If a currency falls beneath this point, it is less likely to keep falling until it hits the next support level.
Volatility is defined as a measure of how much the value of a currency fluctuates during a given time. A volatile currency has significant price changes, and an “unstable” currency can fall below the support level.
Volatility is calculated by using the average true range (ATR). The ATR is an indicator that measures volatility from day to day, week to week, and month to month.
14. Bollinger Bands
Bollinger bands are a way to measure the volatility of a currency over a specified time. For example, they show whether a currency is overbought or oversold at any given moment.
15. Trend Reversal
A trend reversal occurs when a currency briefly rises above the resistance level, only falling and rising again. This can indicate that the currency is beginning to move away from its resistance level.
16. Bull Trap
A bull trap is when a currency quickly rises past the resistance level but falls back below it after only a short time. This can be because of fear in the market that is causing people to sell their coins quickly. As a result, the rapid price rise was just an illusion, and investors lost money by buying into it.
17. Dead Cross
The “dead cross” pattern is when the 50- and 200-day moving averages cross below the 200-day average. It indicates that a bearish market is likely to follow.
18. Parabolic Indicator
The parabolic indicator is a method that uses the price and its acceleration to predict whether the price will either rise or fall next. If it goes above the indicator line, it means that the trend could be upward or downward. If it falls below, then it will likely fall further in value.
19. Risk Assets
Risk assets are not tied to any government, central bank, or country, thus having fewer regulations. These include stocks, bonds, and commodities.
Diversification is splitting up investment funds between different classes of investments unrelated to one another. It means having funds spread across various opportunities to minimize risk. If one individual’s investments turn out to be wrong, the investments are less likely to have a large effect on their overall portfolio at the end of a given period.
With the recent chaos on Bitcoin price plummets, many people are afraid of cryptocurrency. However, it can still be a good investment if you know how to use it and don’t go too much on the risks and speculations.
It also needs to be backed up by some experts who can advise where to invest. It’s not an easy mission, some technical terms are used, but once you get familiar with it, there is no turning back!