NEW DELHI: For all those interested in crypto trading, knowing and understanding the daily used vocabulary is a must. We acquaint you with the essential terminologies that will help you gauge the trading patterns and price trends better.
Here’s a thorough look at the glossary for understanding price charts, patterns and trends of cryptocurrencies:
* Circulating supply – Circulating supply means the number of coins or tokens that are circulating in the cryptocurrency market and are being accessed by the public.
– Circulating supply increases or decreases over time.
– It depends on the frequency of mining, which generates new currencies every 10 minutes in the case of Bitcoin.
Bitcoin’s circulating supply will increase further, till the total stock of 21 million coins are mined.
– Circulating supply can also be reduced intentionally to increase the value created due to a dearth of the coins or tokens at the moment.
– The artificial scarcity is made by burning coins regularly.
* Market capital – The ranking of cryptocurrencies is done on the basis of market capitalization or market cap.
– Market cap is determined by multiplying the total number of coins that have been mined by the price of a single coin at any given time.
* Market cap of cryptocurrencies explains the following things:
– It is a yardstick to measure the stability of digital assets.
– A higher market cap is indicative of a less volatile cryptocurrency for trading.
– A cryptocurrency with a lower market cap is susceptible to the market trends and can go through sudden and steep losses and gains.
Based on market cap, cryptocurrencies are categorised into three types:
* High-cap cryptocurrencies- Those having market cap of more than $10 billion and considered least risky by the investors.
– Bitcoin, Ethereum and Solana are few of the examples in this category.
* Mid-cap cryptocurrencies have a market cap ranging from $1 billion to $10 billion.
– These are riskier than high-cap ones and also have unutilized potential.
– FTX token and Hedera are examples.
* Small-cap cryptocurrencies are those having market caps below $1 billion, and they are the most volatile ones and are influenced heavily by market sentiments.
– Terra and Immutable X are examples.
* Liquidity – This term is also one of the most used terms in the crypto market.
– Liquidity refers to the capacity and the ease with which a cryptocurrency can be converted into cash without the reducing the worth of the virtual currency. Among all digital assets, Bitcoin has the highest liquidity.
– Liquidity increases generally with rising adoption of the cryptocurrency, and wider acceptance of cryptocurrencies as mediums of exchange.
– High liquidity means decreased volatility. Level of liquidity generally depends on the number of users in a particular platform, the trading volume and frequency of trading.
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