Written by Matthew Warholak
Like any new technology, crypto has introduced a host of new terminology and phrases with subtle or clever meanings perhaps unbeknownst to the average person. For a crypto beginner, learning these nuanced phrases and acronyms might help to buy the dip and HODL through a wave of FUD. (By the end of this article, you’ll know exactly what that means.)
Related: Guide to taxes and cryptocurrency
1. Satoshis aka “Sats”
Satoshis, commonly abbreviated as “sats,” are the smallest unit of Bitcoin, the preeminent cryptocurrency. Named after the credited creator of Bitcoin, a developer named Satoshi Nakamoto (which may actually be a pseudonym for a group of people), one satoshi is equivalent to 100 millionth of a Bitcoin.
Because Bitcoin is easily divisible and constantly transacted in fractional amounts, being able to denominate arbitrary fractions of a Bitcoin is essential. This is especially important since the Bitcoin price has risen precipitously over its decade-old existence, making it much more expensive for new investors to buy one whole Bitcoin.
A similar popular term, “stacking sats,” refers to an investing strategy in which an investor accumulates satoshis, fractions of a Bitcoin, to increase a Bitcoin position.
2. Altcoin aka “Alt”
An altcoin is any cryptocurrency besides Bitcoin. Because Bitcoin was the first cryptocurrency, conceived in 2008 and launched in 2009, it is widely perceived by many as crypto itself. It wasn’t until a couple of years later that other altcoins started being created as spinoffs to Bitcoin with different use cases and features.
While thousands of altcoins have been created, some have failed or become inactive. Many of the most prominent altcoins such as Ethereum, Litecoin and XRP promise higher transaction speeds, lower transaction fees, or some form of staking for passive income in the native crypto token. Some of the more popular altcoins can even be purchased through a traditional investment account.
3. Fear, Uncertainty and Doubt aka “FUD”
“FUD” as it’s commonly exclaimed in crypto circles, is a psychological method of inspiring negative sentiment about a particular asset to prevent further buying or even instigate selling or short-selling.
The objective is to suppress an asset’s price so the FUDer can accumulate at a lower price, or can inflict financial pain onto others that are holding the token for what may be a competing crypto project.
There are many ways to spread fear, uncertainty and doubt, including proclaiming poor fundamentals, questionable project leadership, stagnant or bearish price movement, unclear roadmaps, lack of adoption, low network usage, and inability to be transacted in certain countries.
4. Fear of Missing Out aka “FOMO”
FOMO happens across all parts of life. In this context, it’s a common investor psychological state in which an investor feels a combination of panic and envy for not having an active position in a powerful market move from which others are benefiting.
In crypto, this typically refers to when a sharp bullish breakout occurs and anxious investors debate whether or not to buy into an already high-priced market in hopes they will be along for the remainder of the move.
FOMO can apply to any financial market but is commonly heard in crypto markets which are largely composed of amateur retail investors trying to navigate extremely volatile price action as they attempt to build a well-balanced crypto portfolio.
5. Hold On for Dear Life aka “HODL”
HODL is a popular crypto meme and misspelling of the word “hold” (which some people then misinterpreted as standing for “hold on for dear life”).
The term originated on a Bitcoin forum during a period of market turbulence in late 2013 in which an unsettled investor ranted about how investors are ill-suited to trade highs and lows, but rather simply buy and hold in their own personal wallet.
Since then, HODL has exploded in popularity and is widely exclaimed during price rallies in which investors will instruct other investors to HODL through steep price volatility.
6. Know Your Customer aka “KYC”
Know Your Customer, commonly referred to by its abbreviation, “KYC,” is a form of identity verification required by many crypto exchanges since being imposed by regulatory agencies in 2017.
The Security Exchange Commission (SEC)’s Rule 17a-3(17) requires that broker-dealers (exchanges) make a good-faith effort to obtain personal information and create a record for each account with each individual customer.
KYC ensures that customers are relatively suited for their trades or investments, customers are who they say they are, and customers’ transaction histories are recorded for tax purposes. KYC is commonly hyphenated KYC-AML (Anti-Money Laundering) as the two guidelines closely complement each other.
KYC is a long-standing regulatory standard in traditional finance but has been met with some animosity in crypto. Some Bitcoin-maximalists and crypto enthusiasts emphatically oppose KYC as they claim it defeats the point of crypto’s decentralized philosophy.
Here are some other cryptocurrency rules and regulations to know.
7. Buy the Dip aka “BTD/BTFD”
“Buy the dip” or BTD is a common term in financial markets meaning to enter a long position during a suspected brief decrease in an asset’s price. It is more commonly used in bull markets to support the bullish sentiment and rising prices but also used in crypto bear markets to buy at good historical value for a longer-term investment horizon.
BTFD, short for “Buy the [Expletive] Dip” is an exuberant exclamation of BTD, typically used during manic bullish rallies.
8. Decentralized Finance aka “DeFi”
DeFi, short for decentralized finance, is an umbrella term for a form of finance that relies on a peer-to-peer network of smart contract-enabled blockchains instead of relying on a central financial intermediary such as banks or brokerages.
DeFi draws from the core of Bitcoin and crypto philosophy—to allow people to directly transact with other people anywhere at any time outside of companies’ and governments’ control. However, DeFi aims to take it one step further, targeting a transformation of old financial products such as loans, insurance, betting, and more into modern DeFi iterations.
The majority of DeFi applications are built on Ethereum, the leading base layer protocol.
Rekt, an intentional misspelling of “wrecked,” is a slang term used in crypto to describe an investor’s portfolio or investment getting handily defeated. It’s used sensationally on social media to alert overleveraged positions being liquidated causing massive financial losses.
10. Pump and Dump
Pump and dump refers to an investing scheme and form of securities fraud where a bad actor will buy a large position of a low-quality investment, falsely instigate other investors to buy it—thereby increasing the price substantially—and sell the entire position at an artificially higher price.
This form of manipulation occurs in many financial markets but is common in crypto markets due to less oversight and a large population of amateur retail investors.
Pump and dumps can be disguised as trading groups and insider chatrooms in which a leader will recommend a new “opportunity” to the group’s followers with short notice, encouraging them to buy it and promote it on forums and social media themselves.
Shilling has a negative connotation and is widely used in pump-and-dump schemes but can be used in other contexts as well.
For example, an influencer might be paid to promote a cryptocurrency or service, a cryptocurrency project developer might shill their project to help it gain users and see it succeed, or a casual investor might shill an underperforming cryptocurrency in their portfolio to sell it for a profit at a higher price.
Crypto is a new space for a lot of investors but is quickly changing the way people think about and transact money. Crypto has some similarities to traditional finance as it’s both a standalone network and considered by some as a store of value.
As these crossovers enable opportunities for technical integrations and mainstream adoption, a new wave of specific terminology has sprouted up. It can be helpful to learn these terms and phrases unique to crypto before investing in this dynamic new asset class.