Here is a list of five important crypto terms you can find in CMC Glossary!
#1 - Limit Order
Simply put, a limit order is an instruction used to purchase or sell at a specific price. When it comes to buy limit orders, the order will be executed at a point where the limit price is hit or lower, while for the sell orders, the order will be executed when the price is achieved or higher.Traders often use this method to execute their projections – for example, if one thinks the ETH bottom is coming in soon, one might set their limit order to purchase loads of ETH at a target low, in order to get a great deal.Limit orders basically guarantee an investor pays a specific price or less. It’s important to note though that the filing of the order is not necessarily guaranteed, and limit orders will not be executed unless the price meets the order qualifications.
If the asset doesn't reach the specified price, the order is not filled. So what this means if you were off by your estimation by even 1c – your order will not be placed and you may miss out. This is a good thing at times, but can also be a bad thing if your judgment is wrong, so use limit orders wisely!
#2 - S&P 500
You may have heard of this one a lot – the S&P 500 is a stock market index that measures 500 large-cap firms in the United States. It is essentially an overall representation of the market's performance through the major firms' risks and returns.The index monitors and reports on the risks and returns of the firms that are part of it. The listed firms' large-cap stocks total roughly 14.6 billion or more. This is why it is used as a yardstick by investors against which all other assets are measured across various industries.The S&P 500 is a float-adjusted index that measures the value of publicly traded shares, excluding those controlled by government bodies or other governing organizations. Each share price fluctuation of S&P 500 firms influences the total value of the index, albeit businesses towards the top of the list have a far larger effect than those down at the bottom.
If you’re wondering whether or not this is a safe bet, an organization must fulfill the following criteria to be included in the S&P 500:
- Be a publicly traded firm in the United States.
- Have a market cap of $14.6 billion or more.
- Have the ability to overcome short-term debts easily.
- Have a public float of at least 10% of the outstanding shares.
- Have good performance in terms of income in the recent quarter plus demonstrate positive earnings from the previous four quarters.
Companies in the S&P 500 must operate on public markets and regularly publish financial performance data to the public. Some very stable companies hold a position on the list, such as Amazon, Tesla, Microsoft, and more.The S&P encompasses a diverse range of businesses, from technology to healthcare and beyond. It’s also widely regarded as a safe investment. Although gains may not be massive, you may imagine that the 500 largest companies are more than likely to continue growing over a long period of time.
#3 - Death Cross
Sounds dramatic we know… a death cross refers to a price pattern that is formed when a slower moving average crosses the faster moving average in the upward direction. The most popular moving average used by day traders is the 50-day moving average and the 200-day moving average. The slower-moving average has to cross the faster-moving average from below for a death cross to be formed on the trading charts. Other examples of death crosses can be seen in 5-day and 15-day averages, however, longer periods are more reliable and provide stronger signals of an asset/stock/cryptocurrency.It is important to identify the key stages of a death cross in order to lock in the perfect time to get out of the market before the overall bearish trend begins. There are three main stages of a death cross:
- The price action of an asset either goes into consolidation or drops sharply after following an uptrend for a long period. The consolidation period is often an indicator that the uptrend is losing momentum and a trend reversal can be expected. During this stage, the 50-day moving average remains above the 200-day moving average.
- The second stage defines the exact moment when the 50-day moving average falls and crosses the 200-day moving average. This forms a death cross and is considered a bearish trend.
- The third stage is the downfall of the asset's price as the price action falls lower and a downtrend is created. After this stage, the price continues to be traded below the 50-day moving average in most cases.
The death cross is usually formed when the price is falling, however, it is not a definitive indicator that a bull market has ended. There have been many instances when a death cross appeared, but the price only fell slightly, recovered, and then broke the previous all-time highs! This is also why financial analysts are divided when it comes to setting moving averages to identify a death cross. Some use the classic 200-day average and 50-day average, while others consider the crossover of the 100-day moving average over the 30-day moving average as a reliable indicator of a death cross and the start of a potential bearish trend.Like every technical indicator, using the death cross alone is not a good strategy. Financial analysts advise the use of technical indicators to understand the price and volume activity from different angles before making a concrete decision to buy or sell. Technical indicators like the accumulation/distribution indicator, on-balance volume (OBV), relative strength index (RSI), moving average convergence divergence (MACD), and the stochastic oscillator.
#4 - Halving
A halvening (or halving) is a deflationary blockchain event where the block subsidies or rewards received for validating transactions decrease by half. It is significant in the sense that it reduces the rate of supply coming into circulation, and thus increases scarcity by bringing fewer and fewer units of coins/tokens into existence. These events are programmed directly into the code and made known in advance for all, it’s public knowledge. For instance, Bitcoin rewards are programmed to decrease every four years more or less. Block rewards are currently 6.25 BTCs per block (900 BTCs daily), down from 12.5 BTCs (1800 BTCs) since 2020. The rewards will continue to decrease every four years like this until the last Bitcoin is mined in approximately 2140. Halvings have the added benefit of making the emission schedule more predictable, as the circulating time can be estimated at any point in time. This can allow the determination of token valuation with accuracy. It’s a design feature of nearly all cryptocurrencies that are not pre-mined that the staking or mining rewards decrease over time. New projects are often designed to bring only the minimum viable supply required at launch into circulation, in order to increase its initial value.Bitcoin’s 2020 halving was its third, following the mining reductions in 2016 and 2012. Each halving was followed by a strong price increase due to increased scarcity and a tightening of supply from miners. Other notable halvings include that of altcoins Bitcoin Cash and Litecoin. The next Bitcoin halving is scheduled for March 2024 and will see mining rewards fall to a mere 3.125 BTC per block.
#5 - Oversold / Overbought
Oversold is a term used to indicate that an asset such as Bitcoin is trading at a price lower than its true value. Oversold is the opposite of overbought. Therefore, whether an asset is treading the oversold region is subjective since analysts employ different analysis tools.An oversold occurrence has no known reversal period. However, technical indicators measure a cryptocurrency asset's oversold status. Moreover, the indicators provide estimates of when the condition is likely to reverse. In most cases, the reversal date is based on “if” conditions. For example, analysts may observe that a shift will only happen if a certain price level, often called a support level, is reached.Common technical indicators used to indicate an oversold condition include the relative strength index (RSI) and Bollinger bands. The RSI indicator uses a momentum oscillator to evaluate the speed and price fluctuation. On the other hand, Bollinger bands consist of lower, middle, and upper bands.The middle band taps into an asset’s moving average while the lower and upper bands record standard price deviations with respect to the middle band. An oversold condition occurs when the values shift towards the upper band. Apart from technical indicators, an oversold condition can also be revealed using fundamental analysis. Fundamental indicators rely on current and past prices.
Written by Ryan Curry.
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