The stock market is a collective term for stock exchanges around the world. On these exchanges buyers and sellers can trade shares in publicly traded companies, known as stock. Similar to an auction, buyers can name the highest price they're willing to pay, known as the "bid", and sellers can name the lowest price they're willing to accept, known as the "ask". The trade will typically execute somewhere between these two figures.

The stock market exists across the world with stock exchanges situated in New York and Hong Kong, connecting traders through a mutual set of guidelines. Learn more about the role of stockbrokers, portfolio managers, and investors as we take a deep dive into the entire stock market.

What is the stock market?

The stock market can also be referred to as the equities market or share market. As mentioned above, the stock market encompases buyers and sellers of stocks of publically traded companies. Similar to a farmer's market, the stock market forms a base where buyers and sellers can exchange things. Unlike farmer's markets, however, stock markets are heavily regulated and more complex, with prices known to change quickly.

The primary functions that the stock market serves

• The buying of stocks: Both retail investors and institutional investors can purchase shares of companies.
• The selling of stocks: every trade needs a buyer and seller.
• The issuance of stocks: A company raising money may do so by selling a portion of ownership via an initial public offering (IPO). If the company is already public, it can raise money through a secondary public offering. After the individual stocks are issued in either case, it can be bought by or sold to members of the general public.
  Trades are typically placed by stockbrokers on behalf of individual investors or portfolio managers.

The primary market is when companies list their shares, while the secondary market is where investors trade these stocks. The secondary market is essentially the stock exchange where stock trading takes place.

It's not just stocks that can be bought and sold on the stock market. Other types of securities, such as exchange-traded funds (ETFs) or REITs, are also traded on the stock market (with some discrepancies in how they're priced and traded).

Around the world, there are 60 major stock exchanges, each varying in size and trading volume. In the United States, for instance, there are 13 different exchanges that make up the stock market, the most popular ones being the New York Stock Exchange and Nasdaq.

How does the stock market work?

The primary function of the stock market is to bring together buyers and sellers so they can trade stocks and other financial instruments. The price is set much like an auction would be.

Bid price

• Buyers determine the bid price. Stockbrokers can bid on the price they're willing to buy a stock for, and the highest price becomes known as the "Best Bid."

Ask price

• Sellers determine the ask price. When an owner of the stock or their stockbroker wants to sell, they place what's called an ask, which is the price that they would like to sell a stock for. The lowest prices become known as the "Best Ask."

The negotiation between the Best Bid and Best Ask is called the “Spread.” The two sides agree to meet somewhere in the middle, and the person who executes the trade gets paid by taking the difference.

As you follow a stock, you’ll notice the share price moves. The stock's price is always changing depending on how many people are buying or selling it and the number of trades that it goes through. As economic, political, and news stories specific to a company affect the movement of markets in general, that company's stock prices can change too as a result. This is known as stock market volatility.

Is trading on stock exchanges risky?

As with any investment pursuit, trading the stock market for both short-term and long-term periods carries a level of risk. Being prepared by knowing that stocks can increase or decrease dramatically at a moment's notice will allow you to prepare for such events in your trading strategy.

In some cases, stock prices can decrease to zero, losing all their value and resulting in a total loss of capital for the investor. While this is an extreme case, making the necessary precautions in one's trading strategy will go a long way.

Is the stock market and stock exchange regulated?

Yes, as the stock market handles trillions of dollars, government organizations around the world have been called in to regulate these markets. In the U.S. for example the SEC (US Securities and Exchange Commission) has been granted the authority by Congress to regulate the stock market because they handle such a large amount of money. Other countries have similar organizations that regulate and enforce different laws.

Regulators are responsible for:

• Safeguarding the investments of the general public
• Promoting a sense of equality and fairness
• Keeping markets running smoothly

Who are the main players in the stock market?

Below are the main players contributing to how the stock market works:

• Retail investors
  Buy or sell individual stocks through a brokerage account. When you place an order, it’s sent to exchanges where the trades are executed.
• Stockbrokers
  “Registered representatives” who have completed professional training and passed a licensing exam and are allowed to buy and sell securities on behalf of investors. Stockbrokers work for brokerages, which can either make their money through markups/markdowns or commissions on trades (known as principals or agents respectively). Fees are often charged by the brokerage to customers that use them to place orders and execute stock trades.
• Portfolio managers
  Portfolio managers are stockbrokers on a grander scale as they buy and sell stocks through large orders as they manage larger stock portfolios. These might include mutual funds, retirement funds, and pension funds, which contain a bundle of securities (stocks, bonds, etc) that are handled by the portfolio manager.
• Investment bankers
  Help companies list their shares publicly on exchanges.

Who makes up the stock market ecosystem?

To better understand how the stock market works you will need to understand the varying components that make up the primary market. Investors buying and selling stock make up the biggest component of the stock market, however, there are plenty of middlemen acting between those buyers and sellers earning money by providing services to them. Below are some examples:

• The stock exchanges charge a small transaction fee and listing fee to the companies that offer their shares on the exchange.
• Agents are the middlemen connecting the buyers with sellers. For connecting each side of the transaction they take a commission.
• Principals are broker-dealer firms that manage a portfolio of shares they're willing to sell. Broker-dealers usually earn a profit by adding a markup to stocks they sell and charge investors less than the full value when buying stock. For example, have you ever noticed how much more car dealerships will sell cars for versus what they offered to pay you for your old one? Brokerages do something similar with stocks.
• Retail investors are people who invest for themselves, and not as part of their job, are retail investors. These individuals manage their own stocks (or other assets) through personal accounts with brokerages.
• Custodians. Brokerage firms use custodians to physically hold stocks, which is seen as less of a risk in terms of loss, theft, or damage. For doing so they charge a fee.

What is the history of the stock market?

The original concept of the stock market is the opportunity for a company to divide its ownership, known as equity, and sell it to investors. This practice dates back hundreds of years to the 1600s where European explorers would raise money for their ventures by selling shares in the company.

Investors would then get a cut of the explorer's missions, whether it be bringing back foreign spices or animal hides. The Dutch East India Company was a pioneer in this movement, selling shares in exchange for future profits on Amsterdam's stock exchange.

A century later and the first modern stock exchange was launched in London. Due to a high amount of fraud and minimal information on the company available to the public, the London Stock Exchange was created in 1773 which provided a consistent and fair platform on which to trade stocks.

Across the pond in 1790 the first stock exchange was formed in Philidelphia, followed shortly after by the New York Stock Exchange. Fast forward to modern days and the NYSE now provides both digital trading and a physical trading floor on Wall Street, the latter of which is a National Historic Landmark.

Nasdaq (National Association of Securities Dealers Automated Quotations) launched in 1971 as the world's first electronic market. The electronic stock exchange is a popular option for tech companies looking to list their shares and a crosstown rival to the NYSE. From a trading perspective, where the shares are listed makes little to no difference to the investor.

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In conclusion: what is the stock market?

The stock market is a collective term for stock exchanges around the world that facilitate the trade of stocks and other financial instruments.

Cryptocurrencies have gained a reputation for being largely volatile investments. While stocks too can have their moments (what with Peloton stocks dropping 20% every other day) the crypto market carries the brunt of it. 

Thankfully, stablecoins have come to the rescue. While still functioning as digital currencies powered by blockchain technology, stablecoins are pegged to external assets such as fiat currencies or gold, thereby eradicating (most of) their volatility. 

A Short History Of Stablecoins

After the advent of Bitcoin in 2009, it was only a few years later that a stable digital asset entered the market. Stablecoins came into existence in 2014 when a Hong-Kong based company named Tether Limited released a coin of the same name. The Tether coins' value was pegged to the US dollar, meaning that 1 USDT would always be worth $1. 

In order to guarantee this value, the company held the dollar equivalent in bank accounts. Skip past the controversy surrounding their reserves and lack of financial analysis, and there are now plenty of other stablecoin options on the market. 

Seeing the infinite benefits of digital currency transactions and blockchain technology, like speed, transparency and low fees, many companies around the world have created their own version of the stablecoin, mostly improving on the previous release. These coins have proven to be invaluable with businesses and retail merchants around the world.

Today, the two biggest stablecoins on the market are Tether (USDT) and USD Coin (USDC). One can argue whether these are "safe haven" assets, but one cannot deny that these tokens hold most of the advantages that digital currencies hold while considerably diminishing the unpredictable market swings. 

In our attempt to better understand the concept, let's take a look at the two biggest stablecoins.

Tether (USDT) vs USD Coin (USDC)

Below we explore the two multi-billion-dollar market cap stablecoins, while they both provide the same service in terms of a digital currency, the companies behind them operate quite differently.

What Is Tether (USDT)?

As mentioned above, Tether is the first stablecoin to enter the market. Launched in 2014, the network was initially built on the Ethereum blockchain but is now compatible with a number of other networks. 

Note that the Ethereum-based USDT cannot be traded as a TRON-based token, coins need to stick to their respective blockchain networks as this is how the transactions are processed. 

It wasn't long before USDT was listed on the top exchanges, and included in dozens of trading pairs. 

Tether Limited have since released a Euro-based stablecoin as well as Tether crypto coin pegged to the price of gold. The downside to Tether falls on the company's reputation surrounding transparency and reserve funds. 

There have been several court cases where individuals and regulatory bodies have called for transparency surrounding the funds held in reserves. Tether has since provided access to this information but is yet to go through a third party audit. Regardless, Tether holds the third biggest market cap (at the time of writing).

What Is USDC (USD Coin)?

USD Coin is a stablecoin created by the Centre Consortium, an organisation made up of crypto trading platform Coinbase and Circle, a peer to peer payment platform. It launched in 2018 as an ERC-20 token and has since climbed the ranks to be in the top 5 biggest cryptocurrencies based on market cap. USD Coin is available on the Ethereum blockchain, as well as Solana, Polygon, Algorand and Binance Smart Chain networks. 

The significant bonus that USDC holds over its biggest competitor, USDT, is that the coin is regularly audited by a third-party institution. These audits are made public, allowing any user to verify the authenticity of their USDC value each month. Since launching USDC, Coinbase has removed USDT from its platform.

USDT vs USDC: Head-to-Head Comparison

Adoption

With over a decade in circulation, USDT has achieved far greater adoption worldwide. It remains the dominant stablecoin in trading pairs and global liquidity, particularly in emerging markets. Winner: USDT

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Transparency

Tether has historically struggled with transparency, though it now publishes quarterly attestations. By contrast, USDC provides monthly reports with independent verification, giving it the edge for investors who value oversight and regulatory clarity. Winner: USDC

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Regulatory Compliance

Circle and Coinbase designed USDC with U.S. and international regulations in mind. USDC reserves are kept in regulated banks and Treasuries, and Circle is registered as a money transmitter in multiple jurisdictions. Tether claims compliance but lacks comparable transparency. Winner: USDC

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Price Stability

Both USDT and USDC are pegged 1:1 to the U.S. dollar. While they occasionally experience small deviations, both have shown resilience and quickly return to their peg. Winner: Tie

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Redemption Process

Redeeming USDT directly requires a minimum of 100,000 USDT plus fees, which makes it impractical for small investors. USDC allows redemptions starting at just $100, giving it an accessibility advantage. Winner: USDC

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Incidents

Both stablecoins have faced brief de-pegging events. USDT dipped below $0.95 during market stress in 2022, while USDC fell to around $0.87 during the Silicon Valley Bank crisis. In both cases, prices stabilized quickly. Winner: Tie

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Longevity

Tether has been around since 2014, giving it a proven track record and first-mover advantage. Winner: USDT

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Which Stablecoin Should You Choose?

Due to the fact that these respective companies are holding the dollar-equivalent value in reserves, these two digital currencies are considered to be centralized, while the rest of the cryptocurrency market holds a decentralized nature. As the demand for digital currencies increases, it is likely that these two stablecoins will only continue to grow.

When looking for a stablecoin, these are two most recognised options. Choosing between USDT and USDC depends on what you value most as an investor or user.

• If you need deep liquidity, global adoption, and access across more blockchains, USDT remains the go-to option. Its size and reach are unmatched, making it the default stablecoin for many traders.
  
  
• If you prioritize regulatory compliance, transparency, and a lower barrier for redemptions, USDC is the safer bet. It continues to build trust among institutions and investors who want accountability.
  
  

Ultimately, both stablecoins play vital roles in today’s crypto ecosystem. Some traders even use a combination of USDT and USDC to balance adoption with transparency, hedging against risks specific to either coin.

Users can both buy and sell USDT and USDC directly through the Tap app. Simply create your account, complete the KYC process and deposit funds into your digital wallet. Manage your entire crypto (and fiat) portfolio from one convenient, secure location.

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Det finansiella landskapet förändrades i grunden när Bitcoin lanserades 2009. Det nya digitala betalningssystemet tog makten från banker och regeringar – och gav den tillbaka till folket. Trots att Bitcoin idag är ett välkänt namn världen över, förblir dess skapare ett mysterium. Låt oss ta en närmare titt på en av vår tids största gåtor.

Bitcoin-lösningen

Innan vi dyker in i mysteriet kring den anonyma skaparen bakom det här seklets kanske största uppfinning, måste vi först förstå vad Bitcoin är. Det elektroniska betalningssystemet introducerades för världen i slutet av 2008 av en viss Satoshi Nakamoto.

Figuren dök upp från ingenstans och presenterade en lösning på den globala finanskris som skakade världen. Lösningen kom i form av en digital valuta, byggd på blockkedjeteknik för att driva och säkra nätverket.

Nakamoto uppfann inte själva blockkedjeteknologin, men förbättrade den avsevärt – särskilt när det gäller problemet med dubbelspendering. Tekniken användes tidigare bland annat för fildelning, men hindrades av bristande verifiering. Idag används blockkedjan inom en mängd olika branscher – långt bortom bara krypto och finans.

Bitcoin är fortfarande den största kryptovalutan på marknaden. Det finns nu över 17 500 alternativa kryptovalutor, och hela branschen är värderad till över 2,2 biljoner USD – med en tidigare toppnotering på nästan 3 biljoner USD i november 2021. Ingen annan tillgång i historien har växt så snabbt.

Vad vet vi om Satoshi Nakamoto?

Vi känner till namnet Satoshi Nakamoto – men inte personen eller gruppen bakom det. Denne individ eller entitet publicerade Bitcoin whitepaper i oktober 2008 till en grupp kryptografer och skapade kort därefter BitcoinTalk-forumet och webbplatsen Bitcoin.org.

Två månader senare, den 3 januari 2009, minerades det allra första blocket i Bitcoin-nätverket – Genesis-blocket – med meddelandet: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

En medlem i BitcoinTalk, Stephan Thomas, analyserade Nakamotos inlägg för att lista ut hans troliga tidszon. Resultaten visade låg aktivitet mellan 06:00–11:00 GMT, vilket tyder på att han befann sig någonstans i Nordamerika.

Under 2010 var Nakamoto aktiv i utvecklingen av Bitcoin och kommunicerade regelbundet med andra utvecklare. Men i slutet av året lämnade han över nycklar och domäner till andra – bland annat Gavin Andresen – och klippte banden till projektet.

Det sista meddelandet vi känner till från Satoshi skickades till utvecklaren Mike Hearn den 23 april 2011: "I've moved on to other things. It's in good hands with Gavin and everyone." Sedan dess har vi inte hört ett ord.

Vem kan ligga bakom pseudonymen?

Många har misstänkts vara Satoshi Nakamoto, men ingen har övertygat världen. Trots år av grävande journalistik är identiteten fortfarande höljd i dunkel. Här är några av de vanligaste teorierna:

Hal Finney

En datavetare som arbetade på ett eget digitalt betalningssystem redan innan Bitcoin. Han var mottagare av den första transaktionen i Bitcoin-nätverket. Han bodde också i samma stad som en man vid namn Dorian Satoshi Nakamoto, som felaktigt pekades ut av medierna. Finney avled 2014.

Nick Szabo

En kryptograf och datorvetare som lanserade projektet BitGold 1998 – en föregångare till Bitcoin. Han myntade också termen "smart contracts". En lingvistisk analys från Aston University 2014 pekade ut honom som den mest sannolika kandidaten.

Dave Kleiman

En expert inom datorsäkerhet vars namn ofta nämnts i samband med Satoshi – särskilt av Craig Wright, som hävdade att de skapat Bitcoin tillsammans. Kleiman avled 2013, utan tillgångar.

Craig Wright

En australiensisk entreprenör som påstår sig vara Satoshi Nakamoto – men har inte lyckats bevisa det. Hans påståenden har inte godtagits av varken kryptogemenskapen eller rättsväsendet.

Mysteriet lever vidare

Ironiskt nog är teknologin som Nakamoto skapade helt decentraliserad och baseras på tillit till kod – inte människor. Än idag vet vi inte vem han (eller de) var, men en sak är säker: Bitcoin har förändrat världen för alltid.

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USD Coin is a prominent stablecoin in the cryptocurrency market. Providing a plethora of use cases to both crypto and traditional investors, financial services and traders, USD Coin sits among the top 10 biggest cryptocurrencies by market capitalisation.

In this article, we explore this celebrated stablecoin and all it has to offer in terms of being a traditional investment opportunity, savings relief and digital value settlement service.

USD Coin is relatively new to the market, launching in September 2018. The stablecoin is pegged to the US dollar, meaning that its value will always reflect the price of the dollar on a 1:1 ratio.

This is established by keeping an equivalent amount of the circulating supply in a reserve account, i.e. for every 1 USDC in circulation, $1 needs to be held in reserve. The reserve is a mixture of cash and short-term U.S. Treasury bonds.

What Is The Point Of The USD Coin?

Built on top of the Ethereum network, USDC is a tokenised version of the US dollar that can operate over the internet and public blockchains. It is designed to provide a stable digital currency in an industry prone to volatility.

Setting itself apart in an increasingly saturated stablecoin market, USD Coin has received wide interest due to it providing a strong layer of transparency. The platform maintains strict protocols to ensure that the reserves are always at the correct levels, ensuring holders that they can withdraw 1 USDC for $1 at any given time, by way of enlisting a major accounting firm.

All USD holdings are required to be reported regularly by USDC issuers, which are in turn published by Grant Thornton LLP (as witnessed in the news). Unlike Bitcoin, while the company uses the decentralized network of Ethereum to function, it has a centralized agency controlling it.

Who Created USD Coin?

The coin was created by the Centre Consortium, a foundation consisting of the peer-to-peer payment service company, Circle and cryptocurrency exchange, Coinbase. Circle and Coinbase were the first commercial industry users of the stablecoin.

In 2020, Circle and Coinbase announced an upgrade to the USDC protocol and smart contracts. These upgrades were implemented to increase the cryptocurrency's usability for everyday payments, commerce and peer-to-peer transactions.

Both companies are well-funded and have achieved regulatory compliance, confirming the cryptocurrency's stability and international transparency appeal.

How Does USD Coin Work?

USD Coins are created through a process of minting. Users send USD to the USDC issuer's bank account, which then uses the USDC smart contract to create the equivalent amount of USDC. The digital currencies are then delivered to the user, with the fiat payment held in reserve.

Should the user wish to liquidate their USDC, they can send a request to the USDC issuer who then sends a request to the USDC smart contract to take a certain amount of USDC out of circulation. The issuer then sends the equivalent amount of USD (minus fees) to the user's bank account, taken from the reserve.

USD Coins can be traded through exchanges for other cryptocurrencies, or sent to crypto wallets around the world (provided that they support ERC-20 tokens). The coins are also often used to hedge against cryptocurrencies going through turbulent or crashing market periods.

What Is USDC?

USDC is a fiat-collateralised ERC-20 token hosted on the Ethereum blockchain platform. The stablecoin has an unlimited total supply with currently just under 37 billion USDC in circulation.

The coin provides an easy means of transferring funds internationally at a fraction of the cost and time that sending the traditional fiat would take. It has also proven to be a popular innovation in the DeFi (decentralized finance) space.

How Can I Buy USDC?

If you're looking to add USDC to your crypto portfolio you can do so conveniently through the Tap app. In a recent upgrade, the Tap app has added support for a number of prominent cryptocurrencies, including USDC.

Users can simply exchange one of the supported cryptocurrencies for USDC, or purchase USDC using fiat money. These can then be stored in the unique wallets integrated into your Tap account.

The study of token economics is known as tokenomics. It covers all elements of a cryptocurrency's creation, management, and sometimes removal from a blockchain network. The term "tokenomics" is formed by pairing up the two words "token" and "economics" and is largely used within the crypto ecosystem to project the potential of a cryptocurrency. Tokenomics, simply put, is how token value is determined and what affects its value. 

Tokenomics and cryptocurrencies

Tokenomics and cryptocurrencies are closely connected. Tokenomics refers to the set of rules and principles that govern how cryptocurrencies work. It includes important aspects like how many tokens exist, how they are distributed, and what they can be used for. These rules are crucial for designing and managing cryptocurrencies effectively.

Tokenomics plays a significant role in determining the value of cryptocurrencies. It influences how people perceive and evaluate a cryptocurrency's worth. Factors such as token scarcity (limited supply), the usefulness of tokens in various applications, and the level of demand for them can impact the price and acceptance of a cryptocurrency.

Well-designed tokenomics can foster trust and adoption, and increase the overall value of a digital currency. Conversely, poorly designed tokenomics can hinder adoption and limit the perceived value of a cryptocurrency when traded for fiat currencies or other cryptocurrencies. Therefore, creating a solid and thoughtful tokenomics model is essential for the success and widespread acceptance of cryptocurrencies.

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An example of tokenomics: Bitcoin

Bitcoin operates on a specific set of tokenomics. It has a maximum supply of 21 million coins that will ever enter circulation, ensuring scarcity and value appreciation over time. Ethereum, for example, has an unlimited amount of coins. The issuance of new Bitcoins through mining creates incentives for network security while halving events reduces the rate of new supply.

Additionally, Bitcoin's decentralised nature and widespread adoption contribute to its value, with market demand and utility driving its price in the open market. These tokenomics elements make Bitcoin a deflationary digital asset with a unique economic model within the cryptocurrency ecosystem.

Why is tokenomics important?

Tokenomics is especially important in the crypto space due to the lack of regulation. Since there are no laws governing cryptocurrencies, tokenomics provide an opportunity for cryptocurrencies to be evaluated according to their real-life merit, not just how they are traded on exchanges.

What are the benefits of tokenomics?

Tokenomics offers several benefits within the cryptocurrency ecosystem. Firstly, it establishes clear rules and incentives, ensuring a fair and transparent economic system for participants. Tokenomics can incentivise desirable behaviour, such as staking or contributing to network security, promoting overall network growth and sustainability.

Additionally, tokenomics enables the creation of utility and value for tokens, providing variable economic benefits to holders. It allows for the development of decentralised applications (dapps) and the creation of vibrant ecosystems around cryptocurrencies. Similarly, tokenomics facilitates liquidity and trading opportunities, enabling users to buy, sell, and exchange tokens in various markets.

Overall, tokenomics fosters innovation, incentivizes participation, and contributes to the overall growth and success of the cryptocurrency ecosystem.

What are the negatives of tokenomics?

While tokenomics has numerous advantages, there are some downsides to consider. One downside is the potential for market volatility, as token prices can be subject to rapid fluctuations influenced by various factors, including market speculation and investor sentiment.

Additionally, inadequate or poorly designed tokenomics models may result in economic inefficiencies, lack of token utility, or even vulnerability to manipulation. It's important to note that tokenomics may not guarantee long-term value stability, and investors should carefully assess the risks associated with specific tokens and projects before engaging in the cryptocurrency market.

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The different tokenomics terms explained

Asset valuation

The process of determining the value of a coin or token. This is especially useful for users who want to purchase new coins or tokens. If they can estimate how much a coin or token will be worth in the future, it might be easier to decide whether or not its price is worth tapping into. Coin and token valuation is also important for traders who have made a significant purchase of a coin or token, and want to assess if its price is likely going up or down.

Inflation

In the context of tokenomics, inflation refers to the increase in the token supply over time, resulting in a decrease in the token's purchasing power and value. Inflation can impact the economic stability of a cryptocurrency ecosystem, and its management is crucial to maintain the desired balance between supply, demand, and overall token value.

Deflation

In tokenomics, deflation refers to the decrease in the token supply, leading to a potential increase in the token's purchasing power and value over time. Deflationary tokenomics can promote scarcity, create incentives for holding tokens, and potentially drive price appreciation within the cryptocurrency ecosystem.

Supply and demand elasticity

If a coin has high supply-and-demand elasticity, its price will likely be more affected by changes in demand relative to its supply. This means that if demand for a particular coin rises, the coin will experience more positive price action ($$) than if demand for the same coin fell.

Supply and demand elasticity = (% change in quantity supplied) / (% change in quantity demanded).

Community rewards

When a coin or token has a substantial community surrounding it, it can play a role in contributing to improving the asset’s fundamentals. This is an example of market-based governance that has the potential to lead to a rise in the coin or token's value as it is considered an indicator of trust in the network.

Pump and dump schemes

A pump and dump scheme is a manipulative practice within tokenomics where a group artificially inflates the price of a token through coordinated buying, creating a "pump." This creates a false sense of value and attracts unsuspecting users. Once the price reaches a peak, the group sells off their holdings, causing a rapid price decline, or "dump," leaving other users at a loss. Pump and dump schemes are considered fraudulent and can lead to significant financial losses for those involved.

In conclusion

Tokenomics plays a vital role in the cryptocurrency ecosystem by establishing rules, incentives, and economic principles for cryptocurrencies. It influences the value and acceptance of cryptocurrencies by determining factors such as scarcity, utility, and demand.

Well-designed tokenomics can foster trust, adoption, and increase the overall value of cryptocurrencies. However, it's important to be aware of potential downsides, such as market volatility and poorly designed tokenomics models. Understanding tokenomics helps participants evaluate the real-life merit of cryptocurrencies and make informed decisions.

We know the cryptocurrency market has a reputation for being volatile, however, these last few months have been particularly nail-biting for many investors. As markets swing in wild directions, some have made impressive gains while others have lost out. In this article, we explore whether crypto markets will ever overcome volatility and what one can do to gain financial stability in turbulent times. 

What causes the markets to be so volatile?

Due to a lack of central authority, the markets more accurately present investor sentiment, rising and falling as a result of the actions of people actively buying and selling. While volatility has a bad name and is certainly a hinder in terms of mainstream payment method adoption, it is valued by traders as it poses an opportunity to make big gains. Traders have created full-time jobs that benefit solely from the crypto market's volatility.

Regulatory frameworks are likely to positively affect the volatility prevalent in the digital currencies markets, but until that is implemented let's explore the biggest factors behind the volatility.

Entirely digital

Due to cryptocurrencies being digital and not backed by any commodity or real-world currency, their prices remain dependent on supply and demand. Essentially relying on faith: the prices will rise based on people believing in the product and accumulating more, while prices will drop when investors lose faith and sell. The markets remain volatile as investors are not concrete in their positions.

In its infancy

Cryptocurrencies have been around for just over a decade, a relatively short time for an asset of such influence. As the technology remains in its earlier years there is still plenty of development that needs to take place. So while Bitcoin has built an incredible market capitalization, there is still a long way for the cryptocurrency to go. 

This contributes to the market's volatility as markets tend to rise when new developments (upgrades, discoveries, implementations) take effect, while markets can fall when deadlines are missed or errors occur, leading investors to lose faith in the technology. 

Outside speculation

Arguably the biggest contributor to the market's volatility is the speculation surrounding cryptocurrencies. Predicting price swings and then acting on them has caused many an upward and downward spiral. From buying in just before the price rises to short just before a crash, speculation plays a large role in the market's swings and increased volatility. Speculation management is a key ingredient when it comes to successfully trading crypto.

Increased media coverage

Another great contender to volatility in the market is the media. Having a great influence over investor sentiment, the media has been behind many price swings in the market. With the power to launch or crash a market, the media plays into the narrative by encouraging investors to quickly buy or sell with attention-grabbing headlines.

Easy accessibility

The final factor to consider in the causes behind the market's infamous volatility is its accessibility. Stock markets and real estate typically attract a certain calibre of investors, while the entry requirements for investing in crypto are very low. It does not require any licences, degrees, lawyers or heavy capital. Anyone can enter the market with a small amount of money and internet access.

The market has typically been dominated by retail investors, however, in recent years institutional investment has been on the rise. The simple way in which anyone can enter the market provides an open invitation for volatility. 

All playing their own role, these factors contribute to market prices being thrown in seemingly random directions at unpredictable time intervals. Understanding the fast nature of price swings and what might be behind them will contribute to investors and traders gaining a tighter grip on what might happen next. 

Can the market stabilize?

Now that we've explored what factors are behind the volatility, let's dive into whether the markets could stabilize. Bitcoin maximalists claim that once Bitcoin reaches a level of adoption, the price will stabilize. While there are no clear criteria for what "adoption" is, the theory remains true. 

According to this data, Bitcoin is currently the 14th biggest currency in the world, sitting comfortably between the Swiss Franc and the Thai Baht. This illustrates the cryptocurrency's affirmative dominance despite its volatility. 

Will it improve with time, or will a seismic shift in the way people perceive cryptocurrency ultimately solve the volatility issues. At this time, one can't say for sure. So in the meantime, continue HODLing if that's what you came here to do, or leverage the swings as you trade, in the end, you can make gains either way and still come out smiling. 

How to maintain financial stability in volatile markets

First and foremost, never invest more than you're willing to lose. This is the golden rule of investment across all asset classes. The next universal rule is to not act on emotions, do not make impulsive decisions when it comes to your trading portfolio, rather expect volatility and have a plan. Below we outline several tips on how to remain calm in stormy markets.

• Do not pay attention to short-term fluctuations and rather stay invested for the long term.
• Create a limit order that will automatically execute if markets crash. This will create a safety net should things turn south.
• Consider that typically when volatility subsides, prices increase.
• Remember why you invested in the asset and refer back to its potential.