To comprehend the nature of trading in general and cryptocurrency trading in particular, we must delve into some financial processes in which we all participate. Since we all utilize banking sector services and not only spend or place our well-earned money on deposit but also envision a cloudless future late in life, transfer some part of the income to retirement funds, social security, and pensions, we automatically participate in the banking system and the stock market. Throughout life, pension contributions are paid, but only some of us contemplate the very structure of the financial industry and how the state manages our future pensions.
The Currency Evolution: From Stability to Uncertainty
Analyzing Historical Events’ Impact on Monetary Systems
Regrettably, any country’s financial system is structured so we do not own capital. Someone other than loans and pension contributions circulates, making money somewhat virtual, constantly slipping through the fingers of the state, fund managers, and private corporations. Concurrently, central banks in any state possess a monopoly on currency issuance, a function bestowed upon them by the state. Theoretically, currency is backed by goods or products produced within a country’s territory, forming its GDP. Simultaneously, central banks commit to upholding the reliability and stability of the national currency.
Financial Realities: Post-1976 Insights
Understanding Historical Events’ Impact
Everything appears clear and reasonable, but the problem is that it is merely an ideal depiction. Unfortunately, reality differs somewhat. The state and central banks need to fulfil their obligations to ensure the currency’s stability, and the value of money diminishes due to inflation and quantitative easing. “How did it vanish? We were not informed about it!” you might rightfully inquire. I’ll substantiate my assertion.
The Banking and Pension Systems: A Deep Dive
Exploring Financial Institutions’ Operations
The value of money, including pension savings, and thus our future stability, appeared more promising before 1976. Up until then, the pension system functioned as follows:
People deposited money into the pension fund, and interest accrued on deposits. The state utilized those funds to make payments.
However, the so-called Jamaica Accords altered the course of history. It was decided to demonetize gold, relegating it to an ordinary exchange commodity. Consequently, all agreements approved within the Jamaica Accords framework permitted the gold price to fluctuate between the U.S. dollar and other currencies. This prompted numerous countries to divest themselves of gold. The countries promptly made the relevant decision. A series of world countries opted to forsake this precious metal and not tie their national currency to the country’s gold reserve.
Trading Revolution: From Professionals to Crisis
Navigating the 2008 Financial Crisis
I urge you to focus on this moment because, since 1976, each country’s credit system has expanded hundreds of thousands of times! The Jamaica Accords transformed money into figures. The system began to standardize after gold was abandoned, taking the form of substantial unified bank accounts that are not backed up or guaranteed. As for the Pension Fund, it is no longer a secure deposit box for your savings. It is a hedge fund that gathers assets from you as an investor and then manages them at its discretion. Our pension funds became part of the state budget and began to be utilized for other governmental needs. The pension fund resembles a bank account. If you scrutinize the pension systems of the most developed countries globally, you will discover that pension funds are allocated for other social needs. Hence, pension deposits do not exist in an account somewhere.
Trust in Finance: Evaluating Investment Banks
Reassessing Financial Institutions
Despite these factors, the middle class has remained the driving force behind the pension system, which lacks support. Most people do not concern themselves with how the Pension Fund manages money, so they continue replenishing its reserves. Like bees in a hive, they regularly contribute to the system but do not reap its benefits. Doesn’t it remind you of a pyramid? And I’m not referring to the pyramids in Egypt! Let me mention that the pension system and the banking system as a whole exhibit signs of this very pyramid scheme. All participants in this system receive income solely from the influx of “new blood,” i.e., the receipt of new investments from new participants.
Cryptocurrency: Stability Amidst Economic Uncertainty
Comparing Cryptocurrency to Traditional Money
We’ve discussed the financial system crisis, but trading also underwent a pivotal period. It is not linked to the Jamaica Accords of 1976 but to the global economic crisis 2008. The crisis, coupled with mobile systems’ availability and the prevalence of trading, thwarted professional traders from earning exorbitant sums of money. Interestingly, the world’s largest investment banks orchestrated the crisis and the trading revolution. Attempting to outmanoeuvre each other, they engaged in a duplicitous game, concocting various derivatives (promissory notes, bonds, etc.). Such products, devised by banks, began to muddle the market’s situation. The initial wave of the downturn struck the market in 1998, but the issue was rectified. However, in 2008, not even a trader’s reputation, who brings vast sums of money to the entire system, could avert the market collapse and the onset of a global economic crisis.
Retirement Rethink: Trading as an Alternative
Exploring New Approaches to Retirement Planning
Consequently, all investment banks have tarnished their image as professional institutions worthy of trust to manage finances. This situation led to genuine professional traders migrating to hedge funds. It’s time to draw the first parallel between conventional (fiat) money and cryptocurrency. As we recall, decisions made within the framework of the Jamaica Accords diminished the value of money since the entire currency cycle began to be constructed solely on the foundation of debts. Conversely, the value of cryptocurrency continues to rise. Furthermore, cryptocurrency is impervious to inflation since creating new coins stems from a predictable algorithm, not a central bank. Thus, if we ponder over the pension issue in the context of the above-mentioned information, we can draw the following conclusions:
- You need to “mend your sails while the weather is fine,” i.e., to think about a decent income in old age right now.
- You need to look for an alternative to a pension.
Trading could be one of the alternatives to a pension. However, the overwhelming majority of people bypass this option of earning because they believe this type of activity requires being a financial genius and having an innate talent for trading. People stuff their heads with such definitions as “pattern,” “analysis,” “technical modeling,” and “configurations of candlesticks” and, therefore, choose other, simpler, so they think, earning options. Considering all the concepts mentioned above as myths is unnecessary.
Mastering the basic concepts of trading and understanding the principles at work on exchanges is key to success. The main mechanics of the market, including who sells and buys and how, only need to be understood. There’s no need to reinvent the wheel. Everything required is already known. Therefore, embarking upon the “profession” of a trader involves mastering the basic principles of the market, discovering how to analyze (i.e., assess the current situation), and making trade decisions as a result.