There is a complete loss of confidence in the space. Bitcoin and other cryptos are plunging, and companies such as Coinbase are announcing layoffs. However, cryptos are falling sharply because they are being hit by the same factors impacting stocks and other assets. Consumer prices are surging, and the Federal Reserve is hiking interest rates to bring down inflation.

The cryptocurrency world is in chaos

Since Bitcoin hit an all-time high in November, the value of the world's most popular digital currency has fallen by about 70%, Ether is down by around 70% this year, and so is Dogecoin. Bitcoin's backers have always claimed the digital currency would be an "inflation hedge," but it hasn't behaved that way. Instead, this crash in crypto prices shows that cryptocurrencies are primarily speculative financial assets subject to macroeconomic forces.

Cryptocurrencies are by and large speculative financial assets

It's been a rude awakening for the millions of people who bought cryptocurrencies. 2021 was the height of digital currencies, which swelled to $3 trillion. Today, the total value of the crypto market has been shaved to about $1 trillion. Some backers of cryptocurrencies still believe a "crypto winter" could lead to a "crypto spring." In the past, deep downturns have led to strong rebounds.

What is means for those who got into cryptos

The increase in amateur investors, combined with the growing complexity of some of the cryptocurrency products, are worrying regulators as they want to prevent people from being taken advantage of. Crypto markets are still fairly new and there is no clarity on who is in charge of overseeing the space. At the moment, both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) claim oversight of parts of the crypto market.

Regulations on the sector

Bitcoin and other cryptocurrencies are plunging. Here's what to know about a market that just a few months ago was being touted as the future of finance.

Stashed ideas

Why cryptocurrencies have gone from the next hot thing to a full-on meltdown

2022 is a year of inflation. It resulted from the huge disruption that Covid caused. The high inflation and low economic growth are all over the media. <ul><li>Inflation is getting higher</li><li>Stocks are down</li><li>People are starting to get fired</li><li>Companies are barely hiring</li></ul> Investment ads claim they have investment strategies to generate significant returns during inflation, yet famous hedge funds like Tiger Global are down 60%. So don't be seduced by investment ads that try to profit from fear and greed.

The current economic situation

When we're faced with economic problems, we can view them in two ways:<ol><li>Up-close perspective: Looking at inflation, interest rates, debt, consumer spending, joblessness, etc.</li><li>Broad perspective: Looking at long-term trends and historical patterns.</li></ol> Taking a step back for a broader view can teach us about what's happening now.

Look at the big picture

Periods of high growth and low growth are not uncommon. For example, look at how the world went from the great 1920s to the Great Depression in the 1930s. Investor Howard Marks discusses the concept of cycles in his book, Mastering The Market Cycle. He states that the economy grows, on average, at a consistent pace. The economy will get stimulated and make people take more risks and consume more. In turn, this period often causes inflation and slows things down. Recessions and slowdowns are normal. However, when you invest long-term, these fluctuations won’t harm you.

Periods of high growth and low growth

Avoid taking too much risk when the economy is booming. Likewise, avoid buying into things you don't understand. Things only become troublesome when you make bad investment decisions during periods of high growth. For example:<ul><li>You bought houses without income in the 2000s.</li><li>Or you bought stocks and crypto with borrowed money over the last year.</li></ul>

Tips on investing

When you recognise economic patterns, you'll know that the current trends are expected and normal. <ul><li>Knowledge. Learn more about how the economy and stocks work. When you have better knowledge of the history of finance, you won't fall for too-good-to-be-true investments. Read good books on personal finance that have stood the test of time.</li><li>Mindfulness. Knowledge will not give you full peace of mind, so practising some form of Mindfulness or Stoicism can help detach from money stress.</li></ul>

The economy is affected by various factors out of your control

It’s difficult to have peace of mind during periods of uncertainty, like the ongoing inflation. Here are some practical tips and perspective.

How to Have Peace of Mind During High Inflation - Darius Foroux

After World War II, New York City assumed a new global prominence in the international financial markets. It became home to the world’s largest and most prestigious stock market on Wall Street. Today, New York City is the most populous city in the United States, with over 8 million people.

New York is the global capital of investing

Ellis Island was the historical gateway through which many immigrants arrived in the country during the 19th and 20th centuries. New York remains a popular immigrant destination. Ambitious Americans traditionally go to New York to make a name for themselves in industries such as writing, theatre, commerce, fashion, mass media, investment banking, and more. The city is a popular tourist spot and home to the Statue of Liberty, the towering Empire State Building, the famous Broadway theatre district, and Times Square.

New York represents opportunity

<ul><li>The area was inhabited by the Lenape people and other Native American tribes. They used natural waterways for fishing, trade, and war with nearby tribes.</li><li>In 1524, Italian Giovanni da Verrazzano explored the region in service to the French and named it New Angoulême, after the French King Francis I.</li><li>Then in 1609, the English explorer Henry Hudson arrived. He took note of the large local beaver population, whose pelts were a valuable commodity.</li><li>Inspired by Hudson's discovery, the Dutch found several fur trading outposts in the area, including a 1624 settlement in what is now Manhattan.</li></ul>

New York history

<ul><li>By 1626, the Dutch had constructed Fort Amsterdam, which served as the town's nucleus. The town was named New Amsterdam and served as the capital of the local Dutch colonies.</li><li>The Second Anglo-Dutch War (1665–1667) resulted in the British gaining control of the city as part of a treaty.</li><li>After the exchange, New Amsterdam was promptly renamed New York after the English King Charles' brother James, the Duke of York.</li></ul>

How New York got its name

By the late 1940s, New York had become the world's biggest manufacturing centre. It had 40,000 factories, a million factory workers and a port which handled 150 million tons of freight goods a year. The city inherited Paris's role as the centre of the art and fashion world. New York was a refuge for foreign artists fleeing war-battered Europe. New York was a great international city and took on the role of the world's financial capital and the site of the world's two largest stock exchanges: the New York Stock Exchange and NASDAQ.

Postwar New York

Centers of Progress, Pt. 28: New York (Finance) - HumanProgress

There are more than 30.000 different banks worldwide, and they hold unbelievable amounts of assets. The top 10 banks alone account for roughly 25 trillion US-Dollars. Banks are, in essence, in the risk management business. People keep their money in banks and receive a small amount of interest. In turn, the bank takes this money and lends it at much higher interest rates. So banks take funds that savers don't use and turn them into funds society can use to do things like buying houses or growing businesses.

Traditional banks 

The main problem with banks nowadays is that many have abandoned their traditional role as providers of long-time financial products in favour of short-time gains that carry much higher risks. For example, back in 2008, banks like Leeman Brothers gave credit to nearly anyone who wanted to buy a house, putting the bank in a risky position. It led to the collapse of the housing market in the US and parts of Europe, causing stock prices to plummet, eventually leading to a global banking crisis.

The problem with traditional banks

Today, other models of providing finance are gaining ground fast. For example, new investment banks charge a yearly fee and do not get commissions on sales. This motivates them to act in the best interests of their clients or credit unions. They provide the same financial services as banks but focus on shared value instead of maximising their profits. Their goal is to help members create opportunities, such as starting small businesses, expanding homes and investing back into communities. They are controlled by their members, who democratically elect the board of directors.

Investment banks are gaining in popularity

<ul><li>Credit union systems range from a few members to organisations with hundreds of thousands of members. They focus on benefits for their members, which influences the risk that credit unions are willing to take. </li><li>Crowdfunding platforms enable people to get loans from large groups of small investors, circumventing the bank as a middle man.</li><li>Micro lending. These platforms offer microloans to businesses and personal people who previously could not access the money they needed.</li></ul>

Other finance models

Banks are a riddle wrapped up in an enigma. We all kind of know that they do stuff with money we don’t understand, while the last crisis left a feeling of deep mistrust and confusion. We try to shed a bit of light onto the banking system. Why were banks invented, why did they cause the last crisis and are there alternatives? OUR CHANNELS ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ German Channel: https://kgs.link/youtubeDE Spanish Channel: https://kgs.link/youtubeES HOW CAN YOU SUPPORT US? ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ This is how we make our living and it would be a pleasure if you support us! Get Merch designed with ❤ from https://kgs.link/shop Join the Patreon Bird Army 🐧 https://kgs.link/patreon DISCUSSIONS & SOCIAL MEDIA ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ Reddit: https://kgs.link/reddit Instagram: https://kgs.link/instagram Twitter: https://kgs.link/twitter Facebook: https://kgs.link/facebook Discord: https://kgs.link/discord Newsletter: https://kgs.link/newsletter OUR VOICE ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ The Kurzgesagt voice is from Steve Taylor: https://kgs.link/youtube-voice OUR MUSIC ♬♪ ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ 700+ minutes of Kurzgesagt Soundtracks by Epic Mountain: Spotify: https://kgs.link/music-spotify Soundcloud: https://kgs.link/music-soundcloud Bandcamp: https://kgs.link/music-bandcamp Youtube: https://kgs.link/music-youtube Facebook: https://kgs.link/music-facebook The Soundtrack of this video: http://epicmountainmusic.bandcamp.com/track/banking http://soundcloud.com/epicmountain/banking http://www.epic-mountain.com Help us caption & translate this video! http://www.youtube.com/timedtext_cs_panel?c=UCsXVk37bltHxD1rDPwtNM8Q&tab=2

Banking Explained – Money and Credit

A new theory of economic decision-making from Mina Mahmoudi, a lecturer in the Department of Economics at Rensselaer Polytechnic Institute, offers an explanation as to why humans, in general, make decisions that are simply adequate, not optimal. In research published in the Review of Behavioral Economics, Dr. Mahmoudi theorizes an aspect of relative thinking explaining people may use ratios in their decision-making when they should only use absolute differences. The inverse is also possible.

Relative Differences And Absolute Differences

“Effectively solving some economic problems requires one to think in terms of differences while others require one to think in terms of ratios,” Dr. Mahmoudi said.“Because both types of thinking are necessary, it is reasonable to think people develop and apply both types. However, it is also reasonable to expect that people misapply the two types of thinking, especially when less experienced with the context.”

Application And Misapplication

Past studies have shown that when given the opportunity to save, for example, $5 on a $25 item or a $500 item, people in general would put in more effort to save the money on the lower-cost product than the more expensive item.They believe they are getting a better deal because the ratio of cost to savings is higher. In fact, the $5 saved is the same for both items and the perfect, or optimal choice, would be to look at the absolute savings and work equally hard to save each $5.

 The $5 Test

“Understanding how the cognitive and motivational characteristics of human beings and the operating procedures of organizations influence the working of economic systems is of critical importance,” Dr. Mahmoudi said.“Many economic behaviors such as imitation occur and many economic institutions like inventories exist because people cannot maximize or because markets are not in equilibrium. Our model provides an example of a behavior that occurs because people cannot maximize.”

Α Case Against The Logic Of Maximizing Behaviour

People consider relative differences and not only absolute differences when making various economics decisions, even in those cases where the rational model dictates that people should consider only absolute differences. A new theory seeks to explain why. 

A new theory of decision-making helps explain why humans often make decisions that are simply adequate, not optimal. According to the theory, people often use relative thinking when they should use absolutes, and vice-versa.

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Why cryptocurrencies have gone from the next hot thing to a full-on meltdown

How to Have Peace of Mind During High Inflation - Darius Foroux

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Centers of Progress, Pt. 28: New York (Finance) - HumanProgress

Banking Explained – Money and Credit

New Theory of Decision-Making Seeks to Explain Why Humans Don’t Make Optimal Choices

Bite-sized knowledgeto upgradeyour career

#economics

TOP STASHERS

RELATED TOPICS

IDEAS ABOUT #economics

Why cryptocurrencies have gone from the next hot thing to a full-on meltdown

How to Have Peace of Mind During High Inflation - Darius Foroux

It's time to

READ

LIKE

A PRO!

Centers of Progress, Pt. 28: New York (Finance) - HumanProgress

Banking Explained – Money and Credit

New Theory of Decision-Making Seeks to Explain Why Humans Don’t Make Optimal Choices

Bite-sized knowledge
to upgrade
your career