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A critic of cryptocurrency made the statement, “Why is Bitcoin so valuable when it is based on nothing.” My response, “What is the US Dollar based on?” The answer is the same. Nothing. So why is the dollar, pound, Euro, Yen, and many other currencies valuable?

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The answer is because everyone agrees that it is. This universal agreement is the same that gives value to gold, stocks, and every other exchange-traded asset. When enough people believe something is valuable, they drive demand.

When driven to a frenzy, demand rises beyond supply. Think about popular Christmas toys where a $15 plastic doll goes for $500 on eBay. After the excitement dies, the demand and associated price drops. …


Instead of loosing out to a broker’s bid-ask spread, there may be a growing number of people who trade forex by returning purchases. For example, you notice a trend that indicates the Japanese Yen will fall against the US Dollar over the next ten days. Instead of trading with a broker, you make a hotel reservation in Tokyo. Nine days later, you cancel it.

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Your bank handles the currency conversion. The difference between the two currencies is added or deducted from your refund amount. …


Financial Markets, regardless of the asset, represent the buying and selling of risk. People sell when they believe the risk is too high. They buy when the risk seems low.

Forget about assets and liabilities. Each stock, bond, futures contract, option, and even the currency to purchase it represents a basket of risk. Much like the Quantum Theory of Matter, where particles have wave-like properties, assets also have features of liabilities.

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Assets, Liabilities, and Equity

In accounting terms, assets represent something of value, such as stock and cash. …

About

Todd Moses

The Uncertainty Architect

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