Tag Archive for: currency trading

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What Supports Currency Prices?

Several factors determine the price of any given country’s currency.  A 4D analysis helps you visualize those influences.  Here, we examine what held up those values on July 12, 2019.

As the red Demand Plane shows us, as the amount of currency issued increases, its price generally falls.

We can (and, in this case, must – we can’t get a functional equation without it) use this influence with others to predict sustainable currency prices in USD.  In the left Value Space, the plane running through the data indicates currency value goes up with added Foreign Exchange Reserves and down with Volume.  The P-Value for this equation is 3.30E-12.  The chance it accidentally predicts the data is that low.

The case manifests The Law Of Value And Demand, which states:

  1. Features determine Value
  2. Value affects Price
  3. Price influences Quantity sold and
  4. Quantity sold is a feature.

The equation explaining the plane in Value Space uses the Prime Rate, set to 2%.  What happens if we set the Prime Rate to 63%?  Check the next post for the answer.

#demand #currency #prices #markets #currencytrading

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The Demand For Money: Crypto vs. Fiat Currencies

Earlier, we examined Demand for fiat currencies and found they had an Upper and Outer Demand Frontier.  Those types of monies have existed for millennia.  A new form of exchange began to take off over a decade ago.

Cryptocurrencies began to become popular with the advent of Bitcoin.  How does the Demand for cryptocurrencies behave relative to the one for fiat currencies?  As it happens, when it comes to Demand, both payment forms have something important in common.

Below, using a fiat currency study from July and one on crypto 20 days later, note the slopes of their Demand Frontiers are nearly identical.  At left in yellow, the crypto Demand Frontier slope is -1.47 (P-Value 1.28E-04), while that for fiat currencies is -1.42 (P-Value 7.88E-05).  At that time, at the Demand Frontier, cryptocurrencies had reached about 1/1000th of the fiat currency extent. Observe with the steep cryptocurrency Demand Frontier, at its limit, there is more money at the upper end of this curve.  Bitcoin’s market capitalization was nearly twice that of the rest of its market combined.

We need to see how each currency form reacts to the coronavirus. Look for my next post on that.

#currency #demandforecasting #cryptocurrencies #currencytrading