The Trading and Financial Cycle of Blockchain

Blockchain is causing a buzz in finance, particularly among firms that could save on costs by eliminating the many intermediaries in their operations. From banks and insurers to audit firms and internal audit departments, there’s a deluge of interest in this disruptive technology.

The problem is our current financial system is an antiquated kludge of industrial technologies and paper-based processes dressed up with digital wrappers. It can be expensive, slow and vulnerable to errors.

The Bull Run

The ebb and flow of financial markets are known as bull or bear market cycles. This cyclical pattern is so well-known that there’s even a statue of a bull in New York’s financial district and a “bull run” is the term for the upward movement that precedes a financial crisis.

Cryptocurrency prices are in the middle of a bull run, meaning they’re rising steadily and investors’ enthusiasm is high. This sentiment translates to lower supply and higher demand, which can boost price. Investors often hold onto their assets during a bull run, as they believe that the increased value will help them earn a greater return if they decide to sell at a later date. This strategy is commonly referred to as HODLing, and it’s a popular way to reap the benefits of a bull run.

Blockchain is transforming trading and commodity markets with the ability to digitize real-world assets. This enables new options for streamlining paper processes and disrupting established business models. For example, S&P Global is working with the Port of Rotterdam on a project to offer transactive pricing for peer-to-peer power trading in microgrid communities of prosumers (retail consumers who also produce electricity). Blockchain also offers new options for trading securities and other financial instruments, enabling efficiencies and transparency throughout the securitization process. Its potential to enhance trust, speed and efficiency in all kinds of capital markets makes it an essential tool for the future of global commodities trading.

The Accumulation Phase

The accumulation phase of the market cycle is a time when buyers and sellers reach an equilibrium. As the selling volumes have flattened, a lot of institutional investors recognize the potential of the undervalued assets and begin buying them in bulk. They usually do this in small loads so that they can stealthily accumulate their position without alerting other market participants. This also helps them to keep the price at a discounted level.

This phase can last for multiple years and it is best to wait until a clear breakout happens before making any purchases. Traders who successfully buy crypto assets in this phase will enjoy a high ROI later on.

Blockchain offers a number of benefits to the trade finance process including greater transparency and faster settlement. This has attracted the attention of big commodity traders such as Gunvor and Mercuria, oil-and-gas giants BP and Shell and major banks like Societe Generale and ING.

It has also allowed for a quicker and more efficient distribution of equity and governance rights. This was possible thanks to the digital security issuance capability that is made possible by blockchain technology. The ability to instantly issue and transfer digital securities has opened up new opportunities for entrepreneurs who want to offer more sophisticated financial products such as decentralized financing or crowdfunding.

The Decline Phase

The markup phase can last for a long time, as new investors continue to jump on the bandwagon. The greater fool theory is very prevalent during this phase, and FOMO is what drives prices skyrocketing. It is important to avoid impulsive buying during this phase and to use tools like the Crypto Fear & Greed Index and on-chain analytics to track market sentiment and volatility.

When the markup phase ends, the distribution phase begins. At this point, price action will begin to plateau. This is because participants are anticipating a bear market. They will sell their assets to protect themselves from losing value. The decline stage is challenging for businesses, but it opens up opportunities to find another way of using a product or entering into a different market segment.

Blockchain is already helping to transform several industries. For example,Download Imtoken from the App Store. , it has helped reduce the costs of trade finance by creating a secure digital ledger of ownership that can save $17B to $24B per year in global trade processing fees. It has also made it easier for banks to identify fraudulent transactions and reduce the risk of credit defaults. Furthermore, it is making it easier for prosumers to share energy with each other and with neighbors. This could reduce the role of utilities and grid operators. This decentralization would help lower electricity rates and promote the use of renewables.

The Distribution Phase

The distribution phase occurs when market participants become fearful of a potential bear market. This period is marked by decreased interest in an asset and lower trading volume. It can also lead to a decrease in price, as supply outweighs demand. The fear can also encourage traders to sell off their assets in order to mitigate losses, which can result in further price decline.

The markup phase occurs when the market begins to recover from a crash and prices rise. As a result, investors may start to feel more optimistic about the future of an asset. In this phase, new groups of market participants may enter the crypto marketplace. This positive news can also help to increase the overall market volume.

Blockchain can provide an opportunity to streamline trade processes, reduce transaction costs and documentation errors, and transfer funds quickly. For example, a blockchain-powered solution can allow an importer and exporter to track the progress of their shipment from origin to destination with real-time tracking. This could save the trader millions of dollars in costs and fees when compared to the traditional process, which can take weeks. The blockchain has the potential to revolutionize trade programs by replacing antiquated paper documents and processes. The world of global trade finance is highly complex, but blockchain technology can simplify the entire process and reduce time and money spent on paperwork.