Supply and demand forex facebook en

A key prerequisite for an accelerated diffusion of Libra would be a high degree of credibility and trust in the stability of the Libra coin, which the founders intend to achieve through a number of instruments such as the Libra reserve, the involvement of global payment service providers and finally the proactive approach of becoming a regulated financial services provider.

This is intended to apply both to Libra as a payment services infrastructure — regulated by Swiss law — and the respective financial services offered on the Libra Blockchain. Therefore, Calibra, a subsidiary of Facebook offering a Libra wallet, has been registered with the U. Financial Crimes Enforcement Network as a money services business.

However, this is just the beginning of an extensive process of applying for licenses needed for specific service offerings and subsequent supervision of the competent authorities in question. For instance, Calibra will most likely need to obtain additional money transmission licenses in each of the US states it operates in. Furthermore, depending on the type and scope of other financial services offered, Calibra or other users of the Libra Blockchain will need to meet relevant legal requirements such as banking regulations.

Provided that Facebook, together with its co-initiators, manages to market the benefits of Libra successfully through its global user base, and assuming that Libra limits itself to the function of a regulated payment platform, demand for Libra coins could grow very rapidly and eventually exceed the geographic reach of the US dollar or the eurozone. In fact, Libra could advance to a kind of parallel digital currency used at least partially alongside the respective national fiat currency.

As long as the Libra coin is only a unit of account in a clearly defined although very large multilateral payment network of Libra users, such a payment infrastructure could promote financial inclusion and increase global payment efficiency.

Ultimately, in such a limited scope scenario, Libra would be merely one more alternative payment system that would have to demonstrate its superiority in a competitive market environment. Like any other payment infrastructure, Libra would have to be considered as a critical infrastructure that needs to be regulated and supervised like any other payment system or clearing and settlement system in the securities business.

This is very clear, as the payment platform itself would hardly generate the kind of profitability the founding members of the Libra Association expect. But if other financial services such as savings and loans products or even securities denominated in Libra are offered on the Libra platform, financial risks such as market risks, credit risks, operational risks and even liquidity risks will be generated within the Libra system or transferred from existing regulated markets to the Libra system.

It is questionable whether Libra, as a fully regulated financial institution, really does have a sustainable competitive advantage over existing financial infrastructures, given that instant payment solutions will be available in the foreseeable future and distributed ledger technologies are already being implemented as a backbone for various financial products. This is a rather complex topic that goes beyond the scope of this article.

Far more research on the interaction between fiat and cryptocurrencies is needed to cover the manifold aspects of this topic. Nevertheless, I would like to share some thoughts that should clearly be understood as preliminary hypotheses to be tested through additional research.

Because Libra coins are backed by financial assets like short-term government bonds or deposits, a link between the creation and destruction of Libra and the global capital markets comes into play that does not exist in the case of pure payment systems or other cryptocurrencies such as Bitcoin.

A number of transmission channels are imaginable. Figure 2 shows a simplified illustration with possible interdependencies between the Libra ecosystem box marked with dotted lines and a typical two-tier banking system like that of the eurozone. A successful development of Libra could trigger a huge demand for deposits and government bonds denominated in various fiat currencies compatible with the Libra reserve.

It is likely that demand will be focused on the most relevant reserve currencies like the US dollar and to a minor degree the euro. As a result, the Libra reserve could quickly become a major player in the global bond, money and foreign exchange markets. In such a world, the current financial system would be overlaid by a global virtual currency Libra. Combined with a huge money market fund Libra reserve , various implications for the effectiveness of monetary policy measures are conceivable.

Firstly, the ability of central banks to influence short-term interest rates rests upon its monopoly on generating central bank money, e. If the introduction of Libra is accompanied by substitution effects, e. This would ultimately undermine the status of a central bank as lender of last resort and could weaken its ability to achieve its primary objective, i.

Secondly, if Libra is really successful, the Libra Association will develop over time into one of the largest money market funds acting upon a rule-based expansion mechanism. This goes hand in hand with a growing demand for short-term government bonds from the Libra Association, which could inflate respective asset prices and depress bond yields, especially if the market in short-term government securities is getting thinner.

This can be demonstrated with a simple calculation. If the average demand for Libra is only about 1, Libra per year, this would result in a yearly Libra demand of approximately billion Libra. If we assume, for the sake of this example, a Libra-to-dollar exchange rate of , the yearly Libra demand of billion would translate into a monthly asset purchase of approximately 55 billion US dollars. This figure is big enough to be comparable with the net asset purchases during the asset purchase programme by the ECB, which ranged from 60 billion to 80 billion euros per month and ended in December In the Libra model, the exchange rate, for example to the dollar, is fluctuating and is a function of both the price of the underlying assets and the relative exchange rate movements of fiat currencies in which the assets are denominated.

Hence, a devaluation of the US dollar relative to other basket currencies like the euro corresponds to a revaluation of Libra. Now, what is the difference between those concepts? Support and resistance are levels or lines in which prices were already determined, while supply and demand are fresh levels or zones in which prices are not determined.

In the following article, we will expand on the topic. We also provide a video with examples so to clarify the explanation even further. What Are the Concepts of Supply and Demand? Supply and demand are the two factors that determine any price in the forex market or any other market. Supply and demand trading takes place when a currency pair reaches a level of friction referred to as a selling zone. This occurs when sellers decide there is a greater opportunity in selling at an inflated price.

The opposite also happens when pairs fall to a lower level into a demand zone. In this case, buyers decide that there is a greater value in purchasing the currency pair. The zones are observable places on the chart where price has neared multiple times before. Supply and demand are zones that are more specific and accurate on the charts.

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Demand far outweighed supply at this price point and when the limited sell orders ran out, price could only go higher. But before you develop a trading strategy, lets go over how to determine Forex supply and demand zones and draw them on your charts. Forex Supply Zones Forex supply zones are areas where banks and institutions are placing a large number of sell positions at a particular price zone.

When price approaches or returns to this supply zone, these orders are just waiting to be filled and send price back lower again. You can see on this chart that there are numerous examples of price returning to a supply zone, before selling again. All of these areas could have been shorted as part of a Forex supply and demand trading strategy. Forex Demand Zones On the other side of the market, we have Forex demand zones. These are areas where banks and institutions are placing their clusters of buy orders at a particular price zone on the chart.

If price moves higher and leaves a chunk of these buy orders unfilled, then they too are likely to just be left untouched, waiting for price to eventually return and trade through them once more. When this happens, the huge demand overload is likely to push price higher again.

Zones that once again where returned to, were often areas where buyers were once again found and price was ripping higher as a result. These are areas on the other side of the market that could have been longed if you were a supply and demand Forex trader. How do you Trade Supply and Demand in Forex? As you can see on the charts found within the section above, you can immediately see how a retest of nearly all supply and demand zones saw another rejection.

With this in mind, the best Forex supply and demand strategy focuses on trading reversals when price returns to retest zones for a second time. Trading reversals at supply or demand zones will give you the highest probability of success using a strategy of this type. Depending on your appetite for risk, there are two ways you can go about trading a supply and demand strategy. Aggressive traders would enter trades using pending orders as soon as price returns to a strong supply or demand zone.