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Central-Bank-Digital-CurrenciesHello, Welcome to this analysis about Central-Bank-Digital-Currencies in which I will explore the ongoing process by central banks to generate Digital-Currencies that replicate the individual Fiat-Currency, its characteristics, its possible manifestations, and its differences to the classical cryptocurrencies we all know as Bitcoin or Ethereum created in the beginning. Since Cryptocurrency was invented by the esteemed Satoshi Nakamoto publishing the open-source white-paper about Bitcoin as a completely decentralized Peer-To-Peer Digital-Currency which supply is limited and is generated through mining and the Proof-Of-Work concept many other decentralized cryptocurrencies emerged such as Ethereum or Litecoin that approved a secure and stable way of payment solutions operating within the determined blockchains. This completely new form of currency and the digital interface was watched by critics as well as supporters and a hype created with cryptocurrency enthusiasts accelerating the innovation process in cryptocurrency. On the other side, banks and governments watched the Cryptocurrency development not always with a non-critical eye, and especially in this process central banks took a greater study into the technology and the idea came into the foreground for digital currencies held and issued by the central banks that should replicate the real fiat-money which is printed by the central banks and distributed through commercial banks. The digital currencies that should be issued by the central banks became the name CBDC (Central-Bank-Digital-Currency) and today many countries' central banks started to work on pilot projects and prototypes to launch the digital replicate of fiat money, in some countries they are already launched and implemented in the economy. __ - Comparing The Classical Concept Of Cryptocurrency To The Central Bank Concept Of Digital-Currency The main characteristics of the classical cryptocurrency like invented in 2009 are that it is decentralized and that its supply is limited while the bitcoins are generated through the mining process there can be no more than 21 Million Bitcoins at all that defines the value of Bitcoin as miners need to improve the technological alignments to rightly mine the Bitcoins and come up with a mining-revenue to keep the process ongoing. On the other side, there is fiat money which is printed in the central bank printing press and which supply can be multiplied by will especially in times of crisis as it was in the last year the money supply increased exponentially by the central banks, this has an inflationary character and comes up with many other issues as in times of crisis the central banks need to print always more and more money as before. Now the fiat money printed by the central banks is issued to commercial banks with zero interests at this time and from there is supplied to the merchants and persons who taking up credits and which account money is held in a bank account as a "digital back-up" by the printed fiat money, the tendency with this bank account money is also to be multiplied by the banks and moved around in the system to be taken for credits so that one holds money in an account while it is used for the other individual's credit. Now as the central banks working on the digital currencies to substitute the fiat money in circulation the biggest difference is that its supply is not limited like it is in Bitcoin or many other cryptocurrencies, as the central bank fiat money can be printed further this is also the case with the upcoming central-bank-digital-currencies. Besides that the central-bank-digital-currencies are not decentral because they are issued by a central authority like the central bank, the system on which the CBDC is settled can be decentral however on a broader scale it is still centralized by the individual central bank, there is still a difference if the CBDC model is indirect, direct or hybrid nevertheless it is always centralized as the intern blockchain is created by the certain central bank. Another factor is also privacy as the public Bitcoin blockchain does not store any private user information, depending on the model with a CBDC this can be very different as there is indeed the possibility that private user information is stored in the blockchain by the central bank. Taking all these assumptions into consideration it comes to the conclusion that CBDCs aren't the same as the classical cryptocurrencies in common sense, it is rather a system that replaces the fiat money with digital money and gives the central bank much better opportunities to handle, store and track it with a faster network and potential storage of data. __ - Examining Models On How Central-Bank-Digital-Currencies Can Function With the gained assumptions it is important to note that there are different type models under which CBDCs can operate. Every model has its own characteristics and handles money circulation in an altered cycle. Besides that, the different models can have very different effects on the economy and especially on sectors like the banking industry or payment solution providers. Furthermore, the types on how payment data and information is stored differ within these models. It is highly necessary to recognize these concepts to assume how the CBDC infrastructure affects the economical landscape. The Indirect CBDC Model Within this model, the central bank keeps track records of wholesale accounts by the commercial bank as an intermediary between the central bank and the persons or merchants. The consumer as the person or merchant has a claim with the intermediary as the commercial bank and handles payments with the commercial bank. In this case, the intermediary handles all the communication with the consumer as retail clients and its net payment information, sending payment messages and storing the data. It would be a similar model to the actual credit distribution that exists with credits given by the central banks to commercial banks and from these distributed to the persons or merchants. The Direct CBDC Model The Direct CBDC Model functions differently from the Indirect one as the payments are handled directly between the central banks and the persons or merchants, in this case, receives, stores, and processes the information given by the consumer. This model is much more functional and practicable for the central bank as the commercial banks as intermediaries aren't necessary for the gateway. A full-scale implementation of this model will cause a higher decrease in commercial banks at all of which the sector already struggles, the model would further this process. The model would also set the central bank as the central authority handling all the payment relevant mechanisms with the consumer as persons or merchants. The Hybrid CBDC Model In this model the Persons or Merchants have a direct claim on the CBDC with the central bank while an intermediary, in this case, a PSP (Payment-Service-Provider) keeps track of the payments information and handles direct payments, the PSP in this case does not need to be a bank essentially. It is also integrated within that when technical issues come up with failures in the system that the central bank can handle direct payments with the consumers and restore retail balances. This system offers more flexibility at the cost of a more complex infrastructure to operate for the central bank. Besides that, it has a similar negative effect on the banks like the direct model as banks arent necessarily needed for the payment communication. __ It is not unlikely that the development of Central-Bank-Digital-Currencies will keep going within the upcoming times, therefore it is necessary to elevate how these diverging models can affect the actual economy. As many countries moving on with the projects and prosecution of CBDCs these will be realized in a more fulfilled way with a high possibility and it will be an important question on central banks will govern these CBDCs as they aren't decentralized like the cryptocurrency roots they can not be held as a direct comparison to these and are indeed a fiat money replication in digital terms, it will definitely open new doors for the central-banks money policy however what it has for effects on consumers as peoples or merchants is a serious examination. Thank you, for watching, it was important for me to scrutinize the significance of Central-Bank-Digital-Currencies and elevate a perception to this omnipresent topic. In this manner what do you have for an opinion of Central-Bank-Digital-Currencies implementation? Let us know in the comments below. Information provided is only educational and should not be used to take action in the markets.
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Blueprint to Success: How to Master Trading Sessions & Planning👑 Pre-Trading Sessions & Planning: 🔥 Key Details + Concepts -------------------------------------- (Psychological, Technical & Concepts): 🟠 Psychological: - Don’t trade if your emotions aren’t aligning with what is on the screen. - If you’re not super happy about entering, and you don’t fully accept the loss, don’t take the trade. - Don’t ‘force’ something to work because it won’t. - Trade as if you are looking for buys and sells in your markup. This removes mental bias, and effectively emotion in trading. 🟠 Technical: - Cause is the most important factor in trading – find what caused the injection of volume (‘follow the money’). Did it get effectively mitigated? Did it leave imbalance? … Find that block of orders and don’t get liquidated - The more inducement respected, the more liquidity to take out, the bigger the move - Zones to trade from must have resting orders to mitigate. Make sure they have inducement above/below (or create it), and they are the cause of structural breaks, demand/supply fails etc - Start analysing on the daily first! Find the intention of price and follow it - Mark out S/R – (support becomes resistance levels vice versa) as that level will be liquidated to usually meet our orderblock above/below it - Previous daily/weekly highs/lows can act as strong structural inducement points - Price needs reason to move to certain levels – imbalance - Often when we have a low Phase 2 inducement, we will sweep it’s orderblock as a SMT because of the zone’s large imbalance = lack of inducement - If you don’t spot the buyers/sellers who got swept before entering, you’ll become liquidated - Mark out pullback zones too - If we break our LPOD/S, we are effectively going to run through all mitigated price until the next valid orderblock - Ensure you wait for your respective time-frame reaction (e.g., don’t look for a 1m reversal from a 4h zone) - If price taps the outside of a zone but doesn’t enter it, it can still be used as inducement - We don’t recommend stacking countertrend trades - A mitigation can be confirmed when price sweeps into its previous range over another small-range inducement. 🟠 Concepts - The demand/supply that took out the Phase 1 inducement then gets broken confirms a shift in market structure. If it is respected, we can trade a continuation. - A ‘slight mitigation’ is when price sweeps liquidity into a range, but doesn’t properly mitigate the orderblock where the high-volume orders lie. Even though we may react from there, we can come back to this orderblock and properly mitigate it, using the ‘slight mitigation’ level as a point of inducement. - It is important for the AR (automatic rally) to ‘fail’ in a reversal range after the B/SC (Buyers/sellers climax) as it often grabs the LPOD/S (the last point of demand & supply), so it is successfully mitigated - News candles can be targeted high/lows as they don’t have inducement - Price works with momentum. You will never see something shoot up or down randomly - Refine zones by excluding the inducement it swept before it – draw a line through the orderblock from the inducement it swept. This will refine your orderblock to the pure manipulation *has exceptions* - If an inducement phase isn’t very clean or only sweeps a small range, there will be another opportunity as more manipulation is needed to fuel a larger move - Weak highs and lows are determined after a leg has been properly mitigated; the 5-15m TF is best to determine an active zone - A high/low is likely to be targeted when it wicks the other side’s high/low (to sweep) instead of having a candle closing over (BoS) - The first part of a ChoCh is often formed from Phase 1 inducement getting swept, creating a slight pullback, then breaking it again to hit the refinement Used Word Definitions: - LPOD/S – Last point of demand/supply - ChoCh – Change of character (a sweep of liquidity then a break of structure) - BoS – Break of structure (a failure of supply or demand creating a price leg break) - OB – Orderblock (a valid zone to trade from) - FVG – Fair value gap (a form of inefficiency/price gaps in the market) - IMB – Imbalance (a form of inefficiency/price gaps in the market) - IPA – Inefficient price action (imbalance) - S&D – Supply and demand (the levels of buying and selling) - IFC – Institutionally funded candle (a candle created by institutions to push price to a certain area) - IPB – Inducement Pullback (The level where price pullbacks before a continuation) - PA – Price action (how price is moving) - B2S – Buy to sell (often seen as a wick to mitigate or sweep) - S2B – Sell to buy (often seen as a wick to mitigate or sweep) - AOI – Area of interest (an area of price that is reactive or tradable) - POI – Point of interest (a specific point where price is reactive or tradable) - IND – Inducement (placement of liquidity that is used to manipulate traders) - EQH/L’s – Equal highs/lows - SMT – Smart money trap (a zone that doesn’t have liquidity under/above it, and gets run, trapping SMC traders) - MSS - Market Structure Shift (a confirmed shift in the markets direction towards the next reversal zone) - Vectors – Large-bodied, impulsive candles that are to push price to its purposeful target - V-SR – V-Shaped Recovery (quick movement of price to enter and exit a zone) - TF – Time frame - FR – Failed Reaction (Internal supply/demand failure) - OF – Order-flow (the movement of money through the market) - True Zone – The actual orderblock that will be used which holds the high volume or orders - PDH/PWH or PDL/PWL – Previous daily/weekly high/low 🟠 Colour Codes: 🟠 Time and Price (Times in AEST): ASIA > FRANKFURT > LONDON > NEW YORK - Asia: – Asia is important to analyse as it can create the model for New York and London its purpose is to create liquidity above and below its session. Mark the bottom and top to create a range, as well as the midline. Often, price will aim to take a high/low or both (AWS) starting with Frankfurt + London Open. If Asia takes a form of liquidity and is impulsive, a continuation trade can be played. - Frankfurt: - Frankfurt often prepares London for its main movement of the day. It often does this by taking out the high or low of Asia to create an orderblock mitigation for London, creates more Phase 1 inducement for London to take out, or helps to move price to an already-made valid orderblock. - London: - When London opens, there is a volatility spike in price. London’s purpose is to attack the liquidity created during Asia. Often, London creates a continuation mitigation after 1.5 hours, but can also contribute to a larger liquidity build-up for New York. Entries that induce + mitigate can be taken at the open (sometimes +30). After 2 hours of opening, we often see a shift in direction. - Pre-NY: - Before New York opens, we often see an impulsive move that directly contributes to the New York session. Sometimes, we can create a valid zone for New York to play from by mitigating high-volume orders. Most often, we see an impulse in price to move into a higher timeframe orderblock to then become targeted liquidity, or we create more low timeframe reversal inducement to then be swept. - New York: –We open with a volatile shift of momentum. New York’s purpose is to attack the liquidity created during the London session, or to create a continuation from London. The New York trap usually starts 1 hour after opening and reverses. After 1.5 hours of opening (MMM), we often see a clean mitigation of the ‘correct’ orderblock and liquidate the opening move. Sometimes, New York Open can mitigate the high-volume orders and continue in the correct direction of the day. - London Close – mitigates the peak of NY open / Reversal for a continuation in NY open direction. Sometimes there is a mitigation-inducement before London Close. - Magic Minute Mitigations (MMM) - refer to high probability trading times that mitigate active continuation orderblocks. We can best see these 1.5 hours after London and New York Opens – rarely, we can see these 3.5 hours after these opens instead. In the next post I will continue with my 8-step daily markup process and my Asian session manipulation formulas. If you found this article helpful, please share it with your friends and leave a comment! Cheers!
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