Learn how to join Bybit's VIP Program, where you can realize exclusive benefits — from up to 50% off trading fees and tailored interest rates to instant OTC trades up to $10M.

With the Bybit VIP Program, you can realize exclusive benefits — from up to 50% off trading fees and tailored interest rates to instant OTC trades, Bybit Card cashback and more. Joining the ranks of the very best traders on the platform will boost your profitability, raise your limits and offer access to VIP-only perks.

 and guides you through the steps to become a VIP trader and unlock exclusive benefits. Let's get started!

 is an exclusive club for the most esteemed traders in the crypto market. It’s designed to provide members an enhanced Bybit experience with numerous VIP-only benefits and perks. The program aims to reward avid traders who have high volumes, account equity levels and borrowing activities.

The Bybit VIP Program offers a multitude of benefits for members. These range from discounted trading fees and high limits for withdrawals and application programming interface (API) trades to priority Bybit customer support access, relationship managers and exclusive VIP events and meetups. You can find the full list of VIP exclusive benefits 

Requirements to Become a Bybit VIP Trader

You’ll need to fulfill a specific level for one of the criteria below to become a VIP trader on Bybit:

Bybit's VIP Program features six distinct tiers: 

. Each successively higher tier offers greater rewards, and also comes with more stringent qualification requirements. For instance, as a 

 trader, you’ll enjoy reduced trading fees, such as 0.03% for makers and 0.045% for takers in the spot market. To qualify for this exclusive tier, you must meet at least one of the following criteria:

Once you become a VIP trader, you must continuously meet the above criteria to maintain your Bybit VIP status and keep enjoying the benefits. 

However, this doesn't mean your account will immediately lose its VIP status and revert to standard after a single day in which you don’t meet the requirements. Bybit offers a 14-day grace during which you can continue enjoying VIP perks and benefits, even if you no longer meet the program's conditions. If the criteria are not met by the end of this period, your VIP status will automatically be revoked. However, if that occurs, you can regain your status by fulfilling the requirements for any VIP tier either during or after the grace period. When this happens, Bybit will grant you a new 14-day grace period.

How to Sign up to Become a Bybit VIP Trader

In the following section, you'll find a step-by-step guide that shows you how to join the Bybit VIP Program.

The first step to becoming a VIP trader is to open a Bybit account (if you haven't already done so). Simply 

 and fill out the form with your details. After registering, you’ll need to verify your account to enjoy the platform's full functionality.

Next, fund your Bybit account with crypto or fiat currency.

You can deposit cryptocurrencies by using the 

 menu. On the page, choose your desired coin and the blockchain where you'll be depositing the assets. To avoid any loss of funds, please always ensure that you're transferring crypto from the correct chain.

Next, copy-and-paste the wallet address displayed on the page, or scan the QR code with your smartphone's camera, and initiate the deposit from your wallet. After a few confirmations, your cryptocurrencies will be credited to your Bybit account.

To fund your Bybit account with fiat currency, click on the 

 button and select one of the available services (e.g., 

 service, choose a fiat currency, the deposit amount and one of the available payment methods. After clicking on 

, follow the instructions displayed on the next pages to initiate the transaction. Your funds will be credited to your Bybit account, with processing times varying according to your chosen service and payment method.

After you have a verified Bybit account funded with either crypto or fiat, perform eligible activity on the platform until you qualify for VIP status (see table below).

You can achieve VIP status by fulfilling a minimum level of VIP 1 in either of the following categories (

After becoming a VIP trader on Bybit, don't forget to maintain your VIP status to continue enjoying the exclusive perks and benefits.

If you have active VIP status at another crypto exchange, or your total MT5 trading volume meets Bybit's VIP criteria, you can apply for a VIP+2 upgrade. This upgrade will grant you VIP status on the platform — and instantly elevate it by two levels. (Please 

 that Bybit only considers 10% of any MT5 forex trading volume.)

 and submit your 30-day trading volume on your current exchange. Bybit’s VIP team will review your application, and a Relationship Manager will contact you if you're eligible for the VIP upgrade.

How to Get Started With a 20-Day Bybit VIP Trial

Another way to qualify for VIP status on Bybit is through a 20-day trial. Instead of fulfilling the requirements of the VIP 1 level, simply fund your account with $50,000 to enjoy the exclusive benefits of the program for 20 days with a VIP Trial Card (issued one day after your deposit). The VIP trial offer is available to users who haven't used a trial within the past two months.

To unlock the 20-day VIP trial, head to the 

 menu on Bybit and use one of the available payment methods to fund your account with $50,000 in assets.

With VIP Level-Up Tasks, you can earn generous bonuses as high as 6,000 USDT. You can claim rewards for Level-Up Tasks for five VIP levels (VIP 1, VIP 2, VIP 3, VIP 4 and VIP 5), with higher tiers offering greater bonuses upon completion.

If you're eligible, you’ll see a pop-up window with VIP Level-Up Tasks after you log into your account. To claim your rewards, complete the specified trading volume requirement within 14 days of receiving the task, and click on the 

 page. You can learn more about Bybit VIP Level-Up Tasks

Exclusive Trading Benefits Offered to Bybit VIPs

As a member of the Bybit VIP Program, you can unlock exclusive benefits to supercharge your trading experience. Among these are discounted trading fees (which can significantly boost your trading revenue), profitability and chances of winning trades.

In addition to discounted trading fees, you’ll also enjoy substantially higher API trading and withdrawal limits. While the former is restricted to 10 trades per second for non-VIP users, you can take advantage of up to 120 API trades per second as a VIP trader. Simultaneously, your daily withdrawal limit is increased from the basic 1 million USDT to as high as 12 million USDT.

 is an exclusive club that provides an enhanced service experience for the most esteemed traders. As a member, you can access a multitude of exclusive benefits and perks, such as the following:

Are you ready to supercharge your trading experience? 

Intermediate

bybit vip.png

How to Become a Bybit VIP: Your Guide to Exclusive Benefits

LETSTOP is a drive-to-earn mobile app that monitors phone distractions while driving. Learn more about how it works in this article.

Smartphone distractions have created an unprecedented road safety crisis worldwide. 

: texting behind the wheel makes drivers six times more likely to crash than drunk driving does — yet millions of drivers still use their phones while operating vehicles.

This article explores how LETSTOP is transforming safe driving into rewarding experiences through blockchain technology. We'll examine its drive-to-earn model, reward system, tokenomics and potential as both a road safety solution and an investment opportunity.

 is a drive-to-earn mobile app that monitors phone distractions while driving. Users earn STOP tokens for phone-free driving through a gamified system that transforms daily drives into rewarding experiences.

A life-changing car accident caused by a distracted driver running a red light inspired LETSTOP co-founder Almog Nissan to reimagine road safety. Together with co-founder and CEO Dor Levy, they envisioned rewarding safe driving, rather than just punishing dangerous behavior.

The founders built a platform that combines automotive technology, cryptocurrency and AI to revolutionize road safety through rewards. This innovative approach has quickly gained traction, with over 50,000 users logging over 3 million kilometers of safe driving since the app’s launch.

Distracted driving claims thousands of lives annually, with 

, of which 9% are directly linked to phone use. LETSTOP aims to tackle this crisis as follows:

Each of these objectives works harmoniously to support LETSTOP's ultimate mission of transforming road safety into a rewarding experience that benefits both individual drivers and society.

The LETSTOP app operates through a sophisticated system that monitors and rewards safe driving through the following apps and features:

The result is a dynamic system in which better driving habits unlock greater earning potential.

The following five core features power LETSTOP's drive-to-earn ecosystem.

LETSTOP uses a dynamic 40-level system to make safe driving rewarding. As drivers earn XP through distraction-free journeys, they advance from Level 1's 2% bonus toward Level 40's 70% boost. Through this gamified approach, daily commutes become opportunities to climb the ranks while building safer driving habits.

LETSTOP Credits are the core currency of the platform, earned directly through safe driving achievements. Earning rates directly scale with user level, vehicle type and subscription tier as follows: PRO subscribers enjoy unlimited earning potential, while PLUS and LITE tiers are capped at 300 and 150 monthly credits, respectively.

In the STOP Store, users invest their earned credits into virtual cars with unique earning multipliers. From the basic model's 2% bonus to the Jazzster GN's 150% boost, each vehicle offers different strategic advantages for maximizing rewards.

Beyond vehicles, the store features mystery boxes containing rewards from 10 to 450 credits, as well as car upgrades and subscription boosts. Users can also access a voucher marketplace to redeem credits for real-world rewards through LETSTOP's partnership network.

LETSTOP's triple-boost system combines vehicle multipliers for immediate earnings acceleration, a level-progression system for sustained growth and a 5% referral program for community expansion. Premium membership unlocks enhanced benefits across three tiers, while special events create time-limited opportunities for increased rewards.

The platform's comprehensive rewards system operates across three membership tiers, each one tailored to different user needs. LETSTOP PRO (at $9.90 monthly) offers unlimited credit earning potential and exclusive benefits. The PLUS tier provides a balanced option at $4.90 monthly with a 300-credit earning cap, while the free LITE tier allows users to earn up to 150 monthly credits.

Beyond direct earnings, the rewards system incorporates partner vouchers, cryptocurrency conversion options and community features, such as leaderboards. Achievement rewards recognize milestones in users' safe driving journeys, while the upcoming cryptocurrency integration will allow users to convert their efforts into tradeable STOP tokens.

LETSTOP has shown consistent progress, with the following key milestones already achieved:

Looking ahead to 2025, LETSTOP plans to implement the following key developments:

These developments aim to strengthen LETSTOP's position as a leader in drive-to-earn while furthering its mission to enable safer roads worldwide.

STOP is an SPL token built on the Solana network. It’s designed to bridge safe driving behavior with cryptocurrency rewards. The STOP token implements an annual halving mechanism to ensure long-term value preservation, similar to Bitcoin's model, but accelerated to align with the project's growth trajectory.

STOP has a max supply of 100 million tokens, to be distributed in the following manner:

The growing adoption of LETSTOP's drive-to-earn app and its impact on road safety directly influence STOP's price trajectory. While cryptocurrency forecasts remain speculative by nature, multiple price analysis platforms project the following for STOP:

These forecasts suggest a positive long-term outlook for STOP, driven by the growing drive-to-earn sector and LETSTOP's innovative approach to road safety. However, STOP's future value will ultimately depend upon user adoption, platform development and broader market conditions.

Looking to trade LETSTOP tokens? Bybit now offers the STOP/USDT Spot trading pair. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the 

STOP shows promising potential in the drive-to-earn sector, though investors should carefully weigh both its strengths and potential risks before making investment decisions.

While STOP's innovative approach to road safety and its strong initial traction distinguish it in the market, potential investors should 

 and invest no more than they can afford to lose.

As smartphone distractions continue to endanger lives on roads worldwide, LETSTOP offers an innovative path forward. Through its innovative drive-to-earn model and STOP token ecosystem, the platform transforms daily commutes into safer roads and user earnings opportunities, showing how digital innovation can effectively “drive” positive behavioral change.

letstop, stop crypto.png

LETSTOP (STOP): Turning Daily Rides Into Profitable Journeys

FDUSD, a stablecoin from First Digital Labs, is now live on Sui as a native token, joining other stablecoins like USDC and AUSD.

The S&P 500 ended flat amid mixed earnings and geopolitical concerns, as investors awaited Thursday's data and Fed commentary. Coindesk Indices, an index measuring broader cryptocurrency market performance was up by 2.01%, with Bitcoin rising by 1.91% and Ether dropping by 0.59%, in the past 24 hours.

Today's top performer is LUMIA, which surged 16.1% following the announcement of its partnership with Cobox to bridge real-world assets and virtual ownership.

Lumia (LUMIA), founded in 2024, is a Layer 2 blockchain solution leveraging the Polygon CDK to enhance scalability, liquidity, and interoperability. It addresses challenges like data availability and cross-chain interactions by incorporating AvailDA for decentralized data and Polygon AggLayer for cross-chain functionality, enabling efficient and flexible dApp development. 

 to integrate real-world assets (RWAs) into its immersive, player-owned universe. This collaboration aims to enhance asset liquidity, trading, and gameplay experiences, bridging digital and physical realms for more tangible and vibrant virtual ownership.

Check Out the Latest Prices, Charts, and Data of 

, a stablecoin from First Digital Labs, is now live on Sui as a native token, joining other stablecoins like USDC and AUSD. This launch reflects growing institutional confidence in Sui, which has seen significant growth in TVL and DeFi volume. FDUSD, backed by reserves in Asian banks and US Treasury debt, offers DeFi users a reliable, US Dollar-pegged stablecoin, bridging traditional finance and cryptocurrency ecosystems.

Yesterday, the total flow into Bitcoin Spot ETFs is $146.9 million, with $0 million in GBTC and $146.9 million in non-GBTC products.

: the Spotlight Badge, which requires minting through the Spotlight Protocol and joining a Spotlight circle; the Impossible Finance Badge, which involves completing social tasks, claiming the TIDIA faucet, staking TIDIA on Impossible Finance, and then claiming the badge; and the SNGLR Badge, where users connect their wallet, follow artists, mint IP assets, tweet, and provide personal details to claim their badge. More badges are coming soon!

Beginner

4.png

FDUSD Launches as Native Stablecoin on Sui, Strengthening DeFi Ecosystem

Morpho (MORPHO) is an efficient Ethereum-based protocol revolutionizing decentralized lending with customizable peer-to-peer and pool-based solutions.

Liquidity pools have revolutionized decentralized lending and borrowing by offering a wide choice of product options and significant liquidity levels. For several years, protocols like 

 (COMP) have been lauded as true innovators that introduced a real game-changer: pool-based lending and borrowing. However, a closer look reveals that things aren’t as efficient and smooth as they may seem within the world of crypto lending. The problem is that lending pools on decentralized protocols often have mismatches between lenders and borrowers, with the former substantially outnumbering the latter. As a result, lenders earn only meager 

s, while borrowers pay exorbitant fees to access funds via these pools. Another critical problem is the lack of customizability in lending and borrowing products, with many protocols adopting a one-size-fits-all approach.

Morpho (MORPHO) is a decentralized protocol on 

 (ETH) that aims to improve the efficiency and flexibility of crypto lending and borrowing by offering a unique model that combines the elements of 

 (P2P) and pool-based matching of lenders and borrowers. To be precise, one of Morpho's essential products, Morpho Optimizers, specifically focuses on P2P matching, with pool-based lending and borrowing used as a fallback option. Morpho also offers users an excellent level of customization for creating new lending markets through its core protocol.

With its innovative lender-borrower matching mechanism and highly customizable and flexible markets, Morpho greatly improves capital allocation and transaction efficiency in the 

 (MORPHO) is an Ethereum-based decentralized lending protocol that offers a unique P2P order matching mechanism to improve the efficiency and affordability of 

 The platform also enables users to create efficient lending markets with highly customizable lending and borrowing parameters. Additionally, it offers a product, Morpho Vaults, for curated lending at varying risk levels.

, a France-based software development company founded in 2021 by Merlin Egalité and Paul Frambot. It's also supported by the nonprofit 

As its first major product, the project launched Morpho Optimizers on the Ethereum blockchain in 2022. Morpho Optimizers is designed as an add-on solution for lending pools on Aave and Compound to help match individual lenders and borrowers. The transacting parties can benefit from a more efficient lending process than with the default pool-based mode.

In January 2024, the project launched Morpho Blue, later rebranded to Morpho, a solution to help users create highly flexible lending markets with custom parameters and options. Morpho acts as the backbone of the Morpho ecosystem, and the project team has turned its focus to promoting and further developing this product. At the same time, Morpho Optimizers remains an integral part of the platform's core offering, albeit in a less prioritized state than Morpho.

The Morpho protocol consists of three main products — Morpho, Morpho Vaults (based on the underlying protocol) and the legacy Morpho Optimizers. Morpho allows users to create individual lending markets by specifying their preferred options for the following key attributes:

All these parameters are highly customizable, with minimal interference from the Morpho governance mechanism. Some parameters do have to conform to certain requirements; e.g., the IRM and LLTV must be from the list approved by the protocol's governance.

Morpho's high level of customizability is a significant departure from the typical model used on decentralized lending and borrowing platforms. On most other protocols, there are fixed parameters governing the lending and borrowing process; e.g., only certain collateral assets, lending assets or LLTV rates are allowed. In contrast, Morpho lets you customize all of these options, giving lending market creators an unmatched degree of freedom. The protocol offers the following key benefits to users, developers and market operators:

While Morpho is currently the platform's flagship product, the legacy Morpho Optimizers continues as a key offering in the platform's product line. Morpho Optimizers are add-on layers to the Aave and Compound lending pools. They can be used to facilitate a peer-to-peer match between lenders and borrowers. Since typical lending pools — including on platforms like Aave and Compound — are often heavily skewed with more lenders than borrowers, both parties end up paying excessive fees. Borrowers have to confront high costs due to the need to service the many lenders in the pool. In turn, lenders fight for the meager scraps left over from insufficient numbers of borrowers.

By using a P2P matching mechanism, Morpho Optimizers effectively takes the lender and borrower away from pool-based interaction and establishes a direct relationship between them. This allows users to borrow assets at cheaper rates, while also delivering better APYs for lenders. If either party withdraws from the direct lending relationship, both parties have the option to use the standard lending pools on Aave and Compound as a fallback.

The platform's third core product, Morpho Vaults (covered in more detail below) utilizes the underlying protocol and provides a way to lend through carefully curated market options at different risk profiles. This can suit lenders who are less proficient in using fully customized markets, but still prefer to take advantage of the lending opportunities offered by Morpho.

In order to create a custom lending market on Morpho, you need to have some technical proficiency and, preferably, knowledge of Solidity, the programming language that the protocol uses for its smart contracts. As noted earlier, developers can create a custom market by supplying five base parameters — a collateral asset, an asset offered for lending, an oracle, a preferred IRM and an LLTV. The first four of these normally require an Ethereum smart contract address to be specified. For the collateral and lending assets, these are the addresses for the tokens' contracts. The selected oracle is also usually established via a pointer to its smart contract address, although oracle-less hard-coded prices for the collateral and lent assets are acceptable. Morpho also maintains Ethereum addresses for each IRM whitelisted by the protocol's governance; developers can use these when choosing a preferred IRM.

The last value, LLTV, is a hard-coded figure that defines the threshold beyond which a loan becomes unhealthy due to its poor 

. Liquidators on Morpho are protocol actors who are incentivized to cover bad debts in return for collateral, similar to the method used on many other lending platforms. They’re allowed to liquidate up to 100% of the debt. In return, liquidators receive the debt's collateral, as well as an additional incentive for their work.

Since Morpho is an oracle-agnostic protocol without a built-in oracle, each market can have its own oracle that sources prices for the collateral and lending assets from external sources. Developers are completely free in that regard, and can even hard-code asset prices for the market if they don't wish to use a price oracle at all. Naturally, an oracle is preferred for maintaining the most up-to-date and dynamic pricing information.

The IRM used is the only base parameter with which developers are somewhat restricted in their choice, as only whitelisted IRMs are allowed for a market. As of mid-November 2024, there’s just one whitelisted IRM that market creators can specify — the 

. This model dynamically adjusts interest rates to maintain the proportion of borrowed funds to supplied funds at close to 90%.

Morpho Vaults are a tokenized vault product that offers curated lending opportunities with varying pre-programmed risk parameters. Each vault is associated with a single loan asset, and can allocate deposits across multiple Morpho markets, thereby leveraging the overall liquidity available on the Morpho protocol. Morpho Vaults suit lenders who prefer predictable risk management over the uncertainty of completely custom markets. Each lender can earn APY rates commensurate with their chosen 

There is no limit on the number of vaults you can open on Morpho. Thus, you might even allocate funds to different vaults with significantly different risk levels to diversify your exposure.

Morpho Vaults' curated nature eliminates the need for users to spend time researching and evaluating individual markets' risk levels and return opportunities, as risk exposure is actively managed by the vault.

Since the vaults are connected to the underlying protocol, and source liquidity from it, they’re dynamically rebalanced, which helps optimize yields. Thanks to their permissionless and immutable nature, the vaults are also completely transparent. Moreover, they’re noncustodial, granting users full control over their deposited assets, which can be withdrawn at any time.

A lender deposits an asset into a Morpho Vault and receives shares of the vault as confirmation of their investment. The vaults themselves are tokenized products utilizing Ethereum's 

 standard, designed to represent tokenized vaults for yield-bearing assets. Each vault may be owned by a 

 (DAO), an individual DeFi expert or some algorithm maintained by a DeFi platform. A vault can be owned by only one entity. The owner may specify additional roles/entities for managing the vault. These roles can include one curator, one guardian and multiple allocators.

The curator is a party who sets certain limits, rules and boundaries for the vault, such as specifying asset supply limitations and enabling/disabling specific markets. Curators are instrumental in maintaining appropriate risk levels for their vaults. Assets that lenders lock in a vault are supplied to the protocol's underlying markets, based on curators' whitelists. There can only be one curator for each vault.

The role of guardian is a key vault position. A guardian protects the integrity and security of the vault. Guardians can revoke any action by the vault owner (or other entities) if they consider it to be against the interests of vault lenders. Each vault can only have one guardian, typically a DAO consisting of vault depositors.

Allocators are protocol actors whose job is to rebalance the liquidity utilized by Morpho Vaults to optimize interest rates and accessible liquidity. An allocator’s job is to rebalance and optimize the total liquidity, either manually or using bots, to best meet the needs of Morpho borrowers.

Morpho Vaults' operations aren't regulated by the protocol's governance mechanism. Each vault owner is responsible for their vault's governance model. Specific roles, such as the curator and the guardian, are designed to help in establishing transparent and secure governance procedures for a vault.

What Is the Morpho Crypto Token (MORPHO)?

The platform's native cryptocurrency, MORPHO, is envisioned as a 

. Holders of MORPHO have the right to participate in decision-making on the platform's future direction, general rules, deployment of smart contracts and allocation of funds from the treasury. Although Morpho promotes lending and borrowing markets that operate with minimal interference from the protocol's governance community, there are some general guidelines and rules through which the community needs to establish certain standards, minimum requirements or whitelists. MORPHO token holders are instrumental in this process.

The original MORHPO token was launched on Ethereum in June 2022 with a supply cap of 1 billion. However, there were limitations to the original token contract that negatively affected its functionality. Specifically, the token wasn't designed to facilitate efficient on-chain voting. As a result of these limitations, the project decided to relaunch the token, now on an upgraded contract. The new reincarnation of MORPHO will offer better functional capabilities, including more efficient on-chain governance processes. 

As of the time of writing on Nov 17, 2024, the project team has yet to deploy the new token. The new MORPHO will also be a supply-capped crypto, with a maximum and total supply of 1 billion. The token's supply distribution shares are shown in the chart below.

 token before its market launch. Bybit Pre-Market Trading is an over-the-counter (OTC) trading platform that provides access to promising new cryptocurrencies before their listings on the Spot market. The key advantage of the platform is the ability to access cryptocurrencies at desirable rates before the broader crypto market affects their prices.

Bybit's carefully designed curation process ensures that only crypto assets with solid potential and fundamentals are whitelisted for Pre-Market Trading. This saves you the time required to investigate each cryptocurrency, and reduces the risk of investing in scam projects. Naturally, you’re also encouraged to 

 on crypto assets you might consider purchasing through Bybit Pre-Market Trading.

Morpho represents a unique and potentially highly effective approach to DeFi lending and borrowing. The platform's facilitation of isolated and highly customizable lending markets gives DeFi users unmatched freedom in terms of choice and variety. In addition, users who prefer the stability of curated and well-defined risk profiles can take advantage of Morpho Vaults for more predictable yields. The use of the overall underlying protocol liquidity along with entities such as allocators makes Morpho Vaults particularly effective at optimizing lending and borrowing costs.

While custom lending markets launched via the protocol are now Morpho's key focus, the legacy Morpho Optimizers also continue to offer value. P2P matching of lenders and borrowers as an add-on to the standard pool-based mechanism is a functionality many DeFi users will find helpful. Morpho Optimizers can offer lenders and borrowers active on Aave and Compound an alternative and highly effective way of conducting their operations.

With this arsenal of innovative and unique products, the Morpho protocol is quickly shaping up as a leading platform in the lending niche of the DeFi industry.

Advanced

morpho crypto.png

Morpho (MORPHO): Leading Efficient, Permissionless Crypto Lending

Investing

Money is coveted by many, but it cannot exist in a vacuum. Discover what the economy does and how it works here.

How-Does-the-Economy-Work_1600x900.jpg

The economy impacts every aspect of our lives, from the food we consume to the people we elect to public office. Despite the economy’s reach, however, few people are able to grasp the full extent of its importance. We’ll break it down into basics for a clearer picture.

Economic issues are crucial to our everyday lives. The term “economy” refers to everything aimed at the production, sale, distribution and consumption of goods. It comprises companies, businesses, private and public budgets: in short, everything that aims to meet the demand for goods and services. The economy is an all-encompassing term which covers — but is not limited to — the production of commercial products and the provision of various services.

The interaction between demand and supply forms the economy. When people work, they generally create tangible products. For example, cars are built, clothes are made and crops are grown.

The economy consists of sectors like construction, mining and automotive. It also includes services, which are activities at which people work without directly producing any products. Services include trade, transportation, banking and more. 

Together, sectors and services make up the economy. 

. The economic activities of a market are subject to cyclical fluctuations. The four phases of upswing, boom, recession and depression characterize the development of various economic variables within an economic cycle. Economic variables include gross national product, gross domestic product, degree of employment, price development and, in this context, rate of inflation. 

The economy reflects the overall transaction and purchase cycles of a market. Economic activity can be measured by different variables such as national product,employment levels and price developments. 

An economic cycle is divided into four phases:

The economic cycle covers the entire period in which economic development goes through the individual phases, from one upswing to the next. Overall economic development occurs with a certain regularity. These economic 

 follow regular movements, or cycles, which may differ between sectors and industries. 

The economy and economic cycle are also influenced by fluctuations in economic variables, such as production rates, employment levels, interest rates and prices.

Following are the three main types of economic cycles.

Seasonal cycles or fluctuations are economic trends that last only a few months, but often have a significant impact on an economy. The retail sector, for example, sees an uptick in sales during holidays, from Valentine’s Day to Christmas.

Characteristics of seasonal fluctuations include:

 usually last several years, and result from a delayed imbalance between the aggregate forces of supply and demand. In contrast to seasonal fluctuations, economic fluctuations affect the entire economy. Economic fluctuations are characterized by:

Structural fluctuations are long-term, usually lasting between 40 to 60 years. They are brought about by technical and social innovations and their continued evolution. With technological changes, working capacities are freed up and can be used elsewhere, resulting in more innovations.

The four phases of an economic cycle are detailed as follows:

During the expansion phase, the positive mood of market participants creates optimistic expectations for the future. Usually, this phase comes after a crisis, and it’s often the result of economic and monetary stimulus measures employed by governments and central banks. Private demand for consumer goods increases and, among companies, the demand for capital goods. The 

 also increases during this economic trend, as the production of companies increases and more jobs are created. Similarly, the share prices of listed companies rise. (Note that the stock market rises even when the economy stagnates, and only the central banks are creating money.)

The following characteristics are present during expansion:

The boom is considered to be the second phase of the economic cycle. Production capacities are completely utilized, and companies record impressive profits and sales. During the boom cycle, market participants are positive, yet expectations are negative. The boom and upper turning point in a business cycle display the following characteristics:

At the height of the boom, the economy overheats, leading to a turnaround. Stagnation occurs as production rates can no longer be increased or sustained. The market becomes saturated, cutting off room for further growth.

A boom is followed by a recession, characterized by higher costs during the boom as demand slowly falls. The cost pressure on companies increases, and at the same time, profits shrink. Theoretically, this means that share prices are also falling, resulting in unemployment, more part-time (as opposed to full-time) jobs, and income reduction. The downturn is accompanied by a generally negative assessment of the economic situation by market participants. A recession displays the following characteristics:

In a depression, market participants are consistently pessimistic even as they see positive signals for the future. The depression phase can be described as a special case in the business cycle. It’s often accompanied by economic crises, as during the 

. Companies suffer as their equity capital shrinks. At the same time, interest rates on capital rise, and more companies are forced into bankruptcy. At the height of a depression, the value of money plummets because of low interest rates.

The depression phase can be identified by these characteristics:

In the study known as microeconomics, decisions of economic entities are analyzed against a background of individual benefit maximization. Households are faced with decision-making problems in the goods-services market, which are countered with a 

. Due to the division of labor between different production processes, companies are faced with coordination problems involving various factors of production. Based on this approach, conclusions can be drawn regarding the allocation of resources:

Note that these two types of economics adopt very different approaches: microeconomics uses a “bottom-up” approach, while macroeconomics looks at the effect of national economic statistics and decisions on the population at large. Put simply, microeconomics deals with the economy on a small level, whereas macroeconomics deals with the economy on a larger scale.

An economic system is a mode of operation regarding the economic activity of a state. The economic system has an impact in particular on the management of a country’s production and the functioning of its labor market.

There are three types of economic systems:

These systems each have specific characteristics which can be influenced and adapted according to the economic and political situation of each country.

In theory, these three economic systems are distinct entities. In practice, however, it’s not always easy to tell them apart. Even if a state’s economy is described as “planned,” it can still display some features of a free enterprise or market economy. Conversely, a state with a free-market economy may possess some aspects of a planned economy.

For example, although the U.S. economy is largely based on private enterprise and market laws, the government’s participation in certain economic areas (such as regulating the price of certain goods) reflects its intervention in the country’s economy — because this type of intervention is more characteristic of a mixed economic system. The economy of the same state may be described as mixed in one sector and free market in another.

This economic system advocates the nationalization of means of production. The state determines the nature and quantity of production in advance. For example, in a planned economy, prices are set by the state, and production involves the intervention of the state in the economy. There is little or no room for private enterprise.

In a mixed economy, both state and private enterprise have a role to play. Freedom of enterprise takes precedence, but the state also has a responsibility to intervene in the regulation and, sometimes, the nationalization of companies to achieve certain objectives. Today, the majority of Western countries run on a mixed economy.

The free market economy is also called a free enterprise economy. Unlike a planned economy, in which the state determines what to produce, supply and demand (also called the laws of the market) dictate prices and the functioning of the economy in a free market economy. Free enterprise is associated with weak state intervention and the dominance of private enterprise.

Generally, the growth of any economy is determined by that of its 

, which depends on how the country’s factors of production are used. These include capital, labor and total factor productivity. Capital refers to investments, while labor refers to the quantity of labor used, which is linked to the active population. Factor productivity encompasses the duration and quality of work, and the know-how accumulated by workers (referred to as human capital).

Investment in the economy is important for sustaining growth. Like labor, capital can grow extensively or intensively. A company makes its production decisions based on expected sales volume. When the economy is in an upswing, companies expect higher sales and will therefore increase production capacities. Companies hire new workers and invest in more machines, or upgrade their current equipment. Raw materials or intermediate goods may also be acquired. 

Consumption is the ultimate driver of demand in the economy. The greater the levels of consumption (government spending and consumer spending), the more likely an economy is to thrive.

One of the lasting effects of globalization is that the world’s economy has consequences for everyone, both local and global: households, governments and the international community. 

The local economy is the economy of an individual country,ranging from household consumption to investment decisions based on inflation and interest rates. This type of economy benefits only its residents. 

On the other hand, the economy of a country interacts with other international economies. The impact of this global economy is primarily on import and export activities. With technological advancement, the global economy also affects the number of investments and foreign exchanges made. 

Public debt corresponds to all public loans contracted by the state, social security, various central government bodies and local authorities. 

Public debt can have positive effects if the loans are used to finance public investments, such as infrastructure, unemployment benefits, healthcare, etc. Such spending increases the growth potential of an economy in the medium term. Ideally, this means that the state can then reduce its deficit again by increasing tax revenues.

Even in exceptional economic situations, borrowing can be useful in order to compensate for losses in demand on the part of companies and consumers.

Negative effects of public debt include rising interest and repayment obligations, which can increase calls for austerity measures. On the other hand, increasing government borrowing risks displacing private loans and investments from the market. The result can have correspondingly negative consequences for economic growth.

Also known as the business cycle, the short-term debt cycle is characterized by the presence of cheaper money in the economy due to lower interest rates. This effectively encourages consumption in the economy, resulting in increased demand and a rise in inflation, ultimately paving the way for the four business cycles discussed earlier. Interest rates and inflation are the primary factors which influence the short-term debt cycle.

Note that each short-term debt cycle typically ends with more growth and debt than the previous one. This means that debt increases faster than incomes over long periods, which causes the long-term debt cycle.

During a long-term debt cycle, people may be getting more and more loans despite rising economic debt. Why? Quite simply, because they think things are going well. Humans tend not to have good long-term memories — when things are going well, we choose to focus on the positives, such as increased incomes, booming stock markets and spiking real estate prices, etc. This can lead to impulsive/spur-of-the-moment decisions.

It’s worth investing in certain goods, services and financial assets with borrowed money. For instance, housing is a necessity for everyone, and you may want to buy an apartment to live in. In this case, taking out a bank loan is perfectly justifiable. 

However, if as a society we rely too much on credit, a bubble may begin to develop. Eventually, this can result in a debt burden that must be reduced by means other than a reduction in interest rates. According to American investor Ray Dalio, there are four ways to achieve this reduction:

Unlike the short-term debt cycle, the long-term debt cycle occurs over a much longer period of 50 to 75 years. It is driven primarily by the accumulation of public and private debt. 

Inflation describes a general price increase without a commensurate increase in value. There are several causes of inflation. Supply inflation is characterized by higher/rising prices of production factors, such as raw materials, or a rise in wages and non-wage costs. This makes the manufacturing processes of many goods more expensive. Companies pass on additional costs to consumers by increasing their prices. As a result, purchasing power decreases over time. 

 is the opposite of inflation. It’s defined as a general price decline over time, typically caused by a decrease in spending. As spending decreases, deflation can be accompanied by a recession. One solution is to lower interest rates. By lowering the interest rates on loans, lenders encourage more borrowing. Then, when more credit is available, the government expects the parties within its economy to increase their spending.

Supply is the quantity of goods and services available in the market for sale or exchange. It corresponds to the quantity of goods sellers offer on the market, which can be raw materials, products or services. Demand is the intention of households and companies to buy a good or service at a certain price. The demand-and-supply relationship creates market equilibrium. 

How Does the Economy Work? (Simplified)

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards