What is a market? Great question. In ancient times – and in many modern settings too – the market was a place where people could come to buy and sell a variety of items. Similar to the old-fashioned marketplace, an economic market offers opportunities for buying and selling. In this guide, we’ll take a closer look at market meaning with reference to economics rather than trade goods.
The Stock Market and More: A Quick Overview of Financial Markets
Markets are loosely defined as infrastructures, systems, and institutions that facilitate the buying and selling of resources including bonds, stocks, derivatives, currencies, and of course, cryptocurrency. Although the stock market and other markets have unique features, they also have many things in common.
The chief aim of most marketplaces is to facilitate trade that distributes resources throughout society. And, even though technology plays a major role in modern financial markets, there’s also a strong element of human interaction as individuals and businesses make decisions and act on them via buying and selling.
Government plays a role in economic markets, too. While regulations vary from one nation to the next, legal considerations are a big part of the marketplace. Laws governing economic markets are typically aimed at preventing fraud, assuring fairness, and ensuring compliance with tax codes.
Besides national markets that operate within a single country, there are international markets that encourage trading between individuals and corporations from different geographical areas. Governmental regulations affect both national and international markets; for example, certain areas forbid some types of trading.
There are many markets available, depending on your location. The New York Stock Exchange (NYSE), NASDAQ, UK’s FTSE, Stoxx Europe, France’s CAC, Germany’s DAX, and of course, cryptocurrency exchanges such as Coinbase.
The term market has traditionally been applied to physical spaces where goods, services, and securities are traded. While these markets continue to flourish, it’s important to consider online markets as well as tangible ones. Amazon and other online retailers are markets, and there’s no shortage of online financial markets that deal in stocks, bonds, securities, and crypto. All of these markets have something in common: The transactions occur entirely online, but they share the end goal of bringing buyers and sellers together for the purpose of exchanging real or virtual commodities.
How Supply and Demand affect a Market
You’ve probably heard about demand and supply. These mechanisms contribute to pricing and in certain sectors, have a strong impact on distribution. Supply and demand are a function of a competitive marketplace in which the price of a traded commodity is correlated to the available amount of the same commodity.
Think about something you enjoy; coffee is a good example for most of us. When coffee farmers enjoy a good year with ideal growing conditions that lead to an abundant harvest, that plentiful supply is reflected in coffee prices, so you get more for your money. When growing conditions are poor and the harvest is smaller, the price of coffee increases and we feel it in our personal budgets.
You can apply the principles from the coffee example to any commodity – even cryptocurrency. In most markets, supply is dependent on the seller, while it’s up to buyers to generate demand. When a certain cryptocurrency has high token availability with low demand from users and/or traders, the value of that cryptocurrency will drop. The opposite is true, too: When there’s a limited number of tokens and plenty of competition among users and traders, that coin’s value goes up.
Learn More about Markets
This has been a brief overview designed to put market meaning into context. Explore our glossary for more market-specific terminology including Market Cap, Market Order, and more. Have a question, or curious about getting started with cryptocurrency? Feel free to contact us. We’ll be happy to help.