What is the trend of future financial market exchanges?

The general trend in the financial world is that exchanges are becoming increasingly virtualized, unregulated, and decentralized.

The earliest stock exchanges in human history were offline, where people stood on the streets shouting at each other, eventually gathering to trade. With technological advancements, trading gradually became electronic but faced strict regulations. Starting with cryptocurrencies, many exchanges began to evade or even require no regulation, eventually leading to the emergence of completely decentralized exchanges. This development trajectory is very clear.

Therefore, the ultimate form of the trading industry must be decentralized and without any regulation.

The evolution of trading methods
Early days: Trading required calling your broker, who would help find a matching buyer, with high commission fees.

Now: Just click on your phone to complete a trade, with almost no transaction costs.

The rise of ICOs and decentralized exchanges
The world is optimistic that ICOs (Initial Coin Offerings) will increasingly become mainstream. In fact, many projects have already conducted IPOs in this manner in 2017, although many scams also emerged.

But is this the most essential form of things?
Think about current enterprises; if they need to raise funds from the public, they must go through complex reviews, accounting audits, etc., with very high costs. But if all business transaction records of an enterprise are public and verifiable, why do we still need to hire professional accounting firms for audits? We could directly open-source a program for automatic auditing, fairly assessing the value of enterprises and participating in market buying and selling. This way, the allocation of social resources would be more efficient.

I believe we will soon see the arrival of this day. By then, traditional exchanges like NASDAQ or the New York Stock Exchange, which have existed for decades, will have to reform or even possibly go bankrupt.

Cryptocurrency exchanges vs. traditional exchanges
Cryptocurrency exchanges are products of another era compared to traditional exchanges (like IBKR).

Traditional exchanges: Set complex rules and charge expensive fees. Their trading varieties have complex rules, such as pre-market and post-market trading, stock splits and mergers, and various regulations on insider information. They believe this way manages the market and provides a fairer trading environment, but in reality, it only allows early market participants with advantages to more reasonably use their positions, setting higher barriers for newcomers.

Cryptocurrency exchanges: Make all information public and let the market fully compete. In the long run, this method is more reasonable and fair.

Of course, there is no perfect solution; everything is evolving.

Changes in trading theory
In traditional classic trading theory, you should control your drawdown, with the maximum loss per trade not exceeding 1% to 2% of your position. This is the ‘bible’ of many trading theories.

But with the development of the crypto field, the traders who have really made big money in the world have used leverage, participating in trading in a way almost like gambling. But in fact, they are not gambling; they are reducing the number of times they participate in the market, filtering out the best trading opportunities, and then using huge leverage. This is the so-called ‘Go big or go home.’

In the crypto field, you can easily find many traders whose assets have multiplied thousands or even tens of thousands of times. I know several of them and have witnessed their success firsthand. In the traditional trading field, this is almost an impossible phenomenon. Even Warren Buffett has not achieved such results in his trading career.

Mathematically, the trading methods in the crypto field are not at a disadvantage compared to traditional trading methods and may even have advantages. Because the characteristics of the crypto market are 24-hour trading, extremely high volatility, and since there are no fundamental restrictions, the rise and fall of prices have almost no fair value. Simply put, they almost entirely rely on the greed and fear of traders. Faced with such a market, traditional securities trading principles no longer apply.

Summary
I am not encouraging you to participate in the financial markets, as there are few successes, and they face extraordinary pressure that ordinary people cannot handle. I just want to illustrate that, as time passes and the market changes, anything revered as the ‘bible’ is worth reconsidering.