The MANTRA (OM) token’s wild crash on Apr 13, 2025, shocked the crypto world. Discover the causes, fallout, and what’s next in MANTRA’s road to recovery.

In the morning and daytime hours of Apr 13, 2025, the MANTRA blockchain's native token, OM, sat at a respectable market cap of $6 billion, making it the third-highest-ranked cryptocurrency in the 

 (RWA) category, the area the platform specializes in. Everything seemed like smooth sailing for the token.

Then, just after 6 PM UTC, the price of the OM token suddenly began to free-fall, declining from nearly $6 to about $0.50 in the space of just two hours.

A project that started the day as one of the top players in the RWA field was now worth 90% less as the evening approached. OM's abrupt, sharp crash immediately caught the market's attention, with speculation of a 

However, MANTRA's CEO, John Patrick Mullin, immediately sprang into action for PR damage control on social media, reassuring the public that the team members weren’t dumping OM tokens at all. Instead, MANTRA's founder and CEO alleged that deliberate actions of some 

 (CEXs) had caused the catastrophic plunge.

As of our coverage date of Apr 23, 2025, this is a developing story. In this article, we’ll establish what actually happened, who's involved and what awaits the OM token in the foreseeable future.

 decentralized network dedicated to RWA tokenization and utilization in compliance with real-world regulatory requirements.

 It features high scalability and low transaction fees. The project is one of the earliest initiatives dedicated to RWA use via blockchain technology. Originally, MANTRA debuted as a 

 (ETH) in August 2020. In October 2024, the project migrated to its own dedicated Layer 1 platform, the MANTRA Chain. The MANTRA blockchain is based on the Cosmos SDK framework, and is part of the wider 

The MANTRA ecosystem's main products include MANTRA DEX, a 

 (DEX); a digital identity (DID) management tool; a compliant token development and management solution; and a comprehensive compliance and permissioning system. MANTRA has also partnered with global powerhouses like Google Cloud, and with DAMAC Properties, one of Dubai's most prominent developers, to propel innovative solutions for 

Starting in late 2024, right after its own dedicated mainnet launch, MANTRA had become a significant player in the RWA corner of 

 (DeFi). By late February 2025, the platform’s native OM token had climbed to a value of nearly $9, with its market cap peaking at around $8.2 billion. Before the fateful events of Apr 13, 2025, OM was the third-highest-capped crypto in the RWA category, trading at $6.27, with a market cap of slightly over $6 billion, according to the CoinGecko portal.

In the evening hours (UTC time) of Apr 13, 2025, OM began to lose its value precipitously, dive-bombing from over $6 to about $0.52 in the space of two hours. The token’s market cap fell to slightly under half a billion dollars — a loss of more than 90%.

CEO John Mullin was quickly online, reassuring the crypto community that no team member had sold their OM holdings, and that this wasn’t a case of the bad ol’ rug pull. Instead, Mullin alluded that after OM tokens were moved to two leading CEXs (Binance and OKX) to use as collateral, the exchanges initiated a cascade of 

 of positions backed by the token. Both exchanges refuted the allegations, and connected OM’s price collapse to its recent unusually high price 

, and significant tokenomics changes made to OM in October 2024 that greatly undermined its value.

As a chain of liquidations took place, the token’s price started to plummet, causing significant panic that quickly led to further price drops. The situation only stabilized closer to the end of the day, with OM’s price remaining under $1. As of Apr 23, it’s trading at $0.5543 — a far cry from its rate of over $6 just two weeks ago.

After investigating, crypto analytics firm Lookonchain concluded that 17 wallets had deposited 43.6 million OM tokens (4.5% of the token's circulating supply) into the implicated exchanges. Two of these wallets are believed to belong to Laser Digital, one of MANTRA's investors. Another investor in the project, Shorooq Partners, is also suspected to be among the 17 wallets. Both Shorooq and Laser Digital have denied the allegations.

Although the price plunge was immediately compared to the 2022 collapse of the 

 (LUNA) blockchain, many analysts point out that the two crashes are fundamentally different. Terra's crash resulted from structural abnormalities in the 

 regulating UST, the project's stablecoin. In contrast, OM's fiasco is suspected to be the direct result of market-driven manipulation by 

, and possibly exchanges. No security breach, disruption to services or data, or other adverse structural events have occurred on the platform.

While this development is unprecedented for the project, MANTRA has been embroiled in other controversies throughout its history. One of these was its 

, first announced in August 2024 and then delayed multiple times. Around 50% of the wallets believed to be bots were cut off from the airdrop list. However, many considered the bot-culling process to have been conducted without much proof.

There have also been reports of vote rigging in the project's governance system in a bid to obscure MANTRA’s centralized model of profit allocation. Additionally, some analysts have accused the project of "forced bridging" to manipulate the market price. Platform users had to migrate their Ethereum-based OM tokens to MANTRA's native OM tokens via 

, which would increase gas fees and allow the project team to control the token's circulation pace.

How is MANTRA (OM) headed toward recovery?

MANTRA’s CEO rapidly reassured users that the team is now working hard to jump-start the token’s recovery. On Apr 14, 2025, Mullin unveiled plans to initiate a buyback scheme, along with the intent to burn all OM tokens held by the project team. The team's supply totals 300 million tokens, representing about 17% of the total supply.

He also denied factually incorrect assertions circulating online that the team effectively controls 90% of OM's supply. Mullin further assured the public that no large-scale selling events by investors have occurred.

As OM’s value has stayed firmly under $1, it remains to be seen how these PR efforts — as well as the planned buyback and burn — will affect the token’s future.

 as a swap pair with USDT, or on the Derivatives market as the 

Naturally, given the ongoing situation with the OM token, buying OM is at your own discretion, as right now the token is truly for the adventurous and brave at heart.

As of Apr 23, 2025, the OM token is trading at $0.5543, 93.8% lower than its ATH of $8.99 on Feb 23, 2025, and 3,138.8% higher than its ATL of $0.01726 on Oct 12, 2023.

Curiously, most crypto price prediction portals are optimistic about the OM token's long-term prospects. DigitalCoinPrice 

 of $1.81 in 2027 and $2.82 in 2030, whilePricePrediction 

It's hard to verify all the allegations flying around regarding the involvement of exchanges and key investors in the MANTRA OM incident. What matters at this stage is that the project team has been quick and proactive in injecting transparency and clarity into the situation.

The free fall in the token's price seems to be over by now. In fact, OM’s decline was over within hours of the incident. Moreover, unlike Terra's LUNA and UST coins, OM hasn't become worthless. All these factors point to potential stabilization and recovery ahead. The question now is: Will the pace and magnitude of the recovery be enough to save the project in the long term? At this early stage after the collapse, few people could answer the question with confidence. We'll eagerly await the developments over the next few weeks to see if MANTRA finds its way out of the woods. 

Intermediate

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MANTRA (OM): Understanding its wild ride and road to recovery

In this article, we explore WalletConnect's features, its native token (WCT) and how you can trade WCT on Bybit Spot and Futures.​

WalletConnect is an open source bridging protocol that facilitates secure connections between digital wallets and 

 (DApps). With over 38 million unique active wallets and 57,000 supported apps, it’s getting noticed by the crypto community. In this article, we explore WalletConnect's features, its native token (WCT) and how you can trade WCT on Bybit.​

 protocol that allows users to connect their mobile wallets to DApps via QR code. This eliminates the need for browser extensions, and enhances security by keeping 

The protocol supports a wide range of wallets and DApps, making it a versatile tool for users navigating DeFi and web3.

 is essentially a decentralized infrastructure that facilitates a uniformed way for users to easily connect their crypto wallets with thousands of DApps. It operates through a network of

 that relay messages, ensuring reliable and secure connections. The network's design emphasizes scalability and resilience, catering to the growing demands of DeFi. 

When a user initiates a connection between their wallet and a DApp, WalletConnect establishes a secure session through a relay server that enables encrypted communication, allowing users to interact with DApps directly from their wallets. 

The network's architecture ensures that messages are transmitted efficiently, maintaining a seamless user experience.​

The WalletConnect ecosystem comprises various stakeholders, including node operators, wallet providers and DApp developers. Node operators play a crucial role by maintaining the network's infrastructure and relaying messages. 

To incentivize participation, the network implements a rewards mechanism whereby node operators earn WCT tokens, based on their performance and contribution. Prominent organizations like Consensys, Ledger and Figment are among the network's node operators, underscoring its robustness and reliability.​

 is the native utility and governance token of the WalletConnect network. It has a total supply of 1 billion, 

Initially, WCT is nontransferable to ensure that tokens remain within the WalletConnect ecosystem, supporting its focus on network functionality and development. Based on discussions within the community, transfers will be enabled based on community consensus and future governance decisions.

Where to buy the WalletConnect token (WCT)

 on Bybit Spot, and as a Perpetual contract with up to 75x 

. Bybit provides a secure and user-friendly platform for buying and selling WCT, allowing users to participate in the WalletConnect ecosystem. 

How to trade the WalletConnect token (WCT) on Bybit

Bybit's platform ensures efficient execution and provides various tools to assist users in their trading journey with ease.​ 

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WalletConnect (WCT): Bridging web3 beyond wallets and DApps

Circle has launched the Circle Payments Network (CPN), a global payment solution designed to streamline cross-border transactions using stablecoins like USDC and EURC for real-time settlement. 

The S&P 500 rose 2.51% as investor confidence improved following President Trump’s support for Fed Chair Powell and hints of easing U.S.-China trade tensions, despite tempered optimism and Tesla’s earnings miss. Gold rebounds toward $3,400 as the US Dollar weakens and investor caution lingers over US-China trade and Fed concerns. Technicals suggest a possible pullback, with focus shifting to upcoming S&P Global PMI data. The Coindesk Indices, which tracks the broader crypto market, rose 7.46%, with Bitcoin and Ether up 4.68% and 7.70%, respectively, in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is DEEP, up 122.1%, following the launch of DeepBook v3.1 on Sui, which unlocks permissionless pools, enhanced balance management, and cost-efficiency for DeFi.

DeepBook (DEEP), launched on July 12, 2023,  is Sui’s native liquidity layer, using a central limit order book to enable high-throughput, low-slippage, and low-fee trading. 

, introduces several key upgrades: permissionless pools, revamped fee mechanics, and enhanced balance management. These changes make DeepBook more accessible, composable, and cost-efficient for DeFi users. Permissionless pools allow anyone to create custom trading pairs, while the enhanced balance manager supports third-party liquidations and improves protocol stability and user experience.

Check out the latest prices, charts, and data of 

, a global payment solution designed to streamline cross-border transactions using stablecoins like USDC and EURC for real-time settlement. CPN offers faster, programmable, secure, and always-available money movement for financial institutions. It supports services like invoice payments, remittances, treasury services, and payroll payouts. Over 20 design partners, including dLocal, WorldRemit, and BVNK, are contributing to building a more efficient global payments infrastructure.

Yesterday, Bitcoin spot ETFs saw $719.2M in total inflows, with $654.1M from non-GBTC funds and $65.1M from GBTC.

 its incentivized testnet, allowing users to earn $SO tokens by testing its cross-chain lending platform. By supplying and borrowing assets across chains and completing quests, participants earn "Seeds," which will convert to $SO at TGE. Powered by LayerZero, Soul aims to unify liquidity across blockchains.

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Circle launches Circle Payments Network for faster, secure global transactions using stablecoins

VeChain (VET) is a blockchain platform focused on sustainability, using eco-friendly technology to support green initiatives across industries and drive a more sustainable future.

Sustainability is now the name of the game across many industries. The blockchain industry is one of them, with several projects aiming to reduce the energy impact of their operations or support green causes in other ways. However, on closer inspection, sustainability has received much less attention in the world of blockchain technology than many people may assume. Indeed, the industry's two leading data portals, CoinGecko and CoinMarketCap, have no "Sustainability" or similar category, despite coming up with hundreds of other classifications.

Some smaller-cap projects outside of the top 100, such as 

 (IOTA), do focus on supporting environmental causes. But in the entire list of top 100 cryptocurrencies by market cap, only one project can confidently be described as having sustainability as its key pillar — 

With a market cap of $2 billion (as of the time of writing on Apr 22, 2025), VeChain stands head and shoulders above any other crypto project in the sustainability niche. The project has been fully operational since 2018, and is among the oldest environmentally focused blockchain initiatives. In short, if we talk about sustainability and blockchain, it would be disingenuous not to mention VeChain and its 

Having championed green blockchain causes since 2018, VeChain announced a significant upgrade initiative in late 2024 to be rolled out in stages during 2025. Called Renaissance, it’s envisioned to further solidify VeChain's position as the leader of eco-friendly blockchain use and introduce a host of technical improvements. In fact, 2025 is the year of the most fundamental upgrade to this notable industry player in its entire history on the market, so it's precisely the time to revisit this project in our coverage.

VeChain (VET) is a decentralized project designed to support sustainability-focused blockchain use cases across various industry verticals.

 The company was first conceptualized and founded as a blockchain project in 2015 by Chinese technology professional Sunny Lu. It launched its Layer 1 network, VeChainThor (VTHO), in mid-2018, becoming one of the first decentralized initiatives to support eco-friendly applications on-chain. The VeChainThor network features low transaction fees and high levels of scalability.

For years, the VeChain blockchain has remained probably the leading decentralized platform in the niche of sustainability. As of April 2025, it retains the leadership position, and is ranked 56th among all cryptocurrencies, with a market cap of $2 billion.

VeChain's sustainable blockchain technology

Many blockchains claiming to support environmental causes typically use the 

, which is indeed much more energy-efficient than the power-hungry 

 (BTC). By using PoS, these blockchains have boldly announced that their energy use is much lower than Bitcoin's. While this is true, these platforms are essentially general-purpose networks that don't specifically design their operations with any particular sustainability use case in mind.

Instead of these two typical consensus mechanisms, the VeChainThor blockchain uses 

 (PoA), touted to be even more energy-efficient than the standard PoS employed by 

 chains. In a typical PoA consensus, a smaller number of validators with "authority" — i.e., a history of reliable behavior on the network — are entrusted to process blocks. This is in contrast to PoS, whereby many validators take part in the staking contest to outperform each other in terms of token holdings. They then receive the right to validate the next block, and have to constantly align their consensus process with other 

As a result, PoS is usually less energy-efficient than PoA. VeChain's PoA model elegantly combines efficient processing, minimal energy use and high levels of enterprise-grade security.

The VeChainThor blockchain network's processing engine also features compatibility with the 

 (EVM), making cross-chain communication with the Ethereum world much easier for VeChain developers and 

PoA block validation isn’t the only sustainability-minded feature of VeChain. Unlike many other popular chains, VeChain also directly enables sustainability use cases, primarily by utilizing its tamperproof and transparent data-tracking mechanism. Thus, enterprises across different industries can track and reliably verify the origin of goods and their sustainability status for eco-friendly supply chain management. For instance, supermarket chains can use the platform to track and verify the carbon footprint of the produce they source; logistics companies can calculate the overall emissions generated along their supply chains; and fashion brands can track sustainable sourcing of materials used for their product lines.

Besides its own blockchain, the project also offers a blockchain-as-a-service (BaaS) platform, VeChain ToolChain, to help businesses integrate VeChain's technology into their business processes via standardized smart contract services.

To further position itself as a champion of sustainability, VeChain launched 

 represents an on-chain ecosystem of DApps that reward VeChain users for completing various eco-friendly tasks, such as using reusable coffee cups, shopping for organic products, picking litter off streets and more. VeBetterDAO is the project’s foray into the individual consumer side of environmentalism, which complements the VeChain platform’s long-standing sustainability features for the enterprise world.

In late 2024, VeChain first announced its planned multi-stage upgrade, Renaissance, to make the platform even more efficient. Its changes are envisioned to take place gradually throughout 2025, and possibly beyond. The Renaissance upgrade touches many parts of the platform, with three key areas involved — a new VeChain staking and node model, technical updates and changes to the dual token mechanism. We'll cover the first two areas below, and the changes to VeChain’s tokenomics in the next section.

VeChain’s PoA block validation model uses a group of 101 trusted Authority Masternodes (AMs) who will fully transition to Validators under the new Renaissance model by December 2025. Each Authority Masternode is approved by the VeChain Foundation. These nodes are responsible for generating transaction blocks. You’ll need to 

 at least 25 million VET to participate in block production, which occurs in fixed 14-day cycles.

Under the platform’s pre-Renaissance model, there are two more types of specialized nodes — Economic and X-Nodes — who stake their tokens to a selected AM/Validator and participate in 

 on the platform. After the Renaissance upgrade is fully rolled out, Economic nodes and X-Nodes will be replaced by a tiered system of Delegator nodes.

Delegators will need to stake a certain amount of VET tokens to mint Delegator 

, which will entitle them to different grades of staking reward multipliers. The more you stake, the higher grade of NFT you receive, and the higher your staking rewards will be. When blocks are produced, AMs/Validators will receive 30% of the total block reward, with the remaining 70% going to holders of the Delegator NFTs.

The image below shows the new Delegator NFT–tiered model, with minimum VET staking requirements and reward multipliers.

While the VeChainThor network is EVM-compatible, there are still differences between its technical parameters and the standard EVM used by Ethereum. For this reason, the Renaissance upgrade aims to reach full EVM compatibility, including implementing the JSON-RPC (

remote procedure call) extensively employed within the Ethereum blockchain.

As part of the Renaissance upgrade, the project will also introduce a new set of tools to achieve more seamless cross-chain capabilities. This will involve integrating new 

The VeChain token model has always been based on two cryptocurrencies: VET and VTHO. VET is the 

 that acts as the main means of value storage and transfer on the platform, while VTHO is used to pay for gas. Now, the Renaissance upgrade also changes the way the dual-token mechanism operates.

Before the upgrade fully kicks in, VTHO is still generated by simply holding VET. After the Renaissance, only staked VET will generate new VTHO for the holder. This should better align VTHO with the active participation of users on the platform. VTHO's inflation rate will also be cut by over 70%, as its issuance will be aligned to a new emission model that considers the total amount of VET staked on the platform.

To further reduce the inflationary properties of VTHO, 100% of all base transaction fees on the network, which are all paid with VTHO, will be 

VET is the platform’s value transfer and storage token. It’s also used for governance and access to various features and apps on the network. VET is a supply-capped token with a max supply of just over 86.7 billion. These properties will not change following the Renaissance upgrade.

VTHO, which is used to pay for gas fees on VeChainThor, is an inflationary token with an uncapped supply. It currently has a total supply of almost 88,7 billion. As noted above, after Renaissance, VTHO will be generated via staking only, and will feature a burn mechanism to reduce its inflation rate.

 as a swap pair with USDT, and on the Derivatives market as the 

In addition, you can take advantage of Bybit’s event dedicated to the VET token to grab a share of a 

. New users can earn VET rewards by accumulating a deposit volume of at least 5,000 VET, or by depositing at least 100 USDT and trading 100 USDT worth of VET via their first Spot trade using their Bybit account. Meanwhile, existing users can also qualify for rewards by trading at least 500 USDT worth of VET on the Bybit Spot market. The event runs through Apr 28, 2025, 9AM UTC.

As of Apr 23, 2025, the VET token is trading at $0.02576, which is 90.8% lower than its ATH of $0.281 on Apr 19, 2021, and 1,243.2% higher than its ATL of $0.001917 on Mar 13, 2020.

Long-term price forecasts for VET are mostly bullish. DigitalCoinPrice 

 of $0.088 in 2027 and $0.14 in 2030, while PricePrediction 

In the long term, VET might even rise to $1, at least according to PricePrediction’s forecast. Its portal is highly optimistic, estimating that VET will hit the $1 mark in 2034.

You might consider investing in the VeChain token VET based on the following:

When Sunny Lu created VeChain in 2015, his vision focused on sustainability issues. VeChain's work in this area has led to the creation of the first decentralized network truly dedicated to making a tangible environmental impact. The entire VeChain ecosystem — including the VeChainThor blockchain platform, VeBetterDAO and VeChain Toolchain — continues to serve as a significant enabler of sustainable technology in the business world.

Now, with the Renaissance upgrade being rolled out for the duration of 2025, VeChain aims to solidify its leadership in this sphere. With the Renaissance upon us, it's hard to see any blockchain platform that could challenge VeChain in the area of sustainability anytime soon.

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What is VeChain (VET): Building a sustainable future for all

Investing

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

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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. 

Theoretically, the primary difference between capitalistic and socialistic economies is the degree of government control involved.

Capitalism is often likened to a free market economy. This economic system is characterized by private ownership of the means of production and the profit generated from them. To achieve the greatest possible profit, entrepreneurs produce goods that meet the wishes of consumers. Ideally, prices are determined by the market forces of supply and demand. 

, on the other hand, is an economic system in which factors of production are owned and controlled by the state. This means that the government controls production and regulates prices to meet consumer needs.

How Does the Economy Work? (Simplified)

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