Bitcoin Cryptocurrency and Payment System - MyAssignmenthelp.com

Question: Discuss about the Bitcoin Cryptocurrency and Payment System. Answer: Introduction The report is based on the Bitcoin which is a cryptocurrency and the worldwide payment system. It includes the details related to the prices of Bitcoin during 2017 in each month along with this it shows what is Bitcoin and it can create an impact on the economics. Moreover, the report shows the rise in the demand of the Bitcoin in few years which leads to fluctuations in the prices of Bitcoin. This cryptocurrency affects the global currencies and its impact on the global stock market. Bitcoin is first decentralized digital currency in which the system works and operation without any involvement of central bank or single administrators. Bitcoin transactions generally take place between the direct users that include the buyer and seller of the currency. Most of the people invest in Bitcoin considering it as an investment (Carmody, 2013). It is said that Bitcoin was introduced by an unknown person under the name of Satoshi Nakamoto in the year 2009. There are different uses of Bitcoin such as: - It can be used for booking hotels on Expedia. Customers can use bitcoin to purchase furniture from overstock and buy Xbox games. Mostly the Bitcoin is used for the trading purpose. Along with this, this currency can be used by the customers to buy merchandise anonymously. There are various marketplaces where the customer can exchange the Bitcoins which means that they can get involved in the buying and selling of Bitcoin using various currencies. The leading exchanges of cryptocurrency are Coinbase, Bitstamp, and Bitfinex (Yellin, Aratari and Pagliery, 2018). Though, these exchange marketplaces face the issue related to the security of the currency as it is one of the leading concerns. In the year 2016, the bitcoins worth of tens of millions of dollars were stolen by the hackers from the Bitfinex. Most of the customers send their bitcoins to each other with the use of their computers and mobile apps as it is a digital money. Therefore, it is the same process like sending cash digitally from one person to other. Most of the people compete to mine bitcoins with the use of computers or desktop to resolve the complex puzzles of math. Mining was the way that created the bitcoins and this how the winners of the contest get rewarded with the bitcoins. This shows the transfer of bitcoin that took place among them (Bitcoin, 2018). Bitcoins are kept in the digital wallet which either exits in the cloud or on a consumers processor. This wallet is basically a virtual bank account that permits the consumer to send or to receive the bitcoins and consumer can make the purchase of goods and services easily. These virtue accounts are not insured by any FDIC as like banks. Prices of the bitcoin during 2017 in each month Prices of the Bitcoin fluctuate according to the demand of the cryptocurrency in the market. The below image reflect the bitcoin value from January 2016 to February 2018. The bitcoin price index reflects an average of the prices of cryptocurrency across the leading global exchanges. The bitcoin index for the end of February 2018 reached on approximately 10,309.64 U.S. dollars. The graph shows that after a downfall in the year 2016 there was a tremendous hike in the prices of bitcoin in 2017. In the month of April 2017, the price of the bitcoin reached to 1,349.19 U.S. dollars. There was a hike in the prices because the number of bitcoins in the circulation increased month on month and it touched more than 16 million in the month of December 2017 (Statista, 2018). The above table reflects the prices of the bitcoin in each month of 2017 along with this, the table also shows the change in $ and change in % (U.S. Finance, 2018). In the month of June, the demand of the Bitcoin was on peak due to which there was a rise in the prices of cryptocurrency. Bitcoin and its effect on Economies It is a digital currency that was introduced in the year 2009. Bitcoin has made the international payments easy and cheap because this currency has tied to any country or regulation. It is cryptocurrency in which there is no involvement of the central command (government, banks, and others). The customer can make use of bitcoins for different purposes due to which the economy gets affected. This is the fact that global economy is interconnected in a way that is unprecedented in the human history. The global economy mainly depends on the US Dollar because US Dollar is the reserve currency of the global economy. Considering the same, it has been analyzing that any changes in the US financial market bring the fluctuations in all the countries across the world. The emergence of the Bitcoin created an impact due to which the transactions are being decentralized across the world (Medium, 2018). Ultimately, there is an impact on the US Dollar and this leads to the changes in the international trade, foreign relations, and diplomacy. Moreover, many countries like Russia, North Korea, and Venezuela tried to make use of this cryptocurrency in their countries. In addition, this currency is not only affecting the trade and other activities but also creates an impact on the financial institutions. If bitcoin becomes widespread, legitimate and respected that can force every financial institution to bring down there cost if they are willing to stay in the competitive market (Yermack, 2015). This will reduce the profit of these institutions and might leads to closure. Some of the major effects on economies are given below: - The currency is present in the form of metal and paper forms which is effective for the exchange. The Digital revolution has brought changes in the medium of exchange and Bitcoin, a digital currency has made the customers depended on it. Digital evolution has brought tremendous changes in the trading with the fiat money (McKinney, 2017). Customers are effectively making use of the bitcoin with trust for the digital transaction and this has reduced the transaction with the fiat money in the market. Though, there are many people who faced fraud transactions because of excessive reliance on the bitcoin. The economies rely on its overseas workforce as these remittances are a major contributor to growth. Currently, most of the remittances make use of banks for transferring money for which they have to pay huge amount along with this the time taken in the transaction is high. The emergence of bitcoin has made the remittance to switch towards cryptocurrency transfer that is simpler and time saver. Bitcoin is an unregulated currency that has enables unbridled access to a secure credit system. Most of the customers find that it is the stable currency that has bridged the people who are isolated with the global merchants (Sen, 2017). Moreover, this will certainly open up new markets and opportunities that will impact the economic growth. There is no exorbitant transaction fees and withholding tax associated with the bitcoin which makes it attractive for the customers. The reason behind the increase in Demand of the Bitcoin in a few years Bitcoin demand is booming not only in the US but also in Asia-pacific region. In the US the demand for the bitcoin rises due to its usage but in other countries, the demand is rising because of its high price. The below image reflects the use of the digital transfer which is highest in Asia-Pacific region. There is not only growth in the money transfer services but also in B2B payments, merchant services and for the general purpose. Bitcoin is used for all these purposes across the world which leads to the rise in the demand of the bitcoin. Considering the fact, there are more than 48 companies who are offering service related to the cryptocurrencies. The image reflects that North America participated less in all the activities because of the global financial system. This is the fact that financial system is depended on the US dollar as making transfer between other currency and dollar is cheaper and simpler than sending money between the two non-dollar currencies. Bitcoins are in demand because of its features that are there is no involvement and regulations from the government side. All the transaction of bitcoin takes place between the two parties which include buyer and seller. Moreover, this cryptocurrency is popular because of its irreversible transactions. This ultimately leads to the hike in the demand for the currency due to which the in the year 2012, April there was more than 11 million cryptocurrency was available in the market. In addition, on 11th April 2012, 25 being added on ever eight minutes. Around the year 2140, there will be more than 21 million which were permitted by the system (Hans, 2013). Bitcoin has seen the massive user internet since the year March 2012 because of the Cyprus banking crisis. The value of bitcoin was $100 on 1st April 2013, which is up from $13 at the beginning of the year (Hans, 2013). This increased price brought a rise in the demand of the bitcoin in last few years. Though, this is also a fact that with the rise in the demand of Bitcoin there was limited supply because the currency rose steeply before a crash. It has been analyzed that the demand of bitcoin in India is increasing with the hope to gain the profit from the rise in the value of the currency (Hans, 2013). There are more than 2,000 active bitcoin users in the country. Through, this is also a fact that no e-commerce website in India accepts Bitcoins but the people of India support this payment system of the goods and services from the overseas websites. Moreover, there are numerous online stores who offer discounts for the bitcoin payment so that they can enhance their coin holding for the future profits. The changes in the price of the Bitcoin The price of the bitcoin has dropped to approximately A$8,000 in the last few days after reaching till A$10,000 in the past month and rising over 1,850% since the year 2015 (Trinh, and Cameron, 2017). Considering the current research there are four major factors that affect the price of Bitcoin. These factors are media hype and uptake by peers, political uncertainty, and risks, movement by the government. The below image reflects the history of bitcoin-related to its price. In the year 2009 when bitcoin came into the market, it was not having value due to which 1000BTC were equal to 0.003$. The changes in the buying pattern of the customers increase the value of the bitcoin which reach until 0.5$ for 1BTC in the year 2010. The tremendous emergence of the bitcoin took place in the year 2013. At that point, the value of 1 bitcoin was approximately 600$. In the following year 2014 and 2015, there was a decline in the prices of every bitcoin. There was an increase in the price of bitcoin in the year 2016 when 1BTC was equal to 1000$. In 2017, 1BTC was 19,000$ which attracted customers. Bitcoin doesnt only affect the global economy but it also affects the global currencies. The emergence of bitcoin has revolved the ways of payment made which affect the US Dollar (Insana, 2018). There are multiple factors with the help of which bitcoin are gaining the momentum in different fields of global finance and leads to the replacement of main fiat currency with the bitcoin for conducting the transactions. This affected the fluctuation of US dollar in the market. The USD is considered as the world currency so the impact on the US dollar leads to the impact on the other global currencies (Seetharaman, et.al, 2017). There are many currencies whose usage is regulated and restricted outside of their home country to an extent which makes the customers use bitcoin. Therefore, this reduces the value of that currency and leads to the value of bitcoin. For example, the Chinese government made it difficult for the customers or businessmen to make use of nations currency overseas due to which the people of China started making the use of bitcoin for the transactions. This shows the impact of bitcoin on the currency of China. Bitcoin impact on the global stock market The bitcoin has created a major impact on the stock market by making the investors attracted towards them. Bitcoin has woken up lots of investors as with the emergence of hike in the prices they started tracking the prices of bitcoin in the market and considering the same they started investing the amount in Bitcoin so that they can earn maximum of profit out of it (Delisle, 2018). This makes the investors switch from other shares towards the bitcoin that reduced the value of shares of other companies. The investors analyzed the fact that there are wild fluctuations in the prices of bitcoin due to which they get attracted towards it. Many of them invested and earned profit but rest faced loss due to improper tracking of the stock in the market. There was a downfall in the global stock market as most of the investors were interested in the Bitcoin exchange (Coinbase, Bitstamp, and Bitfinex). Over here, with reflects those countries who are in support of the use of bitcoin and who has gains (who got the benefit) the bitcoin. The bitcoin usage is supported by the countries include US, Canada, European Union and other. Though, these countries have made some legislation related to the usage of bitcoin. There are some companies who banned the use of bitcoin such as Iceland, Vietnam, Bolivia and many others. Bitcoin advantage is not only taken by the countries but also by the general public along with the investors. There are businesses in the US (Dell, overstock, DISH) who accepted the payment in bitcoin so that they can make a profit. For instance, they take the payment in bitcoin then sell it at higher prices which help the company in generating double profit (Bajpai, 2018). On the other hand, Canada government believes that this currency has contributed in the generation of the business income of the people. Australia government allows entities to trade, mine or buy bitcoin as they consider it barter arrangement subject to appropriate taxes depending on the use and user of the product. This shows the benefits of bitcoin to the different countries. The investors take the benefit of bitcoin while dealing in the stock exchange. The customer can also take the advantage of frequent fluctuations in prices of bitcoin. For instance; a customer might buy bitcoin at a low price and then purcha se the product when the price of bitcoin rise which means that they have to pay less amount for the particular product. Consumer of bitcoin The numbers of buyers of bitcoin are expanding across the world. A survey was conducted which shows that there are most of the millennial who are buying bitcoin. It reflects that most of the consumers of bitcoin are men rather than women. The image reflects that millennials (between the age group of 22 and 37) had 17% ownership rate, baby boomers were only 2% and Gen X (people between the age group of 37 to 55) were at a bit less than 9% (Jones, 2018). Apart from this, there are different market investors who consume bitcoin for making a profit out of it. These investors analyze the market share of the bitcoin and considering that they make a purchase of bitcoin and sell it before the price goes down. The purpose of the purchase of bitcoin is making a profit. Along with this, there are some individuals who make use of this cryptocurrency for the online transactions (Leinz, 2018). There are various companies who are the consumer of Bitcoin such as Expedia, overstock and Xbox games. These companies allow the customers to perform the trading with the use of bitcoin. This shows that the company is involved in the buying and selling of the bitcoin. They accept the bitcoin from the customers and sell it at higher prices in the markets. This how the companies are able to make the higher profit. Conclusion It can be concluded in the end, that the bitcoin is emerging in the markets across the world. The use of the cryptocurrency is creating positive and negative impacts. The report includes the basic details related to bitcoin along with this it includes the prices of bitcoin for the year 2017 as there was a major change in the price took place. It also shows the impact of cryptocurrency on the economies and on currencies. The demand for the cryptocurrency is rising which is discussed in the report along with the change in prices in few years (Ciaian, Rajcaniova, and Kancs, 2016). Global stock exchanges were impacted due to bitcoin. Apart from this, there are many countries who are in support and who has gained the advantage. Consumers of bitcoins are increasing day by day with the increase in the value of the currency. 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