The introduction of digital currencies has been viewed as a new phenomenon in the financial market. Research has proven that there exist digital currencies such as Bitcoin, Ven, LiteCoin, Ripple, PPCoin, and NameCoin. It is also a fact that these currencies have caused a major uproar in the digital world as reported by Google and Wikipedia. Another important fact about these online currencies is that they were invented by people who have a lot of time to spend playing online games and making other sales online. Similarly, they have gained much popularity among people and are appreciating at abnormal rates
The major issue if that these digital currencies cannot be found in any physical central bank. This means that no individual can walk into a central bank or any financial organization found in the real world and claim these coins. Another major issue is that these coins gain interest at very absurd rates. For example, Bitcoin, which is the most popular digital currency started out at $13 per coin and escalated to $240 per coin in a span of four month registering a 1700% rate gain, an issue that cannot be daily financial theories such as future cash flows models, uncovered interest and purchasing power.
Rules and theories
Studies have shown that the rules and theories that aid the prosperity and success in the sales of digital currencies are based on the phenomena of macroeconomic of the internet platforms.
Analysis of issues
The fact that digital currencies are not driven by demand and supply of a country means that there are no existing macroeconomic ground rules for the digital currencies. Moreover, the supply function of these coins is either constant (if the quantity of the currency is fixed) or it changes according to some predominantly known algorithm, as is the situation in the BitCoin market. Similarly, the value of the digital currency is mainly driven by the investors’ faith in the continued growth. In this case, the investors’ opinions become an important variable in determining the price of these currencies. Recent research has shown through Google queries and answers on Wikipedia that there exist actual financial applications of digital currencies, which range from the home bias and the amounts sold through the announcements of earnings up to the portfolio diversification and trading methods.
A digital currency like BitCoin has remained relatively strong in the market, as it has shown a liquid market existence since its existence in the year 2011. Results by weekly Google Trend results show that BitCoin remains the strongest digital currency, it also indicates that as the sales of this currency increase, so is it demands not only with investors but also among the general public. This report also shows that this currency does not have to be traded in large quantities for it to make profits. Examination of the daily Wikipedia results shows relatively the same results for this currency in the market.
Reach of conclusions.
From the research studies, it is evident that the existence of the digital currencies will continue to be accepted by most people as they make more profits within a short period as compared to those of normal currencies.
Alternatively, the investors seeking to use the digital currencies may do so by approaching normal banks to find out how they can make more profits by accepting these currencies to be used in the real world.