Sample Finance Paper on Bitcoin: Economics, technology, and governance

Bitcoin

Abstract

Bitcoins are a decentralized digital currency operated without a centralized administration; in other words, no central bank operates the whole system.  Therefore, bitcoins can be operated on a peer-to-peer basis without the requirement of any intermediates on the system flow. It has received so much attention in the current media platforms by the world investors in the recent past though not much of the cryptocurrency is realized. Through the series of researches done, it is noted that there are bumpy returns that are harnessed from the investment in the coins. In the tests that have been done, it is proven that shortly the cryptocurrency shall have gotten very deep root in the world economic system. Therefore, the analysis’s conclusion is the anticipations of quality results in the market field of crypto coins.

Therefore, Bitcoin is a communication that is an online-based protocol that has enabled the usage of virtual currency in place of physically owned assets, including electronic-based payments. The rules that regulate the usage of the bitcoin is a factor fashioned by engineers who monitor its operations, and so there are no spaces for lawyers and even any regulators to govern its operations. Therefore, it is a built-in transaction log distributed across the networks of the computers involved in the transactions. It includes the set mechanism that aims to reward honest participation in the deal, ensuring that those freshly adapted into the system are entrapped. So does it protect the users against the power concentrations?

It is designed to give room for an irreversible transaction, as there is a prescribed pathway designed to create money over a given period, and so is the option of the public transaction history provided. It is with pleasure that a Bitcoin account is open to anyone free of charge since no single centralized vetting procedures are incurred, not even the name provision requirement is demanded. With these set rules, it is noted that the Bitcoin system is very flexible and so easy to be understood by the individuals who may have an interest in venturing the opportunity, and the privacy is highly accorded to the individuals as not a single oversight regulatory is meant on it as opposed to other payment forms (Böhme et al., 2015)

In December 2018, the market price of cryptocurrencies hit about 400 billion USD, which is an equivalence of 11 percent of M1 in the United States of America. While there is an attempt to regulate the inflation rates of the crypto tradition of fiat currency by the central bank, no success is anticipated as central bank institutions do not control cryptocurrencies. The effect of this has been the tremendous fluctuation of cryptocurrencies, including Bitcoin. We, therefore, note that that the future world is predicted to increasingly use Bitcoins as the media of exchange (Schilling  & Uhlig 2019)

Bitcoins are the most prominently used digital currency. It is noted to be the most impressively booming form as it has reported price development, and so does the volatility of the prices (Panagiotidis et al., 2019). The price of the Bitcoin is noted to have improved from a zero value from the time of its introduction in the year 2009 to about 1100 USD by the end of the year 2013 but reported a drop in the year 2014, but since then, there has been an increasingly hike in its value. It is recorded that the acute rise in the market validity in the price value of a difference of 8000 percentage is so unusual for any traditional currencies, which is an indication of other external factors that regulate the formation of prices which indicate very specific digital currencies (Ciaian et al., 2016)

The variation in the prices of Bitcoin has significant positive impacts on the coins variations that are at medium to the higher quantiles strictly. It is also denoted that the United States Dollar influences the present variations in the prices of |Bitcoins at some reported high quantiles only. Even though the variations are concentrated at the exceedingly high quantiles, this is evidence of a close relationship that exists between the US dollar that projects the use of Bitcoin as a medium of exchange ( Bouri et al., 2018)

On the same track with the continuously growing digital currency, that is the Bitcoin, as recorded with the hiked prices that were realized in the year 2013, the media began to produce and record a good number of stories of individuals that re becoming extremely rich with the good timing met on the investments that are done on the Bitcoin and the more alarming cases of individuals that have increasingly been reported to be acquiring large sums of money in comparison to the masses that also lose their large amounts in the same investment media as a result of poor timing and the problems that are accompanied by the technical hitches. A story is told of a Norwegian national gentleman who purchased 5000Bitcoins for only $27, which has been recorded that since the purchase, the value has increased by about 10000 times in the original value. A Briton also lost 7500 coins that he bought at little cash in 2009 when it was first introduced. The result of this was a throw-away of his laptop that contained the private keys to his wallet; he is James Howells. Therefore, records the anonymity of the decentralized bitcoin that is not regulated. But for the serious individuals with a great passion for generating good cash, one needs to be very keen on the timing of the market trends in the coin prices, and a guarantee of great riches awaits the investor (Wu et al., 2014)

 

References

Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, technology, and governance. Journal of Economic Perspectives29(2), 213-38.

Bouri, E., Gupta, R., Lahiani, A., & Shahbaz, M. (2018). Testing for asymmetric nonlinear short-and long-run relationships between bitcoin, aggregate commodity, and gold prices. Resources Policy57, 224-235.

Ciaian, P., Rajcaniova, M., & Kancs, D. A. (2016). The economics of BitCoin price formation. Applied Economics48(19), 1799-1815.

Panagiotidis, T., Stengos, T., & Vravosinos, O. (2019). The effects of markets, uncertainty, and search intensity on bitcoin returns. International Review of Financial Analysis63, 220-242.

Schilling, L., & Uhlig, H. (2019). Some simple Bitcoin economics. Journal of Monetary Economics106, 16-26.

Wu, C. Y., Pandey, V. K., & Dba, C. (2014). The value of Bitcoin in enhancing the efficiency of an investor’s portfolio. Journal of financial planning27(9), 44-52.