Virtual Trading and the Global Economy
We have seen the rise of the virtual world in the twenty first century, which is a world that exists entirely on the internet. The currency that is used is known as bitcoin, but it does not possess any physical form. Bitcoin has now become a widely used currency, especially in China, the economic powerhouse. However, the lack of physical form makes bitcoin completely different to what money should be.
A long time ago, the value of money was exactly what it was made of. Gold coins were made, and their value depended on the amount of gold in circulation. Nowadays, most money is printed on paper, which does not have that much value. Therefore, the government can print as much money as it wants as long as it has the cheap materials needed to print the money.
Bitcoin is the next step in this worrying trend regarding the creation money. Bitcoins have no physical form, and they cost almost nothing to create. However, using bitcoin is very convenient as online transactions can be carried out using a currency which is suitable for expediting simple financial transactions.
China has become a common user of Bitcoin, and its population uses bitcoin for purchases from abroad. The widespread use of bitcoin in China has resulted in it becoming noted as a large factor in China’s overall economy. A sudden, unexpected drop in the value of bitcoin has resulted in a slowing down of China’s economy; a negative trend in China’s economy will definitely have an effect on the global economy as a whole.
Most bitcoin transactions were made using Yuan, the Chinese currency. When China’s economy suddenly slowed down, the value of the bitcoin began to fall as there wasn’t a large demand for it as before. As a consequence, many Chinese consumers who bought items using bitcoin were left with a currency that was worth less than it had been; this discouraged the consumers from buying from abroad as they just couldn’t afford it anymore.
The fall in imports being requested from China was critical, and it sent shockwaves all over the financial world. The decrease in value of the bitcoin has decreased trade, and this has resulted in a certain slow down of the global economy. Many businesses dealt with Chinese customers entirely because they were able to purchase their items using Bitcoins.
Businesses had less money to spend in the global economy after a loss of Chinese customers. Less money being spent in the global economy mainly reflects a lack of trading which in turn has a devastating effect on the world’s economy.
Originally published at www.fxbtrading.com on October 26, 2017.