Concealed Money — Cryptocurrency
By Pooja Pandey on The Capital
“Virtual currencies, perhaps most notably bitcoin, have captured the imagination of some, struck fear among others and confused the heck out of the rest of us” — Thomas Carper (US Senator)
A cryptocurrency is a digital or virtual currency based on a network that is distributed across a large number of computers. The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network. A blockchain is a growing list of records called blocks that are linked using cryptography.
Cryptocurrencies are verified and added to the blockchain ledger using a process called Cryptomining.
In 2009, Bitcoin was invented by an individual or group of people anonymously named ‘Satoshi Nakamoto.’ It is known to be the first kind of cryptocurrency after which 6000 alternative variants of bitcoins have been created.
Most popular types of cryptocurrencies that are being traded globally are -
1. Litecoin
2. Ripple
3. Monero
4. Ethereum
5. Zcash
These are similar to foreign exchange (forex) and are traded 24/7. The current price of one bitcoin is $9,426.78, which is the highest and popular amongst others.
Financial agencies and banks, regulated by Reserve Bank of India, will not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies).
India is a hub for 1% of bitcoin miners approximately. The Survey conducted by the government’s income tax department stated that $3.5 billion worth of transactions involving the cryptocurrency had taken place last year. Zebpay-India’s largest cryptocurrency exchange claimed to have added 200,000 users per day in January.
Cryptocurrency Scenario globally -
They are banned in some countries and not in other countries because of their volatility, and it has no fixed value as they are not regulated by the government.
Consumers from the United States or European Union may view cryptocurrencies as a novelty, but there are many countries with mismanaged domestic currencies. For example, Venezuela’s.
Other countries have strict capital controls in place in order to control the flow of money and/or charge high taxes. Cryptocurrencies are used as a means to escape capital controls and taxes (legal or not), which has led to increased demand on the part of consumers and businesses. For this reason, many countries have started illegal uses of cryptocurrencies for tax evasion or illegal purchases or sales abroad.
Recent incident of Coronavirus affecting Bitcoins -
There has been an increase in the prices of Bitcoin by 30% since the beginning of this year. The boom has been due to fear escalating around the tensions between the U.S. and Iran and then gaining on fears that Coronavirus has hit global trade.
“Whatever’s happening in the stocks doesn’t seem to be having any effect on the crypto market whatsoever,” Mati Greenspan.
The Coronavirus has impacted bitcoin and cryptocurrency industry and will continue doing so in the coming months. Just last week investors were warned that the latest bitcoin rally might have come too fast and gone too far.
Two cryptomining hardware manufacturers last week notified customers their shipments would be delayed at least a week because of the coronavirus quarantine in China.
Many firms have extended New year holidays till February 10th2020, affecting deliveries, which have undoubtedly affected overall production across industries.
Criticism of Cryptocurrency -
Since market prices for cryptocurrencies are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely, since the design of many cryptocurrencies ensures a high degree of scarcity.
Bitcoin has experienced some rapid surges and collapses in value, climbing as high as $19,000 per Bitcoin in Dec. of 2017 before dropping to around $7,000 in the following months. Cryptocurrencies are thus considered by some economists to be a short-lived fad or speculative bubble.
Cryptocurrency blockchains are highly secure, but other aspects of a cryptocurrency ecosystem, including exchanges and wallets, are susceptible to hacking. In Bitcoin’s 10-year history, several online exchanges have been the subject of hacking and theft, with millions of dollars worth of “coins” stolen, in one go.
Nonetheless, many observers see potential advantages in cryptocurrencies, like the possibility of preserving value against inflation and facilitating exchange while being flexible in transferring and divide than compared to precious metals (commodity market) and existing outside the control of central banks and governments.
Cryptocurrency is an impressive technical achievement, but it remains as a monetary experiment. In the distant future, global and democratized cryptocurrencies will have the potential to replace government-backed fiat currencies as the primary means of conducting financial transactions. With that end in mind, Microsoft has also begun facilitating large-scale simulation tests on behalf of banks and other large corporations interested in understanding the potential ramifications for such a large-scale shift in the global economy. People will adapt to the changes sooner or later.
Reference -
1. https://blockgeeks.com/guides/what-is-cryptocurrency/
2. https://complyadvantage.com/blog/cryptocurrency-regulations-around-world/
3. https://www.investopedia.com/terms/c/cryptocurrency.asp
4. https://www.investopedia.com/news/india-central-bank-bans-many-crypto-transactions/
5. https://www.thebalance.com/how-cryptocurrencies-affect-the-global-market-4161278
This blog is written as part of our assignment for the subject- Financial Management and was undertaken by Pooja Pandey (Me), Aarsh Kansara and Swetha R. We are the students International School Of Management Excellence (ISME), Bangalore, India. Pursuing our Master’s in Post Graduate Diploma in Management (PGDM). This assignment was completed by us on 6th of February 2020.
If there are any mistakes or corrections that need to be made or any suggestion you would like to take into account, do inform us. We’ll improve through your feedback and learn from our mistakes.
