Speculative bubble? Digital currencies cuts both ways / Students generated content
Have you not heard about the cryptocurrencies phenomenon yet? Cryptocurrency is an internet payment system. It was created in 2009, the first and most known as Bitcoin. Something that is really attractive about cryptocurrency is that currency does not support any country.
One of the largest economic bubbles in history was the housing bubble, a high demand of households was the main reason of the great increase in the price of houses. All economic bubbles have a similar structure: some people earn money investing in something, then more people want to invest so demand and price growth, people continue investing paying high prices and then prices fall down. All this situation is explained by behavioural analysis, people tend to invest in what others invest (especially inexpert people) and they are hyped with arguments that promise guaranteed benefits. Here is a picture which explains the behaviour of people.
Cryptocurrencies like Bitcoin or Litecoin have experienced spectacular growth recently. It is possible that a bubble has been created and may explode at any time. If the bubble is true it could have really negative consequences for the worldwide economy. But if nothing happens it may be the end of currencies as we know it now.
The investment in Bitcoin and in general in cryptocurrencies is also very differentiated according to countries, in this graph we can see how three-quarters of the investors (73.31%) are North Americans, of which the majority Americans. And followed by these Europe with the other quarter (20.36%), for which the other continents do not even reach 5% of the investors (these are Asia, Africa, South America and Oceania).
By order of countries, we see as we have already said to the United States as the main investor country with 554 Bitcoin ATMs, followed by Canada with 135 and the United Kingdom with 47. In fourth place in Spain with 27, fifth Finland and sixth Austria.
In this graph we see the importance of each currency within the market of cryptocurrencies, that is 153,235 million dollars (USD) invested in cryptocurrencies, most of which have been invested in Bitcoin, having an investment of 75,889 million dollars (USD), practically half of the money invested in cryptocurrencies, this is followed by Ethereum with 30,498 million dollars (USD), thus a quarter of the investment and the other quarter is formed by Ripple, IOTA, Litecoin and the rest of cryptocurrencies.
Advantages & Disadvantages of Cryptocurrencies
On one hand, cryptocurrencies assist developing nations, Many countries don’t have the economic means of developed nations. So, for those who don’t have reasonable access to credit, Bitcoin can be stored and used as fiat currency. While there aren’t exactly Bitcoin banks, platforms like Coinbase exist for Bitcoin owners to open virtual accounts and store their coins, regardless of where they live or what they do. Moreover, they are potential investments which work like stocks. Depending on one’s economic state, their values go up or down. In one sense, the situation is worrisome as you never know if (or when) your coins will fall.
On the other hand, it has left people in downfall, customers saw most of their earnings practically disappear overnight, and to this day, the mystery surrounding its fall has never been fully solved. Another disadvantage is that it may just be a stage, despite nine years on the market, Bitcoin does face the possibility of disappearing for good at some point. After all, if not enough people are using it, how can it stay alive? It’s impossible to predict when (or if) this might happen, but should a world without Bitcoin ever exist, those invested in it could find themselves at a loss.
To conclude, we could say that digital courrencies are very innovative, and it could help us in some many ways as we observed in the advantatges. It could allow us to maybe someday pay and make transactions worldwide with just one currency. Which also can help the world to become more economically egalitarian.
We believe that is a huge step to the future there are already many good conditions to start working and paying that way. It’s more comfortable and easy.
The content was generated by students: Norka Cano, Carlota Manonelles, Juan Miguel Martínez, Gerard Parrón