Group 5 QUIZ- COVID, Cryto

1. How did COVID affect the financial markets globally? Please discuss its effects on
each component of the financial market as we have discussed in class and on money flow
and price stability (one to two pages)

>The pandemic severely damages the financial market and the economy worldwide. This
COVID-19 pandemic was truly unexpected, COVID-19 is a health crisis that affected the
lives of millions around the world, because of the covid-19 each countries have to
lockdown to avoid spreading the virus. In terms of further lockdown it affected the supply
and demand condition that turned to a mass financial and economic crisis. The first
financial market is a capital market. Capital markets is a financial market where longer
term capital is raised by companies and governments in the form of bonds and shares.
These events made a large disturbance in the supply chain, which might contribute to
inflationary or monetary inflation concerns and stagflation risks. The effect of
COVID-19 on capital markets was remarkably visible to everyone. In the first month of
the crisis, we all saw rapid and longer declines to all sectors. Though this pandemic is
inevitable, those sectors are surprisingly resilient, some had a negative impact that results
in bankruptcy, others used these opportunities to innovate and cope up to the new normal.
Those sectors starting from transportation, business, healthcare related supplies and
services, pharmaceuticals, medical technology retails etc are slowly regaining the losses
and being able to stand up again to their feets. The impact on COVID-19 to capital
markets seems like a roller coaster ride; confusing and uncertain but one thing is for sure.
Pandemic opened new doors and opportunities that lead to bringing new trends to the new
normal. The ones who can be able to keep up to those new trends are surely the winners.
Bond Markets is not an exemption to COVID-19. Bond Markets are bigger than the Stock
Markets. It is made up of issuers like the federal government, municipalities and
corporations looking to borrow money from investors. It is surprisingly shocking how the
corporate bond market that functioned well in the global financial crisis but did not in this
pandemic. Corporate bond market is used for the corporations to fund projects. The
pandemic caused the prices of investment grade corporate bonds to go down, more to the
high yield bonds that come with higher coupon rates which we all know are riskier. The
reason for this occurrence is corporate bonds are used for companies, and companies are
subject to bankruptcy so as a result the corporate bond investors demand for liquidity
beyond the situation wherein it is impossible right now. Furthermore is the Commodity
Markets. Commodity Market is a place that facilitates trading of various such
commodities. According to the semi annual commodity markets outlook report, Oil prices
shockingly fell in the beginning of the pandemic. The reason is that lockdowns are
ubiquitous and as a result, transportation is impossible, only frontliner personnel are
allowed and to the people who need to buy necessities but aside from that, no one is
allowed to go outside. However in the pre-pandemic times, prices of oil have only
partially regained, maybe for the reason that lockdowns are not that stringent and
transportations is allowed as long as the travelers are fully jab and if not, are not
experiencing any symptoms related to COVID-19. Natural gas and oil are also recovering
together with metals. In addition, agriculture prices seem unaffected despite the pandemic
but the people who need food have risen because of widespread unemployment and
ongoing global crisis. Macro backdrop is going to be the most important factor because it
weighs the country's economy; the level of inflation, unemployment, or interest rates. And
when COVID-19 happened those factors went high and that causes more problems in the
nation's economy. Government restricted having long working hours to avoid spreading
more of the virus, preparations for goods and services require face-to-face interactions
with customers but because of the fear of exposure to the virus those goods and services
demands have dropped. This change caused a lot of employees to lose their jobs. The
unemployment rate soared by 33 million globally. To hold the virus from spreading, social
distancing is required. The impact on inflation is high since policymakers are requesting
companies and individuals to reduce spending, including on restaurants and hotels, and
businesses or organizations to start reducing on producing goods and services. Given the
sudden changes in demand, the sudden meltdown of certain industries, and significant
differences in experience across sectors, the impact is quite making it riskier. As the
COVID-19 pandemic continues, the Federal Reserve's top priority is keeping the economy
stable. The Fed can help the economy by raising or reducing the funds rate to help with
the high rate of inflation or to boost the economy. Now whenever the federal funds rate
falls, so will the cost of borrowing. Having a low interest rate makes it easier for the
individual to spend and borrow money. More likely people take loans and make purchases
easily. But what the world’s been experiencing in this crisis makes it hard for people to
buy or borrow money. The US dollar is a universal source of reserve and a common
medium of exchange in global markets. So when the bank of international settlements said
that the dollar accounts for close to 80% of global monetary transactions and when the
federal reserve raises the cost of borrowing it raises globally. Cryptocurrency started in
2008, when COVID-19 happened and cryptocurrency boomed. One of them is Bitcoin, the
world’s first cryptocurrency that could be purchased for about $7,300, and other leading
cryptocurrencies like Ether are showing a similar increase. As a result, cryptocurrencies
become more appealing than other options. The fact that cryptocurrencies may be traded
from anywhere in the world helps to mitigate some of the possible financial issues that
might occur if local governments apply trading rules as part of a lockdown. On the other
hand, cryptocurrencies have proven to be a reliable asset in these difficult times, while
other commodities have lost value. In a moment of crisis, cryptocurrencies could become
so closely correlated with traditional financial systems that the advantages of moving to
crypto are worthless. Additionally, the pandemic could lead to dangerous activities that
could result in massive losses. According to experts, there is likely to be a shift in assets
away from non-yielding and riskier alternatives in the direction of assets that are less
riskier and confer-yield.
2. What are the available cryptocurrencies in the market and how do they differ from each
other? (One page)

>The approach of the pool of advances has prompted the excess turn of events and the
progress of humanity. Prior individuals used to do each undertaking physically and this
necessary exertion and time. Step by step the pattern began changing and the creation of
machines and instruments began changing our way of life. The situation has significantly
changed in the 21st century. The influx of digitalization has made a progressive change in
the way of life of individuals. These all would not have been imaginable without the
innovation of advancements like the web and PCs. Advanced advances have become more
pre-dominant after the episode of the Coronavirus pandemic. The cryptographic money
that is expressed as advanced cash is a consuming subject these days. Cryptographic
money is advanced or virtual cash that deals with blockchain innovation. It is designed to
work as a medium of exchange to buy goods, services and make payments online.
Cryptocurrency is centralized and free from other third parties which means that it is not
issued or controlled by any government or central authority. It was introduced to the world
in 2009, the first decentralized cryptocurrency is bitcoin, it was created by presumably
pseudonymous developer Satoshi Nakamoto. Various other cryptocurrencies have been
designed after the emergence of Bitcoin and all are specific in their functions. There are
more than 7000 cryptocurrencies in the world till November 2021. The other
cryptocurrencies except Bitcoin are termed Altcoins. Here are the most common types of
cryptocurrency Bitcoin, Etherium, Cardano (ADA), Binance Coin(BNB), Theter(USDT),
Solana, XRP, DogeCoin, Polkadot(DOT), USD(USDC). CryptoCurrency works on a
perplexing reinforcement of innovation. This obviously, is important for what makes
digital currencies distant and hard to comprehend. Here are the elements that make all
cryptocurrencies differ from each other. CRYPTOGRAPHIC CALCULATIONS every
digital currency exists and is upheld by an organization. The organization related to every
digital money comprises a cryptographic calculation or an exact strategy for encoding
information from a discernible structure to a code and back to a coherent setting. While
various digital currencies work under various cryptographic calculations, they each require
some type of calculation to work. BLOCKCHAIN is one of the major components of all
digital currency innovation. Blockchain is basically the manner in which an organization
approves or affirms its own money. To lay it out simply, the cryptographic money is
approved on an organization by a chain of squares composed of exchange information.
The cryptographic calculation builds up the way that the information is controlled in the
squares and how they've been added to the chain. MINING on a digital currency
organization, mining is the course of approval that each square of exchange information
goes through. As these exchanges are approved effectively, excavators get another unit of
digital money as an award. The organization is subsequently kept up with simultaneously
it’s still up in the air. Diggers are recognized by their own public and private keys that
distinguish them in the organization. These keys are additionally used to spend their
mined coins. These elements, from the cryptographic calculation to mining, to the measure
of organization, decide the distinctions between the singular digital forms of money
accessible at some random time. The distinctions in each set out extraordinary open doors
for clients.
3. Given that the EU is starting to develop cryptocurrencies that are government backed,
how will this affect the cryptocurrency market? Please explain. (One page)

>The European Union is an international organization that controls 27 European countries'

economic, social, and security issues. In the early twenty-first century, the EU swiftly
expanded into Central and Eastern Europe. Austria, Belgium, Bulgaria, Croatia, Cyprus,
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania,
Slovakia, Slovenia, Spain, and Sweden are all members of the European Union. The
European Union was established by the Maastricht Treaty, which aimed to strengthen
European political and economic unity by establishing a single currency, a unified foreign
and security policy, and common citizenship rights, as well as expanding cooperation in
the fields of immigration, asylum, and judicial affairs. The European Union was honored
with the Nobel Peace Prize in 2012 for its work to foster peace and democracy throughout
Europe. A cryptocurrency is a type of digital asset that is based on a network that spans a
huge number of computers. Because of their decentralized structure, they are able to exist
outside of the control of governments and central authorities. Cryptocurrencies can either
be mined or bought on cryptocurrency exchanges. Examples of cryptocurrencies include
Bitcoin, Litecoin, Bitcoin Cash, Ethereum, Ethereum Classic, Zcash, Stellar Lumen, and
Chainlink. Cryptocurrencies are widely regarded as legal throughout the European Union,
although cryptocurrency exchange legislation varies by country. The global
cryptocurrency market continues to rise, causing various institutions to recognize that
digital currencies are no longer an obscure technology in the future but a transformative
technology now. As a result, the EU would regulate crypto assets as part of its digital
finance plan. In September 2020, the European Commission proposed a rule on “Markets
in Crypto-assets". This proposal aims to create a fully harmonized European market for
crypto assets by establishing a legal taxonomy of crypto assets and outlining requirements
for issuers and service providers. One of the effects of developing cryptocurrencies that
are government-backed is that any fiat money used to cash out a digital token gets taxed.
Because of their decentralized structure, cryptocurrencies are prone to market
manipulation and price volatility. Any unregulated system has the potential to fund illegal
activities. Nevertheless, the government has the ability to make the cryptocurrency market
a safer environment for investors.
4. The word sticky has been mentioned about inflation. What does this mean? Why are
prices generally sticky downwards? Please explain (one page)

>The word sticky that was mentioned about the inflation problem in the market means that
the situation now was in an undesirable economy, which means that if we see the
combination of high inflation it starts in sticky-up as the reason for changes in the
economic situation. The inflation is an increase of prices and the fall of purchasing value
of money. Sticky Inflation also known as an often associated with cost-push factors of the
lower spending of people now because they need to budget their money to make sure the
flow was noted at the end of pandemic they experienced. This Sticky affects the prices
which some sellers set the price of their product by nominal terms that do not adjust
quickly for the response of changes in the aggregate price level, also the price of labor
runs downward due to present economic conditions now. So the result of this sticky price
is that it can move down the price rather easily but it will only move up if we all give
effort for the market-clearing or changing price that will be implied by some new idea for
rises of circumstances. We need to observe market demand if it's price remains lower than
the new market clearing excess demand situation. Prices are generally sticky downwards
because the price of goods won’t just easily move down due to some reason like imperfect
information for economy that need to gather and a volatility in inflation of rate that we
expected because it can be exploited, wages inflation for a numerous reasons which
includes the trade unions role, employments contracts and reluctance for accepting
nominal wage, and a temporary inflation that happen in marketplace now, this temporary
inflation is a pressures in our global economy that won’t be long-term problems because
it’s should just a temporary. Sticky downward is changes in price of goods and products.
So this sticky inflation will be longer if sticky wages will happen because it should lead to
a real problem in the market that unemployment will increase and also it will lead to a
disequilibrium in laborers/workers in the markets. If this happens in our economy, many
people will suffer and our market will change direction because of wrong movement of
wages that will trend the upward direction of others.