CRYPTOCURRENCY

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1602-19-735-030
1602-19-735-046
 Abstract
Cryptocurrency is a recent and significant innovation in the financial industry.
The goal is to offer a currency that is not tied, created, or backed by a
government. Cryptocurrency use the Blockchain technology as the
financial platform.
Cryptocurrency adoption level has increased, and the market has grown
dramatically. There have not been enough literature investigating the adoption
and acceptance of the cryptocurrency by users. The aim of this paper is to fill
the gap in the current literature by investigating the current cryptocurrency
Adoption level, adoption-influencing factors, providing an in-depth analysis of
these factors and discussing some pitfalls surrounding the
cryptocurrency adoption.
We believe that despite the difficulty to find out an
accurate number of cryptocurrency users, a good
estimate can be made by studying the number of
cryptocurrency exchange sites' users. In addition, the
paper suggests that the main factors driving the
adoption decision revealed from the literature review
are the investment opportunity cryptocurrency forms,
the anonymity of the transactions and privacy, the
acceptance by businesses as a payment method, the fast
transfer of funds, the low cost of transactions, and
technological curiosity
 Introduction to Crypto-currency
• A Cryptocurrency is a digital or virtual currency
that is meant to be a medium of exchange.
• The word ‘crypto’ comes from ancient Greek
word ’kryptos’ which means hidden or private.
• These are quicker, cheaper and more reliable
than our government issued money.
• All cryptocurrencies are entirely digital and do
not rely on central bank control.
 Literature Survey
The demand–supply theory is the most common principle used in literature
to determine the price of Bitcoin. “Inelastic demand and tight supply” result
in soaring prices of Bitcoin as found by Blundell-Wignall (2014). The price
determination model used is based on the “medium of exchange” role of
Bitcoin. They form that the demand curve and supply functions are derived
from the advantages or benefits of using Bitcoin. However, the prices can fall
to zero if these benefits are taken away by the government or the coins are
hampered by fraudulent activities or if a better alternative emerges in the
market. The transaction volume also proves to be a significant demand
driving ingredient implying that the transactional needs of users drive up the prices.
The supply-side variables, on the other hand, prove to be insignificant in driving the
prices of this unregulated contemporary currency. This phenomenon has been
explained by Polasik et al. (2015) that it is because the bitcoin is governed by a
mathematical algorithm and any expected future change is already reflected in the
current prices. Kristoufek (2015)
conducts a similar analysis by constructing a demand variable as
a trade exchange ratio and incorporating the method of
wavelength coherent analysis. The study finds that the price leads
the Trade exchange ratio in the short run but not in the longer run. It
means that Bitcoin does appreciate in the long run when used for
more non-exchange transactions while in the short run the price
boosts the exchange-based transactions. The supply-side factor
remains difficult to be determined as the future money supply is also
already reflected in the current prices because of a known algorithm.
This relationship between the expected future supply of Bitcoin and
its prices remains trivial (Polasik et al. 2015).
Using Economic Freedom Index, Viglione (2015) studies the role
of governance and other related factors in determining the price of
Bitcoin as measured by the willingness of users to pay a premium. This work
exhibits that real interest rates, tax burden, and investment freedom across
different countries is significant in determining Bitcoin prices. In contrast,
inflation rates and monetary freedom across boundaries have no impact on
Bitcoin prices.
Bitcoin being a digital currency needs to be analyzed from a further perspective than
just as an ordinary currency. Both the traditional determinants of currency pricesand
factors specific to digital currency are analyzed by Ciaian and Rajcaniova (2016).
They examine if Bitcoin has the characteristics such as a medium of exchange, a unit
of account and a store of value. They argue that the attractiveness of Bitcoin is the
main driver of its’ price and Bitcoin cannot compete with standard currencies due to
its speculative nature.

Later Athey et al. (2016) build a model to examine the equilibrium prices under two
different scenarios. First in the absence of an investor and second by including an
investor with certain characteristics in the model. They demonstrate the existence of
aunique equilibrium for Bitcoin prices defined by economic forces (supply and demand)
and show that the inclusion of an investor in the model gives a dynamic
equilibrium.

In their explanation, the fluctuation In Bitcoin prices is due to associated market

expectations. However, Griffin and Shams (2020) observe that Bitcoin price reflects
much more than just standard supply/demand and fundamental news. 
 History
• In 1998,Wei Dai published a description of “B-
Money”, an anonymous ,distributed electronic
cash system.
• Nick Szabo created “bit gold” like bit coin and
other cryptocurrencies.
• The first cryptocurrency to capture public
imagination was Bitcoin ,using Blockchain
technology launched in 2009 by Satoshi
Nakamoto.
 Top 10 cryptocurrencies used in India
• Bitcoin- highest in India(45,20,205)
• Ethereum- (3,66,908)
• Tether-(78.72)
• Shiba-Inu
• WazirX
• Dodge-coin
• Tron
• Polygon
• Cardano
• Solana
 How Cryptocurrency Works?
• Crypto-currency is an encrypted decentralized
digital currency transferred between peers
and confirmed and added to blockchain
through a process called mining.
 How bitcoins are purchased?
• The process to purchase bitcoin consists of four steps:
1.Choosing a venue or exchange to 2. Place your order,
3. Selecting a payment method, and 4. Ensuring safe
storage for your purchased cryptocurrency.
• Depending on the type of venue chosen in the first
step, there might be additional steps involved in the
process. For example, you might need to factor
additional costs for an online wallet and custody of
your bitcoin, because that particular venue does not
offer these services.
 Benefits:
Low inflation

Simple, fast, safe & cheap

De-centralized ,self-governed and managed.

Untraceable

Currency exchanges can be done easily

Easy to carry

Cost-effective
 Disadvantages:
Lack of awareness & understanding

Can be used for illegal transactions

Data loses causes financial losses

Adverse effects of mining on environment

No refund or cancellation is possible

Risk of Volatility

Still developing
 Conclusion:
• The cryptocurrencies are a hot topic in the global financial
system. It is only after the required trust in the
cryptocurrencies after which they will be used on a wider
scale.
• Despite the flaws, bitcoins are still considered as
masterpiece in digital currency.
• It has provided an alternative currency for less developed
countries and has opened the doors of economic
transformation.
• In order for crypto-currency to succeed, more people need
to understand what it is.
 References:

Bearman, J. (2015, May). The Untold Story of Silk

Road, Pt. 1. Retrieved from Wired.com Website:
https://www.wired.com/2015/04/silk-road-1/

Bitcoin: A New Global Economy. (2015, August 4).

Retrieved July 2016, from BitPay, Inc. Website:
https://blog.bitpay.com/bitcoin-a-new-global economy/

Bovaird, C. (2016, June 24). Bitcoin Rollercoaster Rides

Brexit As Ether Price Holds Amid DAO Debacle.
Retrieved June 2016, from CoinDesk Website:
http://www.coindesk.com/bitcoin-brexit-ether-price-
rollercoaster/

Desjardins, J. (2016, January 5). It‟s Official: Bitcoin

was the Top Performing Currency of 2015. Retrieved
from The Money Project Website:
http://money.visualcapitalist.com/its-official-bitcoin-
was-the-top-performing-currency-of-2015/
THANK YOU