The Economics of Bitcoin and its Future

What is bitcoin?

Bitcoin is a cryptocurrency made and traded without the inclusion of banks or governments. These Exchanges permit anonymity, which has made it mainstream with individuals who need to keep their financial activities as well as identities hidden and private. The bitcoins are made by supposed “miners”, who work computer farms using IT services that check other clients’ exchanges by resolving complex mathematical puzzles. These miners get bitcoins in return. Bitcoin can be changed over to money when saved into accounts at costs set in online exchanges.

Bitcoin miners typically earn in the neighborhood of $500 a month (source – The Atlantic).

Recently, market turbulence and plunging stock prices have again brought up issues about the intelligence of purchasing them.

The cryptocurrency prices have suffered dramatic reversals. Bitcoin, which has had episodes of unpredictability before, has shed about 33% of its value since Sep 1 2017.

Nevertheless, the market price is still up dramatically from the beginning of 2017.

The Sovereign Nations and Bitcoin

In the U.S., the IRS has issued rules on cryptocurrency accounting, naming it an “intangible asset” subject to tax collection. Specifically, their regulations state:

“Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as ‘convertible’ virtual currency. Bitcoin is one example of a convertible virtual currency. Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies.”

Virtual currencies are now closely tracked by intelligence agencies, who see it as a vehicle that allows completely anonymous financial dealings that are often used for illicit purposes, such as hacking and extortion, money laundering operations, drug transactions, and other illegal actions.

The Central bank of China has taken a cautious stance on bitcoin’s future.? It has cautioned in the past that the money is being exchanged without administrative oversight and may be connected to extortion. The bank restricted starting offerings of new forms.

Following the closure of a Bitcoin exchange in Japan called Mt. Gox, that nation has sanctioned new cybersecurity regulations to control digital currencies. Mt. Gox closed down in February 2014, saying it lost approx 850 thousand bitcoins through various means.

 

 

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