Impact of Bitcoin as a World Currency

Abstract

In an era of technology advancement when the entire world is talking about the "Internet of Things" whereby we are expected to have connectivity between anything and everything, Currency cannot be left behind. Paper currency is bound to be a thing of past, as virtual currencies will start taking over and Bitcoin is well poised to achieve this feat. Not only it will revolutionize the way payments are made, but also have potential to impact the future of world currencies like USD, which is already facing challenges from EURO or Chinese Yuan Renminbi (CNY). The rise of crypto-currencies will add a new dimension to this challenge for US Dollar (USD)The focus of this study is to understand multiple factors which are translating Bitcoin (BTC) that is gaining momentum in various fields of global finance and how disruptive it can be, including replacing main fiat currencies in the financial system impacting mainly USD. The key variables studied are Regulation or lack of it around Bitcoin, Bitcoin Technology, Bitcoin Economy and the usage of Bitcoin as a Currency. This research used the latest statistical tool ADANCO 1.1.1 by Henseler and Dijkstra (2015) to analyze the data collected by building a partial least squares structural equation model (PLS-SEM). The observations of this study will help understand the future of global finance from multiple standpoints, especially Regulation, Cryptocurrencies and the fiat currencies.

Regulation of Crypto Currency in World Trade Organization

“…Then followed by China's Yuan (CNY), which lately has been dominating the currency turnover in Asia and has started to shift the existence of Japanese Yen. [7] In the middle of the currency war, the first Bitcoin was discovered in 2009 by Satoshi Nakamoto. Bitcoin is one of the cryptocurrencies that has begun to grow and rapidly increased in 2013, as a matter of fact, within that year, the exchange rate for one bitcoin in USD has rose up to five times.…”

“…When it began to be traded in 2010, its value was less than five cents per US dollar, subsequently in 2013, Bitcoin has exceeded USD 1,200.00 (U.S. Senate Committee on Homeland Security and Governmental Affairs 2013). [7] The initial reason for Satoshi to create Bitcoins is due to a dissatisfaction with the existing currency, and the difficulty in conducting digital financial transactions that must be executed through the Bank as a third party. [8] Meanwhile, through crypto currency as a peer-to-peer (P2P) currency, financial transactions can be made anytime, anywhere and without involving any third parties.…”

Modeling Cryptocurrency (Bitcoin) using Vector Autoregressive (Var) Model

“…However, fluctuations in Bitcoin have an impact on the tweets about Bitcoin. A. Seetharaman et al (2017) tried to investigate the multiple factors which are impacting Bitcoin.…”

“…Today, however, the major chunk of currencies are often called as "fiat" currencies, meaning that these currencies are neither inherently valuable nor redeemable for a product or a service but, instead, are issued and sponsored by some central authority such as the Reserve bank of India. The value of such fiat currencies is derived from the trust placed in the central authority by the users of the currency (Seetharaman, A, et al, 2017) ). Currency forms as a basis of trade and used as a medium of exchange for goods and services in an economy.…”

Examining the day-of-the-week-effect and the-month-of-the-year-effect in cryptocurrency market

“…Bitcoin was first developed in 2010 as a financial instrument called virtual currency which was originally used for peer-to-peer payments among online video gamers (ICBA, 2015) and online gamblers through Satoshi Dice (Badev & Chen, 2014). This instrument was originally created by a programmer (Turpin, 2014) and was named Bitcoin by Satoshi Nakamoto, its inventor (Nakamoto, 2008;Richter, Kraus, & Bouncken, 2015;Seetharaman, Saravanan, Patwa, & Mehta, 2017). In 2010, Bitcoin was only valued at USD 0.04, and once reached the highest record of USD 19.345,49 in December 2017.…”