The economics of bitcoin



The article I read was about the economics of Bitcoin and how the market for it works. Bitcoin is set up to have an almost perfectly inelastic supply with there never being more than 21 million bitcoins at one time. This will allow for the inflation rate to never get too high despite the price of a bitcoin being incredibly volatile. The article explains how it is very unlikely that Bitcoin will ever replace our currencies such as the dollar do to it’s volatility, and the article states that many investors treat it as a highly unreliable store of value. It also compares the Bitcoin market to the crude oil and natural gas industries and shows how the supply and demand works for both of them. Along with that, the value of a single bitcoin even with the volatile market is incredibly high, to the point where it can’t be used as a reliable medium of exchange. It is for all of these reasons that they determined that cryptocurrency won’t break into the mainstream.

a I think that this article is important to the field of economics because I feel like it clears up some misconceptions about Bitcoin. Before reading this article I thought that Bitcoin could end up being just like a normal currency used for daily transactions, but the article does a good job of showing how that couldn’t happen, or at the very least would be very difficult to do so. The article is very in-depth and well researched, and it compares Bitcoin to several other commodities such as oil and natural gas to make it’s point that Bitcoin could not a stable medium of exchange like gold. I think this is relevant to us as Americans because Bitcoin isn’t going anywhere, and although it might not be the next big currency, I think it’s good to have the proper information about what it actually is. That way we are able to properly understand what it is, and have an idea about how it works should we ever want to use it. While this is a well written article, I do have a few questions that were not answered in the text. The biggest question that I had was: if there was a cryptocurrency that was stable, how would it function alongside the dollar and the gold standard? I find this to be an important question because a lot of money is already transferred digitally, and I was wondering about what if there was a currency that was entirely digital. Another big question that I had was: what would Bitcoin have to do if it wanted to actually become a stable currency? At its current state, Bitcoin is nowhere near a point where it could compete with the dollar or gold standard, but if it wanted to, what steps would it have to take, and what would it have to do to get mainstream recognition.

Putnam, Bluford, and Erik Norland. “An In-Depth Look at the Economics of Bitcoin.” Futures & Options Trading for Risk Management - CME Group, 24 Apr. 2018, www.cmegroup.com/education/featured-reports/an-in-depth-look-at-the-economics-of-bitcoin.html.

https://www.cmegroup.com/education/featured-reports/an-in-depth-look-at-the-economics-of-bitcoin.html

Comments

Post a Comment

Popular posts from this blog

The Education Gap

Read an article on a racial issue in America from the last five years, whether it is from an American newspaper or a foreign paper looking at American issues.  Briefly summarize the article information and then respond with what your evaluation as to what is going on, how it is being treated by the press, or anything else that you would like to say about it. The Education Gap Between Whites and African Americans In the United States:  Although we have changed our laws in the years since lawful segregation, the legacy that segregation has left lives on in the present day United States. This is particularly evident in the way we regard education, and even after integration there is still a large gap that lives between the way we education white children and the way we educate African American children. Many of the differences in this lie in the qualification and quality of teachers and curriculum and the contrasts in funding that resides in our school systems. It...
Read more

Where voting matters - El Salvador

Ashwin Dev Mr. Roddy IHSS 24 October 2018 Where Voting Matters - El Salvador The Salvadoran presidential elections are going to be held on February 4, 2019 with a second round in March if no candidate wins an outright majority. El Salvador has a limit for a single 5-year term which means that the current president,  Sánchez Cerén  will not be able to run for this election. This election is different from most in the past due to the new political parties law, which says that a single candidate from each party must be chosen before the date of the election. The two parties at the moment are apart of El Salvador's multi-party system which include the National Republic Alliance (ARENA, right wing) and the Farabundo Mart í National Liberation Front (FMLN, left wing) as well as 2 other new parties.  Arena has been out of power since 2009 however they have chosen a man named Carlos Calleja to represent them. Calleja is a 42 year old businessman who owns a chain of sup...
Read more

Sharing Economy- Luke

Luke Kirchner       After much thinking, I have realized that sharing economies can be created from almost anything. I decided to make create something about sharing home decor. This would include things like paintings, ornaments and other small things to decorate your house. One challenging thing that would need to be sorted out, would be the value of the objects. Art is very subjective and can be valued very differently by other people. The market would have to establish it self to truly assign a price to different pieces. This would be a great way to make some money off of pieces of art that usually aren't seen and this would allow the renter to spruce up their house.       An app would be used to connect people and would ask for necessary information. This would probably be more localized, so people could drive over and pick up, or vice-versa. Some sort of insurance/waiver would also have to be part of the process, to ensure the rente...
Read more