ECONOMICS PROJECT SYNOPSIS
TOPIC:Crypto currency and its impact on economy
Introduction
● What Crypto currency is.
Crypto currency is a digital concept which acts as a form of cash on the digital platform,This
concept of having a digital universe is recent while the items it consist of have existed for almost
a [Link] assets can be held for short or long term This is an open economic concept as it
runs on a global stage with growth opportunities which developing technology
Details
● Advantages of crypto currency
1. Permissionless
2. Censorship-resistant
3. A cheap and fast payment method
● What are the risks to using cryptocurrency?
Cryptocurrencies are still relatively new, and the market for these digital currencies is very
volatile. Since cryptocurrencies don't need banks or any other third party to regulate them; they
tend to be uninsured and are hard to convert into a form of tangible currency
Causes
● Why was Cryptocurrency created and its Growth
The cryptocurrency industry has been one of the fastest-growing markets that most of us have
seen in our lifetimes. Being involved now might reasonably be compared to being involved with
companies on the leading edge of the internet back in the 1990s and early 2000s.
1. High return on investment
Some altcoins have outperformed Bitcoin by wide margins at times, although many of those later
saw their prices collapse. Gains like these might be among the most well-known cryptocurrency
benefits.
2. Easy to trade
Cryptocurrencies have no regard for national borders. An individual in one country can send
coins to someone in a different country without any added difficulty.
3. Most Active exchange market
Crypto markets trade 24 hours a day, seven days a week, without exception.
4. Unregulated Currency
The key to the concept of cryptocurrencies is also the fact that there is no regulator in
[Link] means that the transaction is not supervised in any way.
5. Only Market influenced
The whole system is based on blockchain technology. Cryptocurrency is the first invention in the
financial system that was developed outside of the financial institutions, and even without any
cooperation with them. It is innovative, simple and does not use the existing financial systems.
Effects
Effects on the Banking System
● Positive
Although the world of cryptocurrency is steadily expanding and gaining popularity, traditional
banks are hesitant to adopt the use of these digital assets—believing that their inherent risks
outweigh their potential benefits. However, regulatory agencies such as the Office of the
Comptroller of the Currency (OCC) are working to change banks’ perception of digital
currencies, believing that these assets could positively drive financial institutions to a new era of
innovation and efficiency.
● Why Banks are Cautious of Cryptocurrencies
1. Decentralized Nature
Instead of relying on centralized intermediaries in these transactions, the trust is placed in the
blockchain code and the distributed nature of the blockchain.
2. Volatility
The price of cryptocurrencies (bitcoin specifically) have generally been volatile over their short
life. Banks see this as a risk because historically, the price hasn’t been stable, so they believe the
currency might not remain a stable investment vehicle over time.
● Less dependent on cash
Cryptocurrencies have properties which make them a preferable means of payment. They offer a
certain degree of anonymity, which is often compared to the degree offered by cash. Payments
are not geographically limited; clearing and settlements are done very quickly. Due to the speed
and absence of currency conversion costs, they are particularly suitable for cross-border
payments.
● Loss of control over money supply
If users use cryptocurrencies to a greater extent, central banks could lose their monopoly over the
money supply. the central bank partially loses control over reserve requirement system and
monetary multipliers, in addition to loss of seigniorage
Data analysis
According to the results of the Hatemi-J causality analysis, positive shocks in the panic index are
the cause of negative shocks for all cryptocurrencies.
However, negative shocks in the panic index could not have any effect on cryptocurrencies.
However, the causality relationship between the negative shocks in the panic index and BTC,
ETH, and XRP could not be found.
Conclusion
Cryptocurrencies are a hot topic in the global financial system. If the cryptocurrencies fail to gain
that trust, then their boom might decline. They are still in their infancy, and it is not sure as to
when they will be maturely traded in the markets globally.
Bibliography
THE POTENTIAL EFFECTS OF CRYPTOCURRENCIES ON MONETARY POLICY
The relationship between cryptocurrencies and COVID-19 pandemic | SpringerLink
The Asymmetric Effect of Panic Index on Cryptocurrencies
