Cryptocurrency has become not just a technological feat but the embodiment of money. Cryptographic money is computerized cash. That implies that there is no physical coin or bill — it is all on the web. One can transfer cryptographic money to somebody online without a go-between, similar to a bank. Bitcoin and Ether are notable cryptographic forms of payment; however, new digital types of money keep being made. The boldest unprecedented innovation, Bitcoin, hit economics, presenting the most stable ever seen currency. The article titled “Cryptocurrency and the problem of intermediation” discusses the vital point of crypto development. The purpose of this paper is to identify the objectives, approach, methodology, and other details described in the given article.
The article primarily sets as its objectives the need to indicate the mechanisms of cryptocurrency and identify how it is different from other currencies. Moreover, the paper seeks to investigate possible obstacles, track Bitcoin’s development, and evaluate specific schemes concerning currency purchasing. What is more, the paper explores whether cryptocurrency can become the national currency and suggests limitations and regulations for that. A for the main methods, several can be identified (Harwick, 2016). First, the author uses empirical observation, data analysis, and comparison. For instance, the author profoundly investigates the history of this currency’s appearance, discovers its development stages, and describes its main trait. Thus, the author suggests that the currency is portable, durable, secure, and divisible.
Further, there is a comparison concerning gold and Bitcoin, and the author again refers to the past events that influenced the present situation. When comparing these, Harwick (2016) mentions that gold, unlike Bitcoin, has fewer hurdles in emerging as the constant and valid currency. Moreover, he examines some future impediments standing in the way of cryptocurrency becoming a national currency. When exploring these aspects, Harwick (2016) alludes to historical occurrences, for instance, “even the so-called Price Revolution, during which prices in Europe more than doubled following the discovery and importation of New World silver and gold” which lasted for quite a long time (p. 577). Nowadays, however, individuals may utilize digital forms of money for payments and keep away from exchange expenses. Some may get numeric types of money as a venture, anticipating the values goes up. One can purchase cryptographic cash with a Visa or, at times, get it through a procedure called “mining.” Cryptocurrency is put away in an advanced wallet, either on the web, on the PC, or other equipment. A digital money’s worth can change continuously. A venture that might be worth a great many U.S. dollars today may be worth just hundreds tomorrow. On the off chance that the worth goes down, there’s no assurance that it will go up once more.
The first approach Harwick sticks to is systematic, which implies selecting the best evidence and compiling them into one research to analyze the event and make evidence-based conclusions. Therefore, Harwick resorts to many studies that contributed a lot to the investigation of cryptocurrency and its inner and outer influence. Among the contributors are Bordo, Dowd, Enge, and others who dedicated their papers to cryptocurrency in the modern world. The systematic approach also involves using statistical data; therefore, there is a graph reflecting the statistics of daily change in Bitcoin-dollar exchange. Numerical information is efficient in analyzing two counter currencies.
Moreover, the paper identifies the possible threats or problems that are based on its current state. Among the primary barrier, the author differentiates between technical and institutional ones. According to Harwick (2016), “in addition to the intrinsic network hurdles, regulatory uncertainty and hostility also constitute an extrinsic hurdle for intermediation in a way that they do not for the protocols themselves” (p. 579). Here, the author also underlines that the cryptocurrency technically may serve as a reserve currency, but there is a risk of protocol fraud.
Then, the alternatives to intermediation are described by exemplifying the value of money represented by different means. The author suggests that intermediation is likely to define the value of base money than vice versa (Harwick, 2016). Furthermore, the “intermediation, then—in particular intermediation carried out by large-scale specialists—is not merely a means to achieve MV stability in pursuit of monetary equilibrium” (Harwick, 2016, p. 583). Thus, maybe, intermediation gives off an impression of being valuable to exploit any benefits that MV dependability apparently offers.
The conclusion is marked by the author’s statement that the existence of a cryptocurrency prevents any a priori statement about the impossibility of solving the problem. Among the main findings is the fact that any opportunity for cryptocurrencies to suddenly displace the national currency exchange rate is likely to coincide with the easing of restrictive regulatory measures. In terms of political economy, it may be useful to have a cryptocurrency with stable purchasing power to allay concerns about its adoption. In general, the recommendations suggest that the cryptocurrency will not be eradicated because it is well-positioned now; however, the hurdles still exist and are unlikely to disappear.
Reference
Harwick, C. (2016). Cryptocurrency and the problem of intermediation. The Independent Review, 20(4), 569-588.
In the present day, cryptocurrency attracts more and more attention of people all over the world. Regardless of not being widespread yet among community members, cryptocurrency is used by a considerable number of financial institutions and companies for its potential to influence the financial market in the future. In general, it may be defined as a virtual of digital currency secured by cryptography – that is why it cannot be double-spent or counterfeited. There are currently several cryptocurrencies, and the majority of them are decentralized networks on the basis of blockchain technologies enforced by computer networks. Cryptocurrency cannot be affected by government manipulation or interference as it is not issued by it or any central authority.
The significance of this study is determined by an unknown and controversial effect of cryptocurrency. While it is frequently regarded as a more convenient and stable alternative to traditional money, some experts state that the instability of cryptocurrency will have a devastating impact on many industries in the future (Nova, 2021). That is why the investigation and evaluation of its potential influence will be beneficial for the development of accurate strategies and preventative measures. The purpose of this paper is to examine the nature of cryptocurrency, its characteristics, and impact on the basis of literature review to answer the research question: Is cryptocurrency unstable? The answer will help to approve or reject a hypothesis that lies in the paper’s thesis statement – being a long-lasting uncontrolled bubble, cryptocurrency contributes to financial and monetary instability, a lack of investor protection, the global market’s downfall, and wealth inequity.
According to previous research, a digital currency may be regarded as a highly convenient alternative to traditional money protected from government regulation. It cannot be double-spent or counterfeited, and its use is frequently defined as a future of the financial market. However, this study that incorporates available data related to cryptocurrency demonstrate its instability that may have highly negative consequences for different industries. According to modern studies, cryptocurrency is a long-lasting bubble which value is artificially created. Without proper control, the fluctuations of is value may lead to serious challenges in the financial market and lead to wealth inequities. In the future, more thorough comparison of cryptocurrency and traditional currency in relation to mechanism of its regulation may be required to support this paper’s results.
Having adequate knowledge and information before making financial decisions such as investing in stocks, bonds or cryptocurrency is very important. Understanding the advantages and weaknesses can help one know where to invest their finances best. For instance, company stocks of firms such as Nestle and Volkswagen are very attractive and promise a great amount of profit for individuals looking for opportunities to invest. Despite this, some people who own stocks in such firms are looking for other opportunities to invest in cryptocurrency after trading in their holdings in stocks and bonds. Buying crypto, especially bitcoin, is now like a trend, and many individuals are entering the crypto space without assessing the trade’s pros and cons or weaknesses. This paper looks at the financial advantages of Russian bonds, Nestle, and Volkswagen stocks while also looking at the weaknesses of cryptocurrency in an attempt to help reach a financial decision on investment.
Financial Advantages of Nestle Stock, Russian Bonds, And Volkswagen Stock
Financial Advantages of Nestle Stock
Nestle, one of the largest food groups globally, raised a whole-year sales target after reaping the benefits of price increases on its products, that range from bottled water to pet food. According to Nestle S.A. ADR Stock Price & News (2022), the company whose shares saw an increase of more than three percent has eclipsed other companies by leveraging the strength of brands like Perrier water. According to (Affonso, Dias & Pinto, 2021), the firm further increased prices in the last quarter of 2021. The same is expected this year when input costs are anticipated to rise even more than the four percent witnessed last year.
Nestle, like its peers, is facing challenges with the supply chain as the global economy is still trying to fight against COVID-19. The hikes in prices should help ensure the margin’s steadiness at around seventeen percent, followed by an average margin boost in the midterm (Affonso et al., 2021). The company raised its annual organic growth guidance to between six and seven percent from five to six percent after the sales improved to about seven percent in the third quarter of 2021. The volume growth is anticipated to slow as the boost witnessed currently because of the pandemic wanes (Affonso et al., 2021). According to Nestle S.A. ADR Stock Price & News (2022), the benefits of greater volumes and pricing would fully show this year.
Financial Advantages of Volkswagen Stocks
There is evidence that this stock should be a great choice for investors, for instance, a surge in recent price momentum shows an increasing interest of investors in the stock. According to Volkswagen AG Stock Price & News (2022), it is clearly well-positioned with a one-month price change of about four percent. Whereas all stocks have the potential of witnessing a hike in price for a small period, a real momentum player is needed to deliver positive returns for an extended period. Volkswagen stock is in that category as the stock witnessed a gain of seven percent over the last year (Affonso et al., 2021). Additionally, the momentum for this stock is fast-paced, as it has a beta of around two (Affonso et al., 2021). This shows that it moves sixty percent higher than the market in any direction.
Given the price performance, it is clear why the Volkswagen stock scores a B in momentum. This suggests that the best time to choose to purchase stocks from Volkswagen would be now if one desires to benefit from the momentum. Additionally, a rising trend in earnings estimate revisions has helped the stock earn a high ranking, ranked second by Zacks. Research reveals that the momentum influence is strong among the top stocks. The reason for this is that more investors have developed an interest in stocks that cover analysts and have raised the earnings estimates, which helps in keeping the prices up. The Volkswagen stock is trading at a great valuation despite processing fast-paced momentum traits. Regarding the Price-to-Sales ratio, the stock currently appears cheap (Affonso et al., 2021). For every dollar of sales, an investor only needs fifty-eight cents.
Financial Advantages of Bonds
Investing in stocks, especially those belonging to companies such as Nestle, is great. It becomes even better when someone invests in bonds such as Russian bonds. The financial weaknesses that can be found in stocks are eliminated by choosing bonds (Isaac, 2020). For instance, the volatility in bonds is lower than in stocks which shows that even though it is safe to invest in stocks, it is safer to do so in bonds. Additionally, stocks suffer from more day-to-day volatility than bonds (Reboredo, Ugolini & Aiube, 2020). The interest payments are higher in bonds than the general level of dividend payments. Bonds are also liquid, which means that it is easier for an organization to sell a significant amount of bonds without impacting the price. They are also attractive due to the comparative certainty of a fixed interest payment twice annually plus a fixed lump sum at maturity.
Financial Weaknesses of Cryptocurrency
Despite all the popularity of the idea that crypto is a great asset, buying one is similar to buying a share of stock in companies such as Nestle or Starbucks. With the two companies, one gets quarterly earnings releases, investment bank presentations, earnings calls, and media appearances. With trading in stocks, one has a general idea of how a company is doing financially and possibly in the future. Even with micro-cap firms that are traded publicly, one can access financial statements.
However, trading in crypto is entirely different, where there are extreme periods of volatility and zero fiscal statements. It just exists as well as thrives on speculation and hype, plus can crumble on fears that could appear out of nowhere. This means that one could lose everything while investing in the crypto business if they do not comprehend for what they are signing up. This continues to be seen as more prominent investors continue to be involved in the business and use different tactics.
Trading in crypto is different from how someone can trade in a traditional market. For instance, it is still a challenge to access leverage. A trader particularly has to pay a funding raise to maintain their options and thus positions open, which is expensive. Therefore, one must note that unlike conventional markets, where there is a huge amount of leverage plus borrowing that they can get at low costs, crypto leveraged cash is expensive.
Conclusion
The paper has shown the differences between investing in bonds, stocks, and cryptocurrency by revealing the financial advantages of stocks and bonds while also showing the weaknesses of cryptocurrency. For instance, individuals who own stocks at Nestle will earn more profits this year than even last since it is expected that the company will raise the prices to more than four percent seen in 2021. Volkswagen stock is gaining interest from many investors as its earnings estimates are high. This means that the price, like that of Nestle, will also rise. The Crypto business, as popular as it is, continues to welcome sophisticated investors who are applying various tactics which can make others lose as they gain. Additionally, also paying a funding raise to maintain one’s options in crypto is more expensive than investing in bonds.
Cryptocurrency is a means of exchange designed around the digital use of encrypted figures. The term cryptocurrency derives from cryptography, which implies a secret means of sending information to the correct persons without a third party. The basis of cryptocurrency operations is essential codes that allow the private exchange of business. Even though many governments view it as a disruption to the traditional banking systems, this emerging issue has gained significant traction over the last few years. Today, there are over 15,000 cryptocurrencies that exist around the world, with a total market capitalization of about $300 billion (Russell, 2020). This method of exchange is used in various fields, including ATMs, electronic commerce, and passwords.
An American cryptographer first introduced the idea of cryptocurrency by inventing digital cash in 1989. Since then, various programmers have created algorithms central to the encryption of codes. However, the first transaction using cryptocurrency was recorded on 12th January 2009. Today, numerous cryptocurrencies operate, gaining popularity through their secure and cost-effective properties (Russell, 2020). Cryptocurrencies like Bitcoin and Coinbase make transactions easy for people with limited technical knowledge trading with digital coins. Bitcoin is the world’s largest digital currency and is known for its fair rates of exchange.
Ethical SWOT Analysis
Cryptocurrencies lacked value in their early years of operation and were rendered worthless. With time, the coins gained merit, and several people started making thousands of dollars by trading.
Strengths
Cryptocurrency uses blockchain technology, a decentralized method that is easy, transparent, and safe, making it suitable to apply by many people. This technology prohibits the involvement of a third party during the transaction process. This implies that transactions happen quickly and faster and with minimal or no interference from government organizations. Blockchain technology really boosts the economic turmoil for many cryptocurrency users. In addition, cryptocurrency trading is fully anonymous and 100% untraceable (Al-Amri et al., 2019). Blockchain technology makes this network private; hence the users’ financial data is fully hidden. Every crypto trader receives a unique PIN upon signing up, which masks the user’s identity. The PIN changes once the currency is sold, and only the sender and the buyer get access. Because of this increased security, many people have joined cryptocurrency trading activities (Billah & Atbani, 2019). The transaction processes are simple, and the settlement fees are close to zero, making it favorable for many people.
Weaknesses
During the first few years of its discovery, trading in cryptocurrency was faster. Today, transactions are not as fast as they used to be due to the flooding of the blockchain network. With the expanding market, transaction speeds are expected to be even slower (Billah & Atbani, 2019). Until this problem is solved, it is unlikely that cryptocurrency will usurp the fiat system. The encryption of transactions makes it hard to recover a lost wallet password (Al-Amri et al., 2019). Many people who forget their account passwords lose their transaction details and access to their accounts. In addition, the value of cryptocurrencies has shifted in the past few years. The reliability of cryptocurrencies is too questionable; it looks like a very volatile investment. The prices can crash anytime since the currency has not proved itself a long-term investment. It is worth noting that they have only been around for a decade.
Opportunities
We must appreciate that we are moving away from physical money usage into cashless currencies as a society. Big institutions like Amazon have started accepting payments in terms of Bitcoins. With growth and adaption ratio, cryptocurrency can become a global reserve currency (Al-Amri et al., 2019). In recent years there have been increased cases of data breaches in banks and financial institutions, raising the question of the safety of the client’s information. Many people are looking for alternatives, and blockchain technology promises the safety of customer information. The transactions are encrypted and provide a very high solution to data protection. Cryptocurrency networks can allow investors to reduce bureaucracy and increase trade efficiency.
Threats
The anonymity of banks and other government organizations poses a big threat to the operation of cryptocurrencies. Knowing that a transaction is untraceable provides a good environment for criminal activities. If more criminals purchase and use illegal cryptocurrencies, this will be a problem for the government and law enforcement agencies. It will be hard for the government to trace and prosecute such acts. Although it may be difficult to control cryptocurrency operations due to anonymity, the government will still try (Al-Amri et al., 2019). The government will understand the huge profits in this market and increase attention to imposing taxes. The values of the latest coins skyrocket, and every coin will try to compete favorably in the market, leading to unhealthy competition and the destruction of the market. Criminals are taking advantage of the cryptocurrency leading to threats with unknown identities. The issue of environmental degradation has made this activity banned in several countries.
Historical Context and Ethical Questions
Historically, the idea of cryptocurrency started in the year 1989. However, the first transaction with cryptocurrency occurred in 2009 using Bitcoin. After its discovery, Bitcoin prices stayed relatively low, with users unsure of its trajectory. In 2013 there was a sudden projection of its price from $1 per coin to around $1,250.00 per coin (Wang et al., 2022). This increase in the price of Bitcoin brought about attention to the crypto market, and many crypto coins started flooding the market with promises of different levels of usability. The most serious development of this market was witnessed at the beginning of the year 2020 with the outbreak of COVID-19.
The year 2021 was characterized by an increased surge in this market as more pension funds and financial institutions started showing the legitimacy of the crypto market. The amount of money that these organizations were making started to increase rapidly. Another move that helped this market draw attention was the intention of the US government to tax activities involving cryptocurrency (Wang et al., 2022). The government estimated an approximately $10,000.00 to tax from trading with Crypto monthly.
There are various ethical issues surrounding the trading activities of cryptocurrencies. One major issue is the anonymous nature of the currencies. While many people who trade Crypto see this as an added advantage, it creates a loophole for criminal acts. Various research works prove a positive connection between criminal acts and cryptocurrency transactions in the pacific region (Al-Amri et al., 2019). Even though the United Nations has continuously focused on curbing the potential for funding human and weapons trafficking, the anonymous nature of the crypto market makes this process impossible.
Another ethical question regarding cryptocurrency is the fear of legitimizing the currency market. The users of cryptocurrency cannot allow governments and banks to have control of their activities. This question has been discussed over the past few weeks, with some countries thinking of creating government-based crypto coins. Various governments have adopted the changes in technology to design and attempt to use national cryptocurrencies (Russell, 2020). However, this idea faces a dilemma as the International Monetary Fund (IMF) pushes various governments to avoid Crypto-based activities, which would destabilize the international monetary system.
The ethical issues surrounding the cryptocurrency trade bring both positive and negative aspects. The activity, however, has brought more advantages to the people with its legitimacy and widespread use. Locals can now trade peer-to-peer without interference from the government and intermediaries. The transaction can remain anonymous, and the market can have the opportunity to control inflation rates. While it is argued that it promotes illegal activities, the current tender systems have always allowed for illegal activity (Yue et al., 2021). Changing the form of the legal tender will not necessarily worsen the crime. We are sitting on the edge of a new international monetary system.
Literature Review
A narrative literature review aims to understand and evaluate knowledge relevant to a particular topic. It also works to reveal the strengths and weaknesses or claims that deserve further research. The use of a narrative literature review in this study enables us to investigate how cryptocurrencies have been conceptualized in recent studies and assess the theoretical underpinning of this emerging trend in technology.
Vilkov and Tian attempted to analyze the future growth of Bitcoin and other cryptocurrencies using the SWOT analysis technique. They concluded that cryptocurrency revolutionizes the digital currency market with free flow and zero transaction fees. The increased advancement in technology has contributed to the increased use of these digital currencies. However, it is worth noting that digital currency cannot fully replace the fiat system (Vilkov & Tian., 2019). Some recent events and movements also influence that Bitcoin can contribute to a shift in economic paradigms.
Ajmi and Arfaoui tried to use the SWOT analysis to analyze the effects of cryptocurrency on politics. The study concluded that digital currency is the new model for the global economy and influences major political decisions in countries during the campaign. Within ten years, the digital currency has won the hearts of many investors. The future potential is the weakness of the cryptocurrency movement (Ajmi & Arfaoui, 2020). Russell had presented the effects of cryptocurrency on the country’s banking systems and monetary policies. The study concluded that the advancement of technology and openness to accept Bitcoin circulation and government intervention by creating laws are future strengths of digital currency (Russell, 2020). This has greatly affected the circulation of money through the central bank. The study also included the weaknesses, strengths, threats, and opportunities of Bitcoin and other cryptocurrencies.
In their study, al-Amri et al. proved that the use of digital currencies would rise to become self-regulated money free from government control. The SWOT analysis proved that the reoccurrences had opportunities and strengths with the rapid growth of capitalization and great people’s interest (Al-Amri et al., 2019). The results concluded that cryptocurrency adoption is scalable throughout the research period, and there is furthermore scope on factors influencing cryptocurrency. Yue et al., in the year 2021, studied the effects of cryptocurrency on the economy. The research reported that the use of crypto in the economy had shifted the economic model.
The sources identified in this paper were relevant as they focused on cryptocurrency as a major technology trend. The sources had a minor and major focus on cryptocurrencies, and they presented opportunities for using Crypto. These sources provided insights into the challenges of adopting cryptocurrencies in today’s financial systems.
Equity Impact Assessment
Since the discovery of cryptocurrency in 2009, the impact of these activities has been felt in all aspects of life. Socially, Cryptocurrencies have created a more affordable and reliable remittance payment method (Wilson, 2019). Cryptocurrencies have promoted social impact programs globally, and various beneficiaries of these programs have realized maximum profits and benefits (Wang et al., 2022). This has eliminated the issues of corruption and waste while conducting these programs. Today, the United Nations Food program uses blockchain technology to deliver cash-based transfers, saving millions of dollars and helping numerous people.
Cryptocurrencies facilitate the aspect of foreign donations and funding to political parties. 56% of countries globally do not accept the sponsorship of political candidates during campaign activities. Since there is no oversight on cryptocurrencies, they seem to fund many parties. For example, the 2016 USA elections appear to have been facilitated by the influence of cryptocurrency. According to various sources, funds from the Russian government were transferred through Crypto into the USA during this election period (Ajmi & Arfaoui, 2020). In Ukraine, research has it that 57 government officials have declared over 21,000 bitcoins.
Since its discovery, blockchain technology has improved financial institutions across borders for transactions. Currencies like Bitcoin have created a unique and unmanageable market, making it impossible for the global economic market to thrive (Yue et al., 2021). The low transaction cost of cryptocurrencies makes them superior to the traditional monetary system. The years 2016 and 2017 were characterized by an increased number of people working using blockchain technology; since then, the number has increased drastically (Wilson, 2019). The technology is automated and digitized; therefore, the figures can never be changed and altered.
The main environmental effects of cryptocurrencies come from the high amount of energy required in the transaction process. Mining new coins require tremendous energy, ranging from one cryptocurrency to another. The most popular cryptocurrency that requires incredibly energy-intensive is Bitcoin which requires an estimated 2100 kilowatt-hours of energy to mine (Wang et al., 2022). It is estimated that Bitcoin mining activity generates 97.2 megatons of carbon dioxide, which is dangerous to the environment. Mining cryptocurrencies threatens fragile energy grids in countries with weaker infrastructures. Many cities worldwide have experienced power loss due to Bitcoin mining. Countries like China, Iran, Algeria, Egypt, and Morocco have moved to ban cryptocurrencies and outlawed these activities altogether.
Code of Ethics
A code of ethics refers to the legal framework through which an organization and its employees should follow. It describes the ethical behavior expected of the company and its operations. The rise in the crypto market has led to increased attention, and the activities have to be regulated using codes of ethics. All crypto companies must comply with the laws, rules, and regulations of municipalities, states, and countries in which they operate. All crypto companies must comply with the securities laws prohibiting insider trading (Ajmi & Arfaoui, 2020). The companies must also comply with laws concerning disclosure requirements, anti-bribery laws, payments, and health and safety rules.
In addition, all companies trading in cryptocurrencies should address the issues of conflict of interest. A crypto associate is not allowed to work for other competitor firms as this will give rise to a conflict of interest. The associates should also cease using business assets and opportunities for personal gain. The assets of works should be protected and ensure efficient use. Loss of assets affects the profitability of cryptocurrencies (Yue et al., 2021). Family members of crypto traders should never receive gifts or offers from trading activities.
Recommendations
The emergence of cryptocurrency technology has dramatically impacted the social, economic, and political environment. Several people appreciate the transparency, viability, and speed of transactions through cryptocurrencies. Various people have invested in crypto mining activities, making a considerable sum daily. In addition, the move has led to a new global market independent of financial institutions (Al-Amri et al., 2019). People can now transact businesses over a significant geographical distance without delays or government interference.
While many people appreciate the benefits of cryptocurrency, this technology’s ethical dilemma is still questionable. The fact that this market is not regulated makes it vulnerable to cyber-attacks leading to a loss of investments (Al-Amri et al., 2019). Investing in cryptocurrency is a risk-taking activity, and only financially stable people can do this. In several other countries, governments are still delaying its implementation. Many people feel the adverse effects of the activities surrounding the mining of crypto coins. The processes involved in mining activities negatively impact the environment.
Conclusion
In conclusion, the growth analysis of cryptocurrencies shows that the adoption process of cryptocurrency is high in the global world. Lack of enough knowledge and information is the major drawback to this market. However, with well-regulated policies, the crypto market can grow faster. Moreover, the cryptocurrency market analysis shows that not many people would invest in it due to its volatile nature. Many investors prefer to use bonds, shares, and stocks as they have stayed for a long and are trusted by huge organizations. Though profitable, cryptocurrency is a volatile market and a risky investment for starters.
Al-Amri, R., Zakaria, N. H., Habbal, A., & Hassan, S. (2019). Cryptocurrency adoption: Current stage, opportunities, and open challenges. International Journal of Advanced Computer Research, 9(44), 293-307.
Billah, M. M. S., & Atbani, F. M. (2019). SWOT analysis of cryptocurrency and ethical thought. Journal of Islamic Banking & Finance, 36(1), 204-432.
Vilkov, A., & Tian, G. (2019). Blockchain as a solution to the problem of illegal timber trade between Russia and China: SWOT analysis. International Forestry Review, 21(3), 385-400.
Wilson, C. (2019). Cryptocurrencies: The future of finance? In Contemporary Issues in International Political Economy (pp. 359-394). Palgrave Macmillan, Singapore.
At the moment, the popularity of cryptocurrency investing has piqued the interest of people all over the world. Africa is a continent that does not desire to be behind the trend of blockchain and cryptocurrency usage. Blockchain tech underpins cryptocurrency that includes such types as Bitcoin and Ethereum (Soomro et al., 2022). A cryptocurrency is a type of virtual money that employs encryption to authenticate the ownership of a unit of financial value (Walton & Johnston, 2018). Perceived utility and availability to favorable conditions were the critical criteria affecting African users’ choice to accept the cryptocurrencies (Jankeeparsad & Tewari, 2018).
Blockchain has many advantages since it offers enormous promise in a variety of industries, including the financial sector, social networks, and the Internet. Despite this promise, there are several difficulties to address in the use of blockchain (Kesa, 2019). The first type of cryptocurrency, Bitcoin, might have issues such as liquidity, security infringement, and unethical mining (Campbell-Verduyn, 2017). Data optimization and blockchain development are two approaches to addressing sustainability and liquidity (Kesa, 2019). To mitigate confidentiality leaks, mixing has been suggested. Finally, unethical mining may be avoided by employing randomized transmitters and timestamps that allow miners to pick new blocks.
Furthermore, the emergence of cryptocurrency poses a severe threat to many existing banking operations. Cryptocurrencies use a peer-to-peer method to cut out the mediator, which might be a financial intermediary (Härdle et al., 2020). For instance, to operate in the realm of cryptocurrency, no bank account or bank card is required. A crypto-wallet does fulfill the same purpose as a bank vault (Härdle et al., 2020). Considering that over two billion people do not have bank cards, there is the possibility of a shift in financial intermediation with devices and the internet.
Hence, the cryptocurrency started to gain attraction not so long ago, which made it famous in Africa as well. While many people might find cryptocurrency unstable, the lack of intermediaries, availability, and utility made it especially interesting to people who live in Africa. Nevertheless, there are specific challenges that come with cryptocurrencies. These include problems with liquidity, security infringement, and unethical mining. Moreover, cryptocurrencies might lead people to stop using intermediaries when it comes to financial transactions.
References
Campbell-Verduyn, M. (2017). Bitcoin and beyond: cryptocurrencies, blockchains and global governance. Taylor & Francis.
Härdle, W. K., Harvey, C. R., & Reule, R. C. (2020). Understanding cryptocurrencies. Journal of Financial Econometrics, 18(2), 181-208.
Jankeeparsad, R. W., & Tewari, D. (2018). End-user adoption of bitcoin in South Africa. Journal of Economics and Behavioral Studies, 10(5), 230-243.
Soomro, B. A., Shah, N., & Abdelwahed, N. A. A. (2022). Intention to adopt cryptocurrency: a robust contribution of trust and the theory of planned behavior. Journal of Economic and Administrative Sciences.
Walton, A. J., & Johnston, K. A. (2018). Exploring perceptions of bitcoin adoption: The South African virtual community perspective. Interdisciplinary Journal of Information, Knowledge, and Management, 13, 165-182.
The increased importance of cryptocurrency peculiar to the recent several years contributed to significant attention devoted to the investigation of this potentially beneficial means of payment. At the same time, there are also numerous attempts to oppose it to the traditional options such as precious metals and fiat money that have been used for a long period. In this regard, the paper delves into the peculiarities of cryptocurrency and its production regarding the stable popularity of other means of payment. Bitcoin is taken to investigate factors that impact the market and forces that might contribute to the increase or decrease of their potency. At the same time, the paper revolves around precious metals and fiat risks as the modern alternative and factors affecting the sphere. Perspectives associated with these means are discussed, probabilities for financing and benefits are also revealed. At the end of the paper, the conclusion is made.
Introduction
The last several years are characterized by the rapid rise of Bitcoin. Its rates achieved the highest ranks and provoked a powerful reaction in the market of virtual currencies (Andrianto & Diputra, 2018). Investors and coins owners acquired a potent tool to perform financial operations and guarantee particular stability. The given shift of priorities from traditional to innovative currencies also preconditioned the emergence of multiple debates regarding the future of this payment method and its use in deals. At the same time, the popularity and power of precious metals were doubted (Grier, 2014). However, the rise of Bitcoin was followed by its downfall as its price quickly became lower and created the ground for a new wave of discussions about the reliability of the coin and its ability to be used at the international level (Andrianto & Diputra, 2018). For this reason, there is the need for in-depth research of the given aspect with the primary aim to determine its potency, nature, and correlation with alternatives such as precious metals.
Nevertheless, bitcoin is not the only virtual currency that is used in the modern world. There are also Ethereum, Dash, Litecoin, and Monero that are characterized by the ability to accumulate money and serve as the promising investment to monitor the state of the market and play on forex rates (Andrianto & Diputra, 2018). Therefore, at the moment, it is one of the most well-known coins because of the recent rise and shock caused by its blistering growth. However, precious metals trading has always been an alternative to innovative methods because of their traditionally high reliability and understandable character (Grier, 2014). Cogitating about the forces impacting both these options, researchers assume that they are vulnerable to similar processes happening within the market and stock (Andrianto & Diputra, 2018; Grier, 2014). For this reason, the need for an in-depth investigation of the current situation along with the analysis of the perspectives and problems associated with these cryptocurrencies becomes obvious.
Problem Statement
At the moment, the wide use of the new payment method poses a certain threat to the market. The problem is that Bitcoin, Ethereum, Dash, Litecoin, and Monero, same as fiat money, do not have intrinsic value (Cuardas-Morato, n.d.). In this regard, the rapid downfall of this currency can be associated with the lack of a specific ground that supports the stable position of the coin (Papp, 2014). There is another concern related to cryptocurrency. The fact is that the anonymity peculiar to all transactions involving Bitcoins complicates the ability of the government to trace financial flows that might result in hyperinflation and other problems (Malik, 2016). Its use in the shadow economy and the high energy consumption introduces numerous doubts regarding the nature and future of this form of electronic cash (Bonneau et al., n.d.). For this reason, a particular problem with its management, mining, and use as the currency of the future emerges. Investigators suggest several methods to analyze this cryptocurrency and combat with oscillations of this course.
In such a way, the existing problem can be described as the lack of confidence regarding the mechanisms of the functioning of cryptocurrencies, their future, and perspectives as the would-be form of cash used on the Internet. The research is needed to determine several factors. First, aspects impacting the demand for Bitcoin, Ethereum, Dash, Litecoin, and Monero, precious metals as the alternative, and fiat money should be investigated. Second, the peculiarities of their management and manufacturing should be discussed. Finally, these means of payment should be compared to understand the advantages and disadvantages and their potential (Morisse, 2015). The problem is complicated by the fact that there is no generally accepted methodology utilized to investigate all peculiarities of the currency. For this reason, there is also the need for the in-depth investigation of sources devoted to the issue with the primary aim to determine approaches the authors used to acquire credible data needed for the research. Only considering these elements an appropriate analysis can be made.
Literature Summary
The bigger part of the modern literature devoted to the issue focuses on several aspects of cryptocurrency. These include phenomena impacting the evolution of coins, the state of the market benefit for the development and rise, mechanisms of their mining, management, and comparison with such traditional options as precious metals and fiat money (Sovbetov, 2018). At the same time, the literature also discusses central determinants for value formation and it is becoming an important tool for trading or investment. Under these conditions, investigating the works, specific attention to the criteria should be given. The pivotal aim is to outline the existing regularities, and mechanisms of Bitcoins formation and existence to be able to select the most appropriate research methodology that will help to collect credible data and provide a relevant conclusion.
The paper by Sovbetov “Factors influencing cryptocurrency prices: evidence from Bitcoin, Ethereum, Dash, Litcoin, and Monero” examines the factors that affect the value the of most commonly used cryptocurrencies, including Bitcoin, Litecoin, and others as determining the impact of various factors on cryptocurrency can help to predict future fluctuations. The given article contributes to the improved understanding of the mechanisms peculiar to the modern market and the way Bitcoins generate value and enter global operations and other deals on the Internet. To acquire credible information about the current situation in the market, the author included samples of five commonly used cryptocurrencies: Bitcoin, Ethereum, Dash, Litecoin, and Monero. Sovbetov (2018) states that they sampled “top 50 crypto coins that have proportional contribution to market capitalization weights” (p. 7). As a result, the sample covered about 92% of the entire crypto market, making up for a sufficient sample size to generalize the findings to other cryptocurrencies.
The methodology selected for the research presupposes the introduction of two variables. The weekly prices of crypto coins were the dependent variable, whereas measures including market beta, capitalization, trading volume, and SP500 index were the independent ones (Sovbetov, 2018). The researcher used the ARDL technique to establish the correlation between the variables.
Due to the utilization of the sample mentioned above and specific methodology, Sovbetov (2018) concludes that market variables, such as market beta and volatility, had a statistically significant effect on the prices of all five currencies examined as part of the study. Moreover, the attractiveness of coins to the audience, measured by their market capitalization, also had an influence on cryptocurrency prices in the long term (Sovbetov, 2018). The SP500 index also influenced some of the currencies (Bitcoin, Litcoin, and Ethereum), but this variable was not conclusive in predicting short-term prices.
Altogether, the given paper contributes to the examination of cryptocurrency production and manufacturing in three ways. First of all, it offers a framework for predicting coins prices in the long term, which could positively affect cryptocurrency trading and increase the demand for some of them. Secondly, the study proved that the attractiveness of a cryptocurrency had a significant impact on its price. As the attractiveness develops over time, cryptocurrency producers could use this information to impact the value of crypto coins. Finally, the study showed that the prices of a new form of money were not affected by exchange and interest rate, as well as gold prices, thus indicating that cryptocurrencies can develop independently of other traded money.
In other words, the research proves the idea that the demand for cryptocurrency will increase in the future, which is crucial for the investigation of the potency and nature of this phenomenon. Another central idea that should be used later in the research is that the value and price of coins remain independent from gold prices or interest rates. It means that virtual currency can be considered a direct rival to traded money, while the situation with the fiat ones remains complex.
Hayes (2017) provides another investigation of the given sphere. In his paper “Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin” he aims at the identification of the “the likely determinants for cryptocurrency value formation, including for that of bitcoin” (Hayes, 2017, p. 1308). The study sought to develop a model for evaluating bitcoin depending on the cost of production, which is why it is relevant to the field of coin manufacturing. To improve the understanding of numerous coins peculiarities, the author includes plenty of cryptocurrencies including Bitcoin, 365Coin, 42Coin, Alphacoin, Ixcoin, and 60 more in the sample. (Hayes, 2017). At the same time, he introduced the dependent variable which was the observed market price of a crypto coin. The independent variable was the cost of production, which was measured as the hash power, price of electricity, and hardware energy efficiency. Those measures were used to determine the production and thus were hypothesized to influence mining decisions and the resulting price of a cryptocurrency.
Due to the utilization of the given methodology, the author manages to formulate three critical predictors of cryptocurrency value. Firstly, the level of competition among producers positively impacted the value of all coins observed. Secondly, the rate of unit production contributed to mining decisions, thus indirectly increasing the cost of some cryptocurrencies by increasing the demand and competition. The difficulty of the mining algorithm also predicted the level of demand and had a negative correlation with the value of most alternative means of payment.
Altogether, the given study shows how mining decisions and the demand for cryptocurrencies correlate with their value. The author also proposes a model for determining the prices of coins based on production costs, thus contributing to their previous research on valuing and production.
The article “Precious metals under the microscope: a high-frequency analysis” by Caporin, Ranaldo, and Velo (2015) is focused on the investigation of precious metals as one of the direct rivals of all existing cryptocurrencies. The pivotal aim of the paper is to analyze patterns in spot prices, returns, volume, and selected liquidity measures of precious metals. For this reason, the sample included high-frequency observations of quotes and trades of gold, silver, palladium, and platinum. The data collection period was five full weekdays, during which the observation frequency was 100ms. The measures used to assess patterns in trading included prices, trade volume, log transaction prices, and the number of quotes and trades.
In the course of this investigation, Caporin et al. (2015) manage to show that there are certain periodic patterns based on the trading hours of the most active markets. Therefore, time variabilities in spot returns in precious metals are similar to those of other assets, including currencies. The authors also proved that gold is the most liquid and volatile asset, whereas platinum is the least. However, the research uncovered a strong commonality among precious metals in terms of their market liquidity and the variables affecting them.
In such a way, the study describes the characteristics of precious metal trading to discover how it compares to that of other financial assets. The results of the study provide important information on the liquidity of certain precious metals, which could affect their trading and influence the demand for production (Caporin et al., 2015). When considering a relationship between metal production and cryptocurrencies, the results of the study could mean that the growth in demand for cryptocurrencies could affect precious metals liquidity and trading volumes.
Another area of interest related to cryptocurrency is its impact on financial assets, investments, and the financial market. For this reason, researchers try to investigate this domain to improve its comprehension. Thus, Andrianto and Diputra (2018) conduct a study in this field and provide its results in the article “The effect of cryptocurrency on investment portfolio effectiveness”. The central purpose of this study is to figure out what effect cryptocurrency has on the “conventional asset investment portfolio” (Andrianto & Diputra, 2018, p. 229). Also, the goal is to trace the risks of producing cryptocurrency in the conditions of a specific model observed. Investor opportunities are assessed in terms of developing investment portfolios to maximize profits and avoid the threat of losing a significant part of the capital.
The authors note that to acquire credible data, it is critical to take the period from December 2013 to December 2016 as it will show the peculiarities of cryptocurrencys rise and it is becoming a potent asset. The sampling includes data from these periods compared to other financial indicators. However, commenting on sampling, it should be said that according to Cheah and Fry (2015), “the historical record alone will not be sufficient to quantify the true level of risk in the market” (p. 34). As Pavlovski (2015) remarks, a relevant security policy should be ensured to secure existing assets and prevent the production of cryptocurrency losses. Also, the author notes that the spread of virtual money with a decrease in the manufacturing of precious metals is due to the natural development of society towards digital progress (Pavlovski, 2015).
Nevertheless, Andrianto and Diputra (2018) implement the Modern Portfolio Theory approach as the mean of assessing an opportunity to develop an investment portfolio. Specific assets are used to compare the outcomes of the study. Three types of cryptocurrency are used as tools for intervention. Risk assessment as a percentage is conducted to draw up a comprehensive picture of the work performed and, consequently, to find ways to deal with potential financial threats.
The authors conclude that the effectiveness of the portfolio may be increased in two separate ways through the introduction of the model with cryptocurrency. Firstly, the standard deviation is minimized, which, according to Andrianto and Diputra (2018), can allow calculating the success of using this method of work. Secondly, investors receive a real opportunity to choose the possibility of allocating money without fear of losing a significant part of their financial resources because of dynamic rates and a drop in positions in the exchange market.
Altogether, utilization of the Modern Portfolio Theory helps to implement investments successfully and avoid fiat risks through the comprehensive monitoring of financial transactions and profit dynamics (Cuardas-Morato, n.d.). The approaches described above prove that the modern information field allows tracking the market of the cryptocurrency to make timely decisions regarding asset management. However, the lack of thoughtful methods, on the contrary, is fraught with losses caused by financial risks and volatile exchange rates.
As it has already been stated, there are some concerns related to the reliability of Bitcoin because of the nature of this cryptocurrency. That is why researchers also analyze the popular idea it can be a financial bubble. For instance, in the article “Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin”, Cheah and Fry delve into the factors that precondition the high value of this financial asset.
The purpose of the study is to investigate “economic and econometric modeling of Bitcoin prices” and assess how the production of precious metals can interact with the cryptocurrency (Cheah & Fry, 2015, p. 32). Also, the authors’ study is aimed at finding the factors affecting the formation of the Bitcoin course and the work of the virtual money market (Cheah & Fry, 2015). The fundamental value of the cryptocurrency under consideration is the basic direction of research. In the paper, the production of precious metals is compared with the manufacturing of cryptocurrency, and the perspective is calculated by using formulas. Assumptions regarding the influence of economic factors on the growth and decline in the prices of virtual money are extorted. The authors argue that “Bitcoin’s digital mining processes are intended to replicate the production costs associated with precious metals” (Cheah & Fry, 2015, p. 33).
Thus, analyzing sampling peculiar to the article, it should be said that other researchers provide similar ideas. Andrianto and Diputra (2018) cite the example of the cryptocurrencys prices and note that “Bitcoin issued in 2009, the value is not more than USD 10, but in early June 2017, Bitcoin is worth about USD 3000” (p. 229). Also, they argue that volatility is one of the features that are typical for virtual money (Andrianto & Diputra, 2018). “The precious metal was substituted for a minted form of paper currency” (Pavlovski, 2015).
In the course of the investigation, Cheah & Fry (2015) assume that the behavior of Bitcoin in the financial market is more like an asset than a cryptocurrency. The outlook for development does not provide accurate forecasts regarding the growth or fall in value. “Bitcoin’s main attraction seems to lie in being an object of speculation instead of functioning as money” (Cheah & Fry, 2015, p. 34). The value of precious metals is not compared with the cryptocurrency since, for instance, gold can be exchanged for services or goods. The behavior of markets depends on the interaction between the fiat risk and return.
Altogether, the authors argue, “the fundamental value of Bitcoin is zero” (Cheah & Fry, 2015, p. 35). Speculative procedures are the typical feature of the work of the cryptocurrency markets. Academic studies on Bitcoin are insufficient to make comprehensive conclusions regarding the possible the currency’s tendencies to fall and grow. Compared to precious metals, the risk of producing cryptocurrency is high, since there are not enough opportunities to be realized with the help of virtual money.
Finally, speaking about works devoted to the investigation of Bitcoin and its ability to impact the banking sphere, another article should be mentioned. Pavlovski (2015) in his paper “Reference architecture for cryptocurrency in banking” study the possibilities of using cryptocurrency in the banking sector and the introduction of this asset in the financial production processes. According to the author, “the availability of a practical electronic currency has only recently gained actual adoption” (Pavlovski, 2015, p. 74). A framework for investigating the impact of cryptocurrency on the financial activities of banks is proposed, and potential risks are assessed based on the effect on existing assets.
The fact is that as Cheah and Fry (2015) note, “the status of Bitcoin as an alternative currency or another kind of speculative asset is still unclear and subject to on-going debate” (p. 33). At the same time, Andrianto and Diputra (2018) assume that investors with high-risk tolerance prefer to implement virtual money in their activities, and banks with a stable financial base may allow this initiative. For this reason, the basis for the selection of the given topic and particular sampling is the fact that “cryptocurrencies have received considerable attention recently by consumers and merchants” (Pavlovski, 2015, p. 74). That is why the relevance of the given research cannot be doubted.
To conduct a study, the author proposes “a reference architecture for supporting two forms of electronic currency” (Pavlovski, 2015, p. 74). Also, the relationship between cryptocurrency and standard cash is considered for compiling the comparative analysis of opportunities and risks. Supporting systems are described as methods for avoiding potential threats. Visual schemes are made for the easy perception of the results obtained.
Thus, Pavlovski (2015) states that banks with high-risk tolerance can allow using cryptocurrency as one of the assets. The effectiveness and performance of security protocols are the most important features that ensure the safety of electronic money. Cryptocurrencies are unlikely to displace paper money and precious metals from financial markets. However, an increasing number of people prefer to use virtual currency as a means of payment. For this reason, the author concludes that the use of cryptocurrencies in the banking sector is acceptable if a particular organization has sufficient capacity to protect assets. The value of electronic money is high on the Internet, but in a normal financial environment, some risks arise, and the application of traditional currency and precious metals is still relevant. The choice of clients in favor of cryptocurrencies may be due to the convenience of paying for services and exchange.
In such a way, all these works prove the idea that the modern financial markets are impacted by cryptocurrency that has become a real perspective to such traditional options as precious metals. At the same time, the manufacturing of Bitcoin is opposed to the production of metals as a resource-demanding process is replaced with a new one that rests on calculations and other tasks performed by computers. That is why a new form of financial assets is considered an appropriate perspective to the old ones. At the same, there is the need for further investigation to acquire data about the relevance of cryptocurrency and its ability to satisfy growing demands.
Analysis of Research Methodologies
The investigation of the problem shows that the majority of authors are united in the necessity to analyze how the production of and oscillations in the course of Bitcoin are reflected in different journals to understand the existing attitude to the cryptocurrency and its future. In such a way, literature review remains one of the central methods. However, there are also original researches that collect different data sets related to factors that impact Bitcoin.
For instance, Sovbetov (2018) uses the ARDL technique to establish the correlation between the variables which are the price of coins and market beta, capitalization, trading volume, and SP500 index were. It helps to understand the situation in the market and predict the further development of coins. There is also a research method that presupposes the creation of detailed models that can be utilized to predict the way Bitcoins impact the market, prices for precious metals, and other assets (Andrychowicz, Dziembowski, Malinowski, & Mazurek, 2014). Bohr and Bashir (2014) in the research create specific graphs that represent his model and demonstrate the velocity of these cryptocurrencies if to compare with USD value, Satoshi Dice volume, and precious metals, which turns out to be an efficient approach.
Another methodology that is used is the in-depth investigation of the cost of production of all known cryptocurrencies including the price of electricity, hardware, and energy consumption. This method becomes central while comparing this option to the traditional use of precious metals as the way to enter markets or finance different ventures. Finally, researchers investigate the ability of coins to impact the market by tracing alterations that happened under the impact of its blistering rise (Bohr & Bashir, 2014). These methods contribute to a better understanding of the topic and its comprehensive investigation.
Analysis and Evaluation
From the literature mentioned above, we can understand that Bitcoins are one of the main factors impacting the modern financial market. The blistering rise of multiple cryptocurrencies triggered various processes in the world. However, it endangers a traditionally potent position of precious metals which has been used as the central financial assets and objects of interest for investors. Moreover, the weakening of their position impacts fiat money that does not have intrinsic value but is opposed to those which has it. In such a way, differences in the position of Bitcoin affect the whole market and other financial tools that have a significant impact on the global market. There are multiple fears related to the nature of these coins. The use of cryptocurrency presupposes complete confidentiality and the absence of monitoring (Biryukov, Khovratovich, & Pustogarov, n.d.). It creates the basis for the emergence of multiple uncontrolled flows of money that will be used for transactions on the Internet. This tendency might have a pernicious impact on the governments ability to regulate inflation and introduce appropriate measures to attain its needed levels.
Regarding these facts, oscillations in cryptocurrencies prices and their velocity might pose a significant threat to the traditional financial system, the market of precious metals, and fiat money. The increase of fiat risks can also trigger the development of various processes in countries where they are introduced (Biryukov et al., n.d.). At the same it, it can precondition the emergence of undesired changes in the global economy and financial crisis. For this reason, the investigation of the problem becomes critical for the creation of the appropriate solution.
Recommended Research Design
The significance of the problem contributes to the emergence of a need for deep research of the way Bitcoins, and other cryptocurrencies might impact the worlds financial market and how precious metals and fiat money will react to the empowerment or weakening of Bitcoin. As it has already been stated, there is a specific correlation between the price of cryptocurrency and precious metals that come from the high potential of this payment method (Caporin et al., 2015). Even though manufacturing processes are different, they both demand resources. For this reason, one of the possible research designs is the comparison of resources and money needed to create a particular amount of Bitcoins and precious metals. Furthermore, the paying capacity of these pieces and their position in the market should be compared. It will help to understand the opportunities and the potential for investments (Wolfson, 2018). At the same time, the level of inflation in countries using Bitcoins most of all during the period of its rise should be analyzed to outline its impact on fiat money, and governments ability to monitor the state of the financial sector. The slightest alterations will help to understand whether Bitcoins have a pernicious impact on the worlds economy or not.
Conclusion and Future Research
Altogether, cryptocurrency can be considered an important tool in the modern financial sphere. Its central advantage is another approach to its manufacturing and the possibility to be used on the Internet that becomes the main platform for various deals. However, the rise of this payment method might threaten the position of precious metals and fiat money because of the emergence of a direct rival and numerous opportunities for new investments (Caporin et al., 2015). For this reason, future research should be focused on the investigation of Bitcoins ability to become the central financial asset that will attract the attention of all potent players and replace other currencies that are not so innovative. The understanding of these mechanisms is fundamental for further analysis.
References
Andrianto, Y., & Diputra, Y. (2018). The effect of cryptocurrency on investment portfolio effectiveness. Journal of Finance and Accounting, 5(6), 229-238.
Caporin, M., Ranaldo, A., & Velo, G. G. (2015). Precious metals under the microscope: A high-frequency analysis. Quantitative Finance, 15(5), 743-759.
Cheah, E. T., & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics Letters, 130, 32-36.
Grier, A. (2014). All that glitters is not gold. Computer, 47(4), 116-116.
Hayes, A. S. (2017). Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin. Telematics and Informatics, 34(7), 1308-1321.
Papp, J. (2014). A medium of exchange for an Internet age: How to regulate Bitcoin for the growth of Ecommerce. Pittsburgh Journal of Technology Law and Policy, 15(1), 33-56.
Pavlovski, C. (2015). Reference architecture for cryptocurrency in banking. Information Technology in Industry, 3(3), 74-80.
Sovbetov, Y. (2018). Factors influencing cryptocurrency prices: Evidence from Bitcoin, Ethereum, Dash, Litcoin, and Monero. Journal of Economics and Financial Analysis, 2(2), 1-27.
Cryptocurrencies are a controversial topic in society, as their volatility puts their long-term validity into question. However, older blockchain coins have failed to deliver a scalable and secure currency that will be as decentralized as possible (Hamilton, 2022). Unlike Bitcoin and Etherium, Solana has multiple advantages that make it a worthwhile investment. For this proposal, I would like to highlight the benefits of this cryptocurrency to a business university graduate.
Solana is not the newest cryptocurrency, yet it is one with the highest potential. Other blockchains possess a small capacity for transactions, as their operations per second make them unfeasible (Locke, 2021). However, this currency transfers faster and has incomparably small transaction fees (Farrington, 2021). An investment in Solana is a safer choice among cryptocurrencies, yet it has the potential to multiply one’s savings. Safety and speed of transactions are the reasons behind the high chances for future widespread usage of Solana (Hamilton, 2022). My proposed idea is to capitalize on Solana’s recent success on the market, as this currency was up 12000% in the past year (Locke, 2021). I think that this subject deserves more attention, as cryptocurrencies provide a unique take on financial interactions, yet their current state disallows companies to utilize them efficiently. Solana has the potential to overcome these barriers and turn into a globally accepted currency.
In conclusion, Solana is a cryptocurrency that is worth one’s attention, as it has several benefits that make it a better choice for investment than other similar coins. Its current solid position on the market and strong backing from a cryptocurrency community is a perfect indication of future prospects. It might be necessary to analyze Solana’s carbon footprint to prove its potential for a long-term success.
Enterprises have to plan and think about the future.
Demand forecasting (DF) is one of the strategies to minimize working expenses and maximize capital investments.
DF is a prediction that is based on past experiences and present forces.
Nowadays, the IT sector undergoes considerable changes because of the existing organizational problems and the economic downturn. There are many ways to promote effective planning and achieve the main goal that is to learn how to think about the future. During a considerable period of time, demand forecasting (DF) remains one of the well-known strategies in operations management. According to Reddy (2018), modern DF technologies help to minimize working expenses and achieve maximum value from capital investments. In addition, DF is compared to the ability to predict using already gained past experience and properly defined present forces.
How Does DF Happen?
Establishment of goals;
Estimation of the period;
Choice of the technique;
Generation of sales and collection of information through:
Distribution channels;
Factory outlets;
Value-added resellers;
Historical sales data;
General macroeconomic data (Reddy, 2018, p. 113);
Make a forecast and share information.
The process of forecasting is not complex, but all its stages have to be followed and properly understood. DF begins with an appropriate establishment of the goals that have to be achieved at the end of the operation. Then, it is required to identify the time period for which the forecast should be made. The choice of forecasting technique directly depends on the goals and the time given. The next step is the necessity to gather information. Reddy (2018) focuses on such sources as “Distribution channels, factory outlets, value-added resellers, historical sales data, and general macroeconomic data” (p. 113). These activities help to realize the quantities of finished goods that have to be produced. Finally, a forecast can be made.
What Is the Role of DF in Operations Management?
Operations management is the field where forecasts are frequently used.
DF technologies help to make important decisions to succeed at inventory levels and production planning.
DF technologies in operations management make sure that the supply meets the demand.
Operations managers have to deal with numerous tasks all the time. Planning processes may vary in operations, including “capacity, production, inventory, and materials” (Petropoulos, Kourentzes, Nikolopoulos, & Siemsen, 2018, p. 34). All of them rely on demand forecast. Therefore, operations management remains the field where DF can never be neglected. DF technologies help to make decisions and understand the connection between products and services that may be offered, available facilities and equipment that are available, and scheduling or budgeting that should be introduced (Reddy, 2018). The essence of the role of DF in operations management is to make sure that the supply meets the demand.
DF in Real Life
A company should be prepared for its forecast;
Managers must gather past data, feedback, and achievements;
DF technologies have to be chosen regarding the company’s readiness;
It is normal to ask management gurus for help;
It is possible to ignore system recommendations after a thorough investigation.
Demand forecasting may have a variety of forms in operations management. Still, in real life, there are several rules every organization should know. First, it is important to be prepared for a forecast. A company as a whole and each its employee should learn the basics of forecasting to understand why it happens. Second, managers have to work hard to gather enough material for evaluation and analysis. The company is free to choose any technology, and the only requirement is to be ready for it. Sometimes, leaders may ask for additional help. Reddy (2018) calls them “sales and marketing gurus and economists” (p. 114). Petropoulos et al. (2018) support the possibility to ignore system recommendations if a forecast is based on a judgmental model. In general, company’s resources and offered technologies have to be related to each other to introduce a perfect demand forecast.
DF and Cryptocurrency Production
DF may be developed within different fields;
Traditional financial systems undergo numerous changes;
Cryptocurrency and precious metal introduce the progress in the monetary system;
Evaluation and assessment help understand the worth of cryptocurrency production and manufacturing;
Fiat risks and potential threats can be identified.
DF technologies are available for the representatives of different fields. Sometimes, people are aware of their possibilities. In many situations, additional work and research may be required. The fact that traditional financial systems undergo numerous changes cannot be ignored, and cryptocurrency continues gaining a new meaning and value (Chuen, Guo, & Wang, 2018). As well as cryptocurrency, precious metal is frequently chosen for multiple financial operations. DF technologies help to develop the required evaluations and assessments and realize the worth of such innovations to prove the importance of its manufacturing. The analysis of past data shows what fiat risks can be dangerous for managers and potential users.
References
Chuen, D. L. K., Guo, L., & Wang, Y. (2018). Cryptocurrency: A new investment opportunity? The Journal of Alternative Investments, 20(3), 16-40. Web.
Petropoulos, F., Kourentzes, N., Nikolopoulos, K., & Siemsen, E. (2018). Judgmental selection of forecasting models. Journal of Operations Management, 60, 34-46. Web.
Reddy, R. (2018). Gazing at the Crystal Ball: Disregarding demand forecasting technologies during tough economic times can be a costly mistake. In W. J. Stevenson (Ed.), Operations management (13th ed.) (pp. 113-114). New York, NY: McGraw-Hill Education.
