This work is about bitcoin and illegal trading as well as fluctuations and the causal effect of it. The recent emergence of new technologies in the financial sector and virtual communities lead to new types of transactions and started questioning the relevance of financial centers around the world. The main reason for the emergence of virtual currencies (cryptocurrencies) is not necessary incapability or shortcomings of traditional currencies, but rather the development of the internet and its networks. Unfortunately, cryptocurrencies raise more controversies on questions such as legal framework, financial risks or effect on the economy – this is a challenge for the financial sector and the existence of financial centers.
In the beginning, it is necessary to define Virtual Currencies. This type of currency can be defined as International Monetary Fund (IMF) in a research "Monetary and Capital Markets, Legal, and Strategy and Policy Review Departments" describes digital representations of value, issued by private developers and denominated in their own unit of account. This definition clarifies the usage of virtual currencies as it has the functionality to be transacted electronically, stored, accessed if two parties of a transaction confirm an exchange.
Virtual currencies emerged because of the creation of a blockchain or so-called distributed ledger system. This system is exceptional because of decentralization principles. The most important detail in a system is the unique ledger of transactions. Bitcoin technology allows to have a consensus between members of a network and decentralize transactions within a network.
Table of Contents
1. Introduction
2. Bitcoin and illegal trading
3. Fluctuations and causal effect of it
4. Bitcoin Fluctuations in the year of 2013
5. Market Fluctuations in the period 2015.01-2017.01
6. Conclusion
Research Objectives and Themes
The primary objective of this work is to analyze the volatility of cryptocurrencies, specifically Bitcoin, and to investigate the relationship between its price fluctuations and external factors such as illegal trading activities and regulatory interventions. The research seeks to understand the challenges these factors pose to the long-term viability and mainstream acceptance of digital currencies.
- The influence of regulatory announcements on cryptocurrency value.
- The connection between anonymity in Bitcoin transactions and illegal marketplaces.
- An analysis of historical price volatility during key periods (2013 and 2015-2017).
- The impact of high-profile security breaches and market crashes on investor trust.
- The transition of Bitcoin from a niche speculative tool to a broader financial asset.
Excerpt from the Book
Bitcoin and illegal trading
Most countries do not view cryptocurrencies as legal tender, but bitcoin is steadily becoming a mainstream asset. What used to be a market for mostly speculators and traders is now also being adopted and integrated into small businesses and large companies. Although there are a couple more things that should not be forgotten about bitcoin, for example according to an article written by Adam Bergman (2017) “What You Need to Know About Cryptocurrencies and Taxes”, retrieved from Forbes journal,bitcoin, like most cryptocurrencies, is taxed in a specific way, is a highly liquid asset, difficult to trace and treated as property and not currency. Naturally raising the question, does bitcoin facilitate some form of illegal trading?
To start with, the bitcoin transactions flow wallet-to-wallet, without any physical items being exchanged, and where “wallet” identities are disguised. In this sense, bitcoin is like USD or gold in facilitating illegal trade. The simple convenience of completing business transactions within the comfort of your own home is what attracts bitcoin users most, not to mention the upside of no fees, just plain give and receive interactions with no strings attached.
Summary of Chapters
Introduction: This chapter defines virtual currencies through IMF standards and discusses the shift in financial landscapes driven by blockchain technology and decentralization.
Bitcoin and illegal trading: This section examines the dual nature of Bitcoin's anonymity, exploring how it serves as both a tool for legitimate trade and a facilitator for illicit activities in black markets like the Silk Road.
Fluctuations and causal effect of it: The chapter analyzes how public sentiment, government policy changes, and news cycles drive the price of Bitcoin, using examples from the 2016-2017 period.
Bitcoin Fluctuations in the year of 2013: This section investigates specific market reactions to regulatory warnings and the shutdown of illegal marketplaces, illustrating the currency's price sensitivity.
Market Fluctuations in the period 2015.01-2017.01: This chapter provides a chronological overview of Bitcoin's price trajectory, focusing on major crashes caused by security hacks and subsequent recoveries driven by global market trends.
Conclusion: The final chapter summarizes that while blockchain technology offers significant innovation, the associated high volatility and criminal associations remain major obstacles to widespread financial stability.
Keywords
Bitcoin, Cryptocurrencies, Blockchain, Volatility, Illegal Trading, Silk Road, Digital Currency, Financial Markets, Decentralization, Anonymity, Market Fluctuations, Regulatory Impact, Asset Forfeiture, Cryptocurrency Exchange, Virtual Currency
Frequently Asked Questions
What is the primary focus of this publication?
The publication focuses on the inherent volatility of cryptocurrencies like Bitcoin and the underlying factors, such as regulatory crackdowns and illegal market activities, that trigger significant price fluctuations.
What are the central themes discussed in the work?
Central themes include the relationship between anonymity and illicit trade, the impact of government bans on currency value, and the evolving role of Bitcoin as a financial asset versus a speculative commodity.
What is the core research question?
The research explores the reasons behind cryptocurrency price fluctuations and how these fluctuations, combined with challenges related to illegal trading, impact the existence and acceptance of these assets.
Which scientific approach does the author use?
The author uses a qualitative analysis approach, examining historical market data, case studies (such as the Silk Road), and reports from recognized financial and media institutions to draw conclusions.
What topics are covered in the main body of the text?
The main body covers definitions of virtual currencies, the correlation between anonymity and criminal use, specific case studies of Bitcoin price volatility from 2013 to 2017, and the reaction of traditional financial markets to digital asset growth.
How would you characterize this paper with keywords?
The paper is best characterized by terms like Bitcoin, volatility, blockchain, illegal trading, market fluctuations, and regulatory impact.
How did the shutdown of Silk Road impact Bitcoin's market value?
The shutdown of the Silk Road caused a notable, though temporary, decline in Bitcoin prices, but the market showed resilience by rebounding to previous levels shortly thereafter.
What role did government announcements play in Bitcoin's 2013 volatility?
Announcements, such as those from the People's Bank of China regarding the legality of Bitcoin trading, created uncertainty among investors, leading to sharp, immediate drops in the currency's value.
Why does the author consider Bitcoin to be "volatile"?
Bitcoin is described as volatile due to its high sensitivity to press coverage, government interventions, and the actions of influential financial figures, which often lead to rapid price swings.
What does the text conclude regarding the future of cryptocurrencies?
The author concludes that while blockchain technology provides valuable decentralization, cryptocurrencies face significant challenges regarding their perception, regulatory environment, and market stability.
- Arbeit zitieren
- Gabriele Pauliuk (Autor:in), 2018, The Cryptocurrency Bitcoin And Causal Effects Of Market Volatility, München, GRIN Verlag, https://www.grin.com/document/584612
