18 - 10 - 2018
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An A., Faculty of International Economic Relations, 2nd- year student,

Financial University under the Government of the RF, Moscow, Russia

Abstract: In recent years a new type of tradable assets, generically known as crypto currencies has appeared. The most widespread among them is Bit coin. Given its novelty, this article investigates some properties of the Bit coin and its market. This study compares the dynamics of Bit coins and standard currencies and focuses on analyzing the returns at different time scales. Bit coin provides decentralized currency issuance and transaction clearance.

Keywords: Bit coin, crypto currency, money, volume, returns

Аннотация: В последние годы появился новый тип торгуемых активов, известный всему миру, как криптовалюта. Наиболее распространенным среди них является Биткоин. Учитывая его новизну, в этой статье исследуются некоторые свойства Биткоина и его рынка. Это исследование сравнивает динамику Биткоина и стандартных валют и фокусируется на анализе доходностей в разных временных рамках. Биткоин обеспечивает децентрализованную выдачу валюты и оформление транзакций.

Ключевые слова: Биткоин, криптовалюта, деньги, объем, доходность

The life of modern man in many spheres has shifted to virtual reality. Here you make purchases, watch movies, communicate and work. It’s not a surprise, that there are many people who wanted to earn on the Internet. That is why a man has invented digital money, which you can’t touch by your hand. This is the so-called crypto currency, which exists in various kinds. However, among the several dozen electronic coins, the most popular are the bit coins. For them, there is a special virtual wallet, and this currency must be mined. These earnings of virtual money funds today are very popular.
Bit coin is the most popular crypto currency nowadays. The rate of this digital currency is growing rapidly, and today it reaches 4303.93$ 1 for a token (05.10.2017). It is quite difficult to predict the exact movement of the crypto currency, because at any moment the price can go to correction. This is due to a small number of economic factors, in contrast to the trade in currency pairs, which directly depends on the fundamental data. To date, there are several main advantages of trading Bit coin. At first, Bit coin was created on the same principle as gold. It has many common qualities as gold, for example, government does not control the value of the gold. A limited number of tokens give rise to huge demand among investors. After creating 21 million tokens, their release will be automatically terminated. This indicates that digital cash, in particular Bit coin, has a very high value, which actively affects its value. Now this is the optimal investment option, while Bit coin has an affordable price. Secondly, the prospects for Bit coin are truly limitless. Today, they want to legalize it and make it as a payment asset. Due to this fact more and more investors are beginning to invest actively in the most popular crypto currency with a limited number of issues. And it is necessary to understand that any investment, in particular, trading crypto-currency is a high-risk occupation, regardless of the digital currency in which you are investing. Despite this, a large number of investors are ready to put up with this, because on the other side there is truly an unlimited opportunity to make a profit. As you know, investing in Bit coin could bring millions of dollars.
For those who still doubt to invest or not in crypto currency, the chart below shows the growth of Bit coin over the past few years.

Pic. 1. Value of the Bit coin 2008-2017 (USD)

In 2008 there was a launch of the crypto currency. The cost is 0.002 $ per 1000 tokens. In 2009 - 0.003 $ for 1000 tokens. In 2010, the price of one token is 0.50 $. From this moment the world begins to learn about the prospects of the crypto currency. In 2011, the price for 1 token was 10 $. Russia begins actively learn about digital cash. According to statistics, 100 $ of investments in 2011 now would bring $ 45,000. In 2012 there were no special price changes. In 2013, the price of one token exceeded $ 500. In 2014, began to open massively the altcoines, because of which Bit coin drops to $ 310 per token. In 2015 there is a small increase - $ 380. In 2016 - 800-1000 $. In 2017, the price of one token from $ 1000 increased to $ 4,500. The maximum value was fixed in August; one Bit coin cost $ 5000.
Many investors and financial industry experts are serious about Bit coin. A large number of opinion leaders in the investment sphere refer to crypto-currencies as a new asset class that deserves attention. Nevertheless, there are some reasons, why people must refrain from investment. Bit coin is volatile and unstable - during the last10 years of its existence, it experienced many painful accidents. It must be mentioned that many users of bit coins are shadow speculators engaged in illegal activities.
Bit coin is virtual cash, an intangible digital code on the Internet. And the money in your bank account exists only in the database. Those who want to try this market and understand it, should remember that investing is best in the long run and you should not invest more than you can afford to lose. Such thinking is extremely dangerous and potential investors should exercise caution.
Despite the fact that skeptics from all over the world did not want to take into account the BTC system for a long time, they had to come to terms with its popularity. Today, the forecasts for this digital currency are different. Some of it is considered a kind of fraudulent pyramids like the well-known company MMM. However, it is fair to say that the technology has unique capabilities. That is why Bit coin with all the downs and ups is quite viable. The electronic currency is steadily and smoothly developing. There is a good growth of digital coins.
In the future, as noted by many experts, Bit coin will make good money on speculative trading. In addition, it is believed that the currency will give equal opportunities to all users of the system in terms of independent production of virtual money.
One of the most common issues related to the prospects of bit coins and forecasts for their growth is the possibility of depreciation. In theory, yes, this can happen, as it is an asset and its value fluctuates in time. However, limited emissions, its good dynamics, involvement of a huge number of users in the project, lack of state control and inflation will not allow this to happen. It is believed that the authorities cannot prohibit the bit coins because it can be compared with the ban on the use of the Internet. Therefore, it is unlikely that e-currency in the near future will lose its popularity and come out of virtual circulation.

References:

1) Benjamin M. Blau.Research in International Business and Finance, Volume 41, October 2017, pages 493-499.
2) Gina Pieters, Sofia Vivanco. Information Economics and Policy, Volume 39, June 2017,pages 1-14.
3) L. Zunino, M. Zanin, B.M. Tabak, D.G. Pérez, O.A. Rosso. Complexity-entropy causality plane: A useful approach to quantify the stock market inefficiency, Physica A, 389, 2010, pages 1891-1901
4) S. Nakamoto. Bitcoin: A Peer-to-Peer Electronic Cash System, 2008
5) https://bitcoincharts.com/(accessed 14.10.17)
6) https://coinmap.org/#/map/55.74991720/37.60336876/13 (accessed 13.10.17)

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