Cryptocurrency: Analysis

The cryptocurrencies such as; Bitcoin, Ethereum, Litcoin and Ripple to name a few have taken the world by storm. The discussion of the essay will focus on defining what cryptocurrencies are, focusing on the most commonly used cryptocurrency Bitcoin and the differences among the ones mentioned above. Further, the focus will be on the implications for economic policy should cryptocurrencies become widely used. Such implications on economic activity, inflation, monetary policy and the exchange rate. The discussion will further explain why the value of cryptocurrencies soared so much in recent times.
However, it can also be argued that even though stable currencies do not fluctuate the way Bitcoins fluctuate, there’s a very good reason why Bitcoins should be considered more of a property or commodity than currency as its value fluctuates wildly due to speculations. Often people buy Bitcoins not to use them as payments for goods and services but to store them so that its value will go up. With the lot of fascination among the general public and the economists, (Kupiec, P, 2018) concludes that Bitcoins act as money, at best, for some people and to a limited
The cause of the hyperinflation was the involvement of central bank and government in issuing money in the country and the country was broke, so it had to borrow money from the central bank. The citizens of the country started using currency of other countries like the US Dollar and the South African Rand (Burda and Wyplosz, 2013:143). The firms were forced to cut their prices and shops were empty because the currency was worthless in the country. When employees received their pay, they then exchanged their currency into US dollars, but at such high rates of price rise, it became hard to measure inflation in the country. This also had an impact on the exchange rates. The increase in the prices caused an increase in the exchange rate since citizens exchanged their currency. In late 2008, the central bank allowed trading to take place in the country in any currency.
Because there are a lot more coin’s nowadays, inflationary cryptocurrencies cannot be regarded as a store of value. This will then cause no more inflation but rather deflation which is a good thing for cryptocurrencies as it will probably cause an increase in their value. The widely use of Bitcoins could revolutionize the way money is provided and the role of central banks in the banking system (Randow Bloomberg, J,