Cryptocurrencies

The article Wolla (2018) introduced some basic principles of cryptocurrencies and the impacts of digital currencies on money supply (as the link below). After reading this paper, use your language to explain the following questions.

(a) What is the major difference(s) between Bitcoin or other digital currencies and a payment system with a central authority?

(b) How the price of Bitcoin is determined in current market? What is the major driving force of price changes of Bitcoin and other cryptocurrencies?

(c) Should Bitcoin and other similar cryptocurrencies be considered as money (legal tenders) or financial investment? Why?

# References:

Wolla, S.A., 2018. Bitcoin: Money or Financial Investment?, Page One Economics. Federal Bank of St. Louis.

https://research.stlouisfed.org/publications/page1-econ/2018/03/01/bitcoin-money-or-financial-investment

Answer rating: 100% (QA)

a The major difference between Bitcoin or other digital currencies and a payment system with a central authority lies in the decentralization aspect T... View the full answer