**2. Cryptocurrencies and the world economy**

The last thing on every analyst's mind was Bitcoin surpassing the gold rate. Even the techgurus could not predict it, as gold is a league of its own. A lot was dependent upon the US inflation rates and China's trading opportunities, while political instability being a constant factor. A volatile asset witnessed the making of overnight billionaires in a matter of seconds, when the price jumped from \$700 to \$2100+. The youngsters, who were merely experimenting with it, became "accidental millionaires", and history was made. Dash, Doge, Litcoin, PlexCoin, Ethereum and many more cryptocurrencies made their way to the volatile market to leave a mark of their own. While the price of gold remained flat in the last year, there has been an eruption of the virtual currencies while bringing down the fiat currencies. With the market trends going anywhere with prediction, the shift is incorrigible, the facts are surprising and more shocks are due.

A closer look in the historical rates of Bitcoin raises the question about the future of cryptocurrencies. With a surge of supply and demand, analysts are marking the mining to be completed by the year 2041. What needs to be seen is the price volatility post mining. The world changes at the speed of light, they say, the world of technology is even faster, quicker, not only in terms of change but also in terms of implementation. **Figure 2** shows the price volatility in Bitcoin in the US Dollar since Sep 2015. The daily data for the Bitcoin Price Index have been derived from coindesk [6].

Tapscott [7], author of Blockchain Revolution and one of the top most influencers of the world, quoted: *"Ethereum* [8] *blockchain has some extraordinary capabilities. One of them is that you can build smart contracts. It's kind of what it sounds like. It's a contract that self-executes, and the contract handles the enforcement, the management, performance, and payment"*. **Figure 3** shows the price volatility in Ethereum in the US dollar since Sep 2015. The daily data for Ethereum have been derived from coindesk [6].

#### **2.1. The stock market volume and the dollar value**

tackle inflation and its value, Bitcoins have a predetermined number of having 120 million Bitcoins in circulation around the world for the next 25 years. At the moment, 16.5 million Bitcoins [3] have already been mined. So, is this the currency of the world, without having

Prominent Market Analysts [4] compare it to the "sharing" economy, which is expected to grow from \$15 billion in 2015 to \$335 billion by the year 2025, according to a report by PricewaterhouseCoopers. Airbnb, founded in 2008, is a notable player in the sharing economy. The company provides a platform for property owners and visitors to agree and transact short-term rental contracts. While it does not own rental properties, Airbnb today has over 2 million listings in 34,000 cities in 191 countries, generating annual revenue of over \$1 billion

The decentralized cryptocurrency, Bitcoin, relies on blockchain technology to record its transactions in a public ledger: a technology originally conceived for Bitcoin in 2008 and first implemented in 2009. The blockchain [5] is a distributed database that maintains a continuously growing list of records called blocks secured from tampering and revision. Each block contains a timestamp and a link to a previous block. It serves as the public ledger for all transactions. Every compatible client can connect to the network, send new transactions to it, verify them, and take part in the competition to create new blocks. The competition creating new blocks is known as mining. The Bitcoin design has been the inspiration for other applications and certainly for other cryptocurrencies. If blockchain technology is like metal, then Bitcoin

The last thing on every analyst's mind was Bitcoin surpassing the gold rate. Even the techgurus could not predict it, as gold is a league of its own. A lot was dependent upon the US inflation rates and China's trading opportunities, while political instability being a constant factor. A volatile asset witnessed the making of overnight billionaires in a matter of seconds, when the price jumped from \$700 to \$2100+. The youngsters, who were merely experimenting with

any central authority?

is like gold (**Figure 1**).

**2. Cryptocurrencies and the world economy**

with a market value of \$24 billion.

**Figure 1.** Bitcoin circulation: the mining map.

270 Financial Management from an Emerging Market Perspective

Trading volume is generally reported not only in terms of number of shares but also in terms of the dollar value. These are the two most fundamental figures in the stock market,

Bitcoin/USD Close Price

**Figure 2.** Bitcoin price in USD from September 2015 to July 2017.

**Figure 3.** Ethereum price in USD from Sep 2015 to July 2017.

the price and the volume. In public stock exchanges, shares are publicly traded, transactions are recorded and the volumes are displayed. Hence, it becomes easy to calculate the trading volume for such stock exchanges. To better understand this trade volume, let us consider the following example:

#### EXAMPLE:

Suppose that Samsung only changes hands twice during the day. Let's assume that 20 million shares were bought at \$10 a share; later 30 million shares were purchased at \$10.5 a share.

The total trading volume = 20 +30 = 50 million shares

Dollar amount equals = (20X10) + (30X10.5) = \$515 million

So, the total circulation of Samsung Shares is 515 million for that day.
