Report macroeconomics bitcoin the currency of half of 21st century

TON DUC THANG UNIVERSITY – TDTU HCMC DEPARTMENT OF FINANCE AND BANKING CLASS 704 REPORT MACROECONOMICS BITCOIN – THE CURRENCY OF HALF OF 21ST CENTURY? Group Pham Quynh Anh – 320I0131 Le Thi Hong Dao – B20I0119 Tran Mai Linh – B21D0014 Phan Kieu Oanh – B20I0104 TABLE OF CONTENTS INTRODUCTION: THEORETICAL BASIS: OVERVIEW ABOUT DIGITAL CURRENCY 1.1 Definition of “Crytos” 1.2 Classify of Digital Currency DEFITION OF BITCOIN HISTORY OF BIRTH AND DEVELOPMENT OF BITCOIN CHARACTERISTICS OF BITCOIN 4.1 Account 4.2 Transaction 4.3 Security 4.4 Privacy 4.5 Legality 4.6 Liquidity ADVANTAGES AND DISADVANTAGES 10 10 5.1 Advantages 5.2 Disadvantages 11 BITCOIN INVESTMENT 11 6.1 How to invest Bitcoin 11 13 6.2 Exchange rate 14 6.3 Payment MACROECONOMIC FACTORS AFFECTING THE CRYPTOCURRENCY MARKET14 7.1 Inflation and Interest Rate 14 7.2 The growth and decline of the economy 15 7.3 Risk mentality 15 7.4 Government regulation of cryptocurrencies 15 7.5 Wrapping up .16 THE REALITY OF TRANSACTION AND USE OF BITCOIN .16 VIEWPOINTS ON MANAGEMENT AND USE OF BITCOIN IN THE WORLD 16 1.1 Perspectives of major international organizations .16 1.2 Nations’ point of view 17 1.3 Bitcoin’s impacts on Europe’s society 17 BITCOIN’S IMPACTS ON VIETNAM 21 2.1 Influences of Bitcoin in Vietnam 21 2.2 Recommendations for Vietnam .22 WHY WE FEEL BITCOIN PRICE SENSITIVE TO MACRO FACTORS .24 3.1 USD appreciation puts pressure on asset classes 24 3.2 Crypto trends fluctuate according to Macro Factors 25 3.3 Macro information to watch in the near future 26 3.4 Crypto-related policy/legal information .26 3.5 The view of the FED on interest rates .27 3.6 Economic instability continues to occur 28 3.7 When will the crypto trend follow the macro to end? .29 INVESTORS GRADUALLY WITHDRAW MONEY FROM THE CRYPTOCURRENCY MARKET 30 CONCLUSION: 32 REFERENCES: 33 Introduction: Reason for writing The boundaries between physical, digital, and biological are becoming more hazy as we go into the era of 4.0 Bitcoin, the pinnacle of computer technology and electronic money, is one of the greatest creations of this era As a statue in the cryptocurrency world, bitcoin That is the reason why our group selected the subject “Bitcoin – The currency of half of 21st century?” Rationale Knowledge of cryptocurrency, especially Bitcoin Object and range of study Bitcoin usage has been around the world and Vietnam since its inception Research methods The method of data collection, the method of analytical summarizing experience, the method of classification and systems, the historical method Theoretical basis: Overview about Digital Currency 1.1 Definition of “Crytos” Cryptocurrencies or “cryptos” are made up of digital bits, also known as digitized money Cryptocurrencies only work in an electronic environment used to pay expenses To make transactions, users must rely on factors: Internet, computer network and electronic means of the issuer (third party) 1.2 Classify of Digital Currency Digital Currency is a form of currency that is available only in digital or electronic form, and not in physical form It includes coin, cryptocurrency, electronic money, cryptocurrency (digital money, electronic money, electronic currency, cyber cash) Currency is stored and circulated electronically Any coin encoded in and meets this definition Broadly, there are three different types of currencies: * Virtual Currencies: A Virtual Currency is an unregulated electronic currency that is not issued by the Government and can generally be issued, managed and controlled by private issuers, developers or institutions founding position This currency is used and accepted among members of a particular virtual community Virtual currencies can also be algorithmically controlled by a defined network protocol An example of a virtual currency is a gaming network token whose economics is defined and controlled by developers In 2014, the European Central Bank defined virtual currency as a digital representation of value that is not issued by a Central Bank or public authority, nor necessarily tied to fiat money (fiat currency), but is accepted by natural or legal entities as a means of payment and can be transferred, stored or transacted electronically Virtual currency is only available in electronic form It is stored and transacted only through specified software, mobile or computer applications, or through dedicated electronic wallets, and transactions occur over the internet through secure, dedicated networks * Central Bank Digital Currencies: Central Bank Digital Currencies (CBDCs) are regulated digital currencies issued by the central bank of a country A CBDC can be a supplement or a replacement to traditional fiat currency Unlike fiat currency, which exists in both physical and digital form, a CBDC exists purely in digital form England, Sweden, and Uruguay are a few of the nations that are considering plans to launch a digital version of their native fiat currencies A CBDC also provides a country's central bank with the means to implement monetary policies to provide stability, control growth, and influence inflation Central bank digital currencies are digital tokens, similar to cryptocurrency, issued by a central bank They are pegged to the value of that country's fiat currency Many countries are developing CBDCs, and some have even implemented them Because so many countries are researching ways to transition to digital currencies, it's important to understand what they are and what they mean for society Defition of Bitcoin Bitcoin (BTC) is a cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity Bitcoin's transaction system works without going through any central storage or management system This transaction system is called peer-to-peer, transactions take place between users directly, without middlemen These transactions are verified by network nodes and recorded in a public distributed ledger known as the blockchain * Since Bitcoin is a form of cryptocurrency, it inherits the common features of cryptocurrencies such as: It is considered the same property as traditional currency (paper money, coins) in many countries The Bitcoin network is not controlled by any government agency, it is completely free Information about Bitcoin owners is completely anonymous, namely you send Bitcoins to someone's wallet but you cannot tell who that person is, i.e no government or bank knows where the other end is Who The transaction fees are quite low, and it is possible to transfer money from one country to another very quickly The processing and confirmation of BTC transfers from one wallet to another are done by computers all over the world, so it is impossible for a hack to hack all of them at the same time for it to crash History of birth and development of Bitcoin Bitcoin began to be designed by Satoshi in 2007 when he believed that it is possible to design a transaction system where members not need to trust each other The domain bitcoin.org was registered on August 18, 2008 Bitcoin was first mentioned on October 31, 2008 in a post about the peer-to-peer payment protocol by anonymous Satoshi Nakamoto In January 2009, the bitcoin network was launched after Satoshi Nakamoto mined the first block chain The first Bitcoin transaction was made when Satoshi Nakamoto sent 10 bitcoins to cryptographer Hal Finney on January 12, 2009, right after the Bitcoin software was first released On October 5, 2009, the value of Bitcoin was first fixed on the exchange, starting at US dollar equivalent to 1,309.03 bitcoins (or bitcoin = 0.00076 USD) The Bitcoin development community gradually lost contact with Satoshi in mid-2010, after he gave Gavin Andresen the alarm key when the Bitcoin network was hacked This key can be used to alert the entire network to stop saving transactions This alarm lock was then aborted to increase the decentralization of the Bitcoin system To this day, the exact identity of Satoshi Nakamoto remains a mystery On October 22, 2010, Bitcoin was used to buy goods for the first time – a Pizza for 10,000 bitcoins, equivalent to US$25 at the time Within days from July 12, 2010, the price of Bitcoin increased 10 times from US$0.008 to US$0.08 In 2011, the value of Bitcoin increased from US$0.30 to US$32, before falling to US$2 Bitcoin began to attract public opinion in 2012, when there were many articles about it In 2013, several major services like OKCupid, Baidu, Reddit, Humble Bundle, Foodler and Gyft started using it In Canada, there was the world's first Bitcoin ATM In July 2013, Thailand was the first country to issue a ban on Bitcoin, after Bitcoin Thailand company presented their Bitcoin business idea to the Central Bank of Thailand However, in February 2014, the Thai Ministry of Finance declared the Central Bank of Thailand to have no jurisdiction over Bitcoin and allowed the Bitcoin Thailand company to register its business shortly thereafter In January 2014, the first insurance service using Bitcoin was launched, shortly after that Overstock announced it was the first retail issuer to accept Bitcoin payments in the US A month later, the British government released a draft of how it would tax Bitcoin transactions On February 28, 2014, Bitcoin exchange Mt.Gox filed for bankruptcy in Japan due to the loss of 750,000 bitcoins of its customers and 100,000 Bitcoins of Mt.Gox's own equivalent of $473 million The incident has damaged the reputation of this virtual currency, causing the price of Bitcoin to drop from a peak of US$1,242 to a low of US$152 In June 2014, the FBI announced the recovery of 29,000 bitcoins after a campaign to raid the Silk Road dark web market This removed Bitcoin's image as a specialized currency used by criminal organizations Shortly after month, the New York Department of Finance intends to bring Bitcoin into the category of legally protected currencies with the BitLicense On June 5, 2016, the first Bitcoin ATM in Vietnam began to be tested at Italiani's pizza shop at 290 Ly Tu Trong, District 1, Ho Chi Minh City opposite Starbucks roundabout Phu Dong This machine is manufactured by BitAccess, operated by Bitcoin Vietnam and Bspend and is directly connected to the VBTC exchange to buy and sell Bitcoins into Dong After that, the second Bitcoin ATM was put into use at the Bitcoin cafe at 74 Bui Vien, Ho Chi Minh City in December 2016 On August 2, 2016, Bitcoin exchange Bitfinex in Hong Kong was attacked by hackers and lost 119,756 bitcoins, equivalent to about 72 million USD and accounting for 0.75% of total Bitcoin in circulation The Bitcoin price immediately dropped 20% from $607 to $480, and recovered gradually back to $600 as of August 8, 2016 All Bitfinex customers are lost 36% of his assets on this exchange On February 9, 2017, the Central Bank of China inspected Bitcoin exchanges in the country Immediately after that, the largest exchanges in China announced to suspend the withdrawal of Bitcoin from the exchange for month to upgrade their AML/KYC system, causing the Bitcoin price to drop by nearly 30% However, after only weeks, the Bitcoin price has surpassed the previous level and Bitcoin transactions in China have been gradually transformed into a decentralized form outside the control of the country's government Almost months later, on June 5, 2017, exchanges in the country allowed Bitcoin withdrawals again On March 2, 2017, the price of Bitcoin surpassed the price of ounce of gold (US$1242) for the first time On April 1, 2017, Japan recognized Bitcoin as an official payment method Then, on May 9, 2017, Australia abolished taxation on Bitcoin and it was treated as a currency for tax purposes On August 21, 2017, the Prime Minister signed and approved the project to complete the legal framework to manage virtual assets, cryptocurrencies, virtual currencies, including Bitcoin This is the official signal from the Government that Bitcoin transactions will be legalized by learning from the management experience of other advanced countries The time for the ministries to complete this project is August 2018 On October 26, 2017, FPT University was the first university in Vietnam to accept Bitcoin payments On November 2, 2017, the Chicago Mercantile Exchange (CME - the world's largest options exchange) announced that it would launch futures options trading in 2017 Currently, the Bitcoin price is at $7,950 per bitcoin as of November 16, 2017 Characteristics of Bitcoin 4.1 Account Bitcoin wallets contain a user’s keys, not their actual bitcoin It’s a basically a virtual bank account but unlike traditional bank accounts, they are not insured by the FDIC, and are not managed by banks * How Bitcoin wallets work? Continuing with the debit card analogy from above, a Bitcoin wallet holds at least one “account,” or sub-wallet We can view this sub-wallet as being roughly equivalent to a debit card For instance, debit cards have information associated with them, including an account number and a password Each Bitcoin “account” within a Bitcoin wallet also has information associated with it For our purposes, the two key pieces of information are the public bitcoin address and the private key The public address is comparable to the debit card’s account number The private key, meanwhile, is kind of like a debit card’s password in that it grants access to the bitcoin associated with that public bitcoin address A private key is a 256-bit secret number Here is an example: 108165236279178312660610114131826512483935470542850 824183737259708197206310322 4.2 Transaction A transfer of bitcoins from one bitcoin user to another, which contains an embedded script, a bitcoin transaction is created in a crypto wallet, residing in the user’s computer, smartphone or tablet or in cryptocurrency exchange * Transaction Sequence: The transaction is broadcast on the bitcoin network, where each participant validates and propagates the transaction until it reaches almost every node in the network The transaction is verified by a mining node and included in a block of transaction that is recorded on the blockchain Once recorded on the blockchain and confirmed by sufficient subsequent blocks, the transaction is a permanent part of the bitcoin open distributed ledger and is accepted as valid by all participants The bitcoin received by a new owner by the transaction can then be spent in a new transaction Extremely low transaction costs: No transaction intermediaries, only transaction processing fees, but it is not worth much Currently, ... creations of this era As a statue in the cryptocurrency world, bitcoin That is the reason why our group selected the subject ? ?Bitcoin – The currency of half of 21st century? ” Rationale Knowledge of. .. from the continued growth in the number of users 6.2 Exchange rate One of the issues that Bitcoin investors are most concerned about is the exchange rate of Bitcoin Unlike other currencies, the Bitcoin. .. 750,000 bitcoins of its customers and 100,000 Bitcoins of Mt.Gox''s own equivalent of $473 million The incident has damaged the reputation of this virtual currency, causing the price of Bitcoin to drop