globalEDGE Blog - By Tag: cryptocurrency

Since we last took a glance at cryptocurrency and its impact on the global economy, the digital currency market has undergone some major expansion.

Cryptocurrencies have been gaining popularity and attention over the past few years, with more and more people investing in them to diversify their portfolios. Some trending names you may have heard of include Ethereum, Bitcoin, and Tether. As the industry expands, so do concerns about illegal activities such as money laundering and terrorism financing. The European Union (EU) parliament recently approved the world’s first comprehensive cryptocurrency regulation to address these concerns. The name of the law is Markets in Crypto-Assets (MiCA). This landmark decision has significant implications for businesses operating in the crypto industry.

Crypto gaming distinguishes itself from traditional gaming by providing gamers with a level of transparency that enables them to own the assets they earn and purchase within the crypto gaming world. In comparison, traditional gaming usually does not offer such ownership rights to gamers, and the assets owned by players in traditional games tend to hold little value outside of the game.

2022 was a year of major milestones and innovations in the cryptocurrency industry, including the meteoric rise of Web3 and the metaverse, the continued development of decentralized finance, and the introduction of non-fungible tokens. The upward trend seemed like it would continue, with the global crypto community aligning to support Ukraine amid its tensions and ultimate conflict with Russia. Thousands of people and leading brands joined hands to donate crypto funds to Ukraine, which will go down in history as one of the most prominent mass-market uses of blockchain technology to date. But this social unity has not helped hide the dramatic downward shift many crypto coins and exchanges are currently taking.

FTX was founded in 2019 by Sam Bankman-Fried. Based in the Bahamas, the crypto exchange allowed users to trade cryptocurrency. With a surge in interest in crypto, the company rapidly grew to earn more than $388 million in net income in 2021. Before FTX’s downfall, many referred to Bankman-Fried as the J.P. Morgan of the crypto world. The founder would cut deals and buy out rivals, growing his personal net worth to billions of dollars. This all changed on November 11th when the FTX Group once worth 32 billion dollars filed for bankruptcy, forcing him to step down as CEO.

Imagine taking a walk down a busy street and asking everyone you see what they think of NFTs. Some will be unfamiliar with the term, some will claim they’re a revolutionary asset class, and some will roll their eyes and claim they’re a complete scam. While their long-term significance and utility within the global economy remain relatively unknown, one thing is for certain – They’re growing in popularity and sales volume at an exponential rate. This year’s sales of NFTs on trading platforms, valued at $27 billion, have already surpassed that of 2021.

With the rise in cryptocurrencies over the last several years, it is possible that we could be experiencing the downfall of cryptocurrencies in the coming months and years. With constant innovation comes new rules and regulations, which many countries across the globe have had to think about recently.

As technology continues to advance at an exponential rate and becomes increasingly intertwined with our daily lives, it should be no surprise that non-fungible tokens (NFTs) are exploding in popularity and sales volumes. In fact, Global sales volumes of NFTs reached $10.7 billion in the third quarter of 2021, making an eightfold increase from the previous quarter. This magnitude of attention is eye-catching, to say the least, and it has businesses and individuals around the world taking action.

A unique digital asset.  The definition of a nonfungible token (NFT) may be simple in writing, but its applications stem to far-reaching uses that encompass a plethora of opportunities.  In its essence, nonfungible means the token can’t be exchanged for another thing of equal value and each token is an entirely original and unique piece.  An NFT could be an entirely blockchain-originating image.  This same image could have an exact duplicate that is a completely different NFT because of its varied blockchain code.  On April 16th, 2021, a single NFT created by the infamous whistleblower, Edward Snowden, sold for 5.4 million dollars.  So what are these new digital assets, and how are they being used in the global business world?

As technology continues to advance and phase itself into many aspects of our lives, the discussion of digital currencies being used by central governments has been brought to the table time and time again. With countries like China already deciding to implement a digital currency through their central government, pressure has been brought on to other large forces of the global financial sector as to whether or not they will do the same.

Bitcoin, the digital currency created in 2009 by the mysterious pseudonym Satoshi Nakomoto, was known by few people on earth at its inception and was priced at less than a thousandth of a cent. It has grown to a current price of around $36,000 and is now debated as either the future of money or a worthless asset. It is an extremely unique currency in the way that it is an entirely digital token with no physical backing. It was created with the intention and ability to be a peer-to-peer technology, meaning no central authority or government can control it, making it entirely decentralized. This aspect of decentralization, along with many other unique features, have led many to believe that bitcoin could revolutionize the global financial system.

At the most recent U.S. Federal Reserve meeting, chairman Jerome Powell announced that the Fed would be experimenting with the implementation of a “digital dollar.”  This news comes as an astounding 80% of central banks across the globe have already begun on the research, experimentation, and implementation of central bank digital currencies (CBDCs). 

This is the second post in a three-part series featuring our blog competition winners from Michigan State University. The author of today's post is Xiyou Xu.

The emergence of cryptocurrencies has shaken up the economic establishments around the world. In fact, the phenomenon of such virtual currencies is thoroughly studied by the economists to understand how they impact the global financial system. As a result, such cryptocurrencies like Bitcoin have been examined regarding contrast to existing physical alternatives, and various experts have responded to its uprising.

Venezuela is in the midst of a political and economic disaster and has faced hyperinflation, an increasingly worthless physical currency, and heightening food and medicine shortages. Recently, Venezuela has turned to blockchain, and the cryptocurrency boom as a potential method to fund its debt and develop a stable currency. The Petro and Petro Gold have the potential to replace the bolivar, which was the countries primary currency in the past.

Trading between cryptocurrencies, also known as virtual currencies, continues to grow as government legalization paves the way for international investment. Japan and South Korea, in particular, have seen significant increases in trading activity and continue to set records for the market.

Bitcoin has had an incredible year. Starting at around $1,000 in January of this year, the cryptocurrency is a mere $40 away from hitting five figures today.

Blockchain is a platform where transactions are recorded.  It is an open source available for all parties involved. Participants in each transaction generally have their own ledger; however, Blockchain serves as a shared ledger. It eliminates the need for intermediaries in transactions and reduces the paper process, increasing efficiencies and lowering costs. Blockchain is known for being a platform on which Bitcoin and other cryptocurrencies trade, however, it is not limited to that.It can track all sorts of data in a structured format.

Initial Coin Offerings, or ICO’s, are a new and quickly growing way for startups to raise capital. Despite being a relatively new phenomenon the total value of ICO’s has been proliferating with nearly $1.5 billion dollars being raised since the start of the year. That value seems outlandish when compared to the mere $256 million of funding that was raised in the entirety of 2016.

While the value of ICO’s has grown nearly six-fold in the past year, many people are still in the dark regarding the new trend that is sweeping investors and startups across the globe. Essentially, ICO’s are a cross between more traditional IPO’s and crowdfunding. During and ICO a company issues “coins”, or digital tokens, similar to the popular cryptocurrencies bitcoin and Ethereum. Investors can then purchase these coins and conceivably can use them to purchase a good or service from the company at some point in the future. The value of these coins will theoretically increase in value, as long as others continue to invest. An important distinction between IPO’s and ICO’s is that investors in an ICO do not receive equity in the company and don’t really have anything tangible behind their investment besides a promise for the ability to be able to purchase a good or service from the company in the future. A second differentiator between traditional methods of raising capital and ICO’s is the amount of regulation. Given that the concept of an ICO is so new, the space is largely unregulated allowing companies to prepare for and launch in ICO in a matter of weeks as compared to the months it takes for companies to clear regulatory approval for IPO’s.

Let’s start with a quick overview of what a cryptocurrency is.  It is a digital currency and is known for its unique feature, in that it is not issued by any central authority, therefore, cannot be controlled and manipulated by any government. Bitcoin is one of the oldest and most popular cryptocurrencies. It, as well as the other cryptocurrencies, are stored and transferred on Blockchain – a peer-to-peer network that validates and records all transaction and is considered to be the ledger for all cryptocurrency transactions. This network eliminates the need for a middle man (financial institutions), however, there are miners who validate the transactions through a process called “mining” and are rewarded free bitcoins for their work. It is important to know that Blockchain’s uses are not limited to just cryptocurrencies and many industries are discovering how they could take advantage of this ledger system. For the sake of simplicity, I will be focusing primarily on one cryptocurrency, Bitcoin, as there are more than 900.