MEMORANDUM

Group: 3

To: Dr. Lê Bảo Thy

From: Group 3__B01032 __ MONEY AND CAPITAL MARKETS__ N01

CC: Dr. Lê Bảo Thy

Date: 11/9/2023

Re: BITCOIN

In response to a request for a helpful Bitcoin information source. Group 3 will support you

For basic information about virtual currency (using Bitcoin as an example) from the

fundamentals to the advanced.

Despite sharp fluctuations, the value of Bitcoin has essentially increased significantly in

recent months. Numerous people have paid close attention to these variations. There

appears to be a wide range of perspectives regarding this cryptocurrencies future. In

general, economists' opinions about Bitcoin differ from those of the cryptocurrency

community. The second group highlights the innovation that Bitcoin, and more specifically

blockchain, offers, whereas economists frequently view Bitcoin as a bubble, resembling a

Ponzi scheme and supported by claims that, while economically spectacular, it will

probably be a high-risk asset class. As such, its value may increase significantly in the future,

but it also has the potential to decrease to zero.

If you have any questions about the content, please feel free to ask questions, our team is
willing to receive the comments and questions about the report in order to build the article.
INTRODUCTION
The global economy has never faced as many opportunities for growth as it does as
we approach the twenty-first century. One of the most important and delicate areas of
finance is currency, which has a significant influence on each nation's economic
development. It is indisputable that the quick and sophisticated development of the
financial and monetary market has increased the risks and challenges faced by managers
and investors, despite the tremendous advancements in theory, management, and the
development of various financial-monetary forms. Money serves as an exchange medium
in the globalization era, when demand for investments, payments, and transactions is
rising. It is crucial to the long-term viability of every economy. Throughout its history,
money has undergone numerous changes related to the growth of the global economy,
both in terms of its structure and purposes. There exist two primary types of money:
nominal money and commodity currency, which includes both metal (such as silver, zinc,
and dong) and non-metallic (commodity dollars), currency made of paper and metal
(coin-coin). Credit money and electronic money are just two of the many new forms of
money that have emerged in the modern era as a result of the growth of credit
institutions, as well as significant advancements in the information technology and
telecommunications sectors. Especially the rapid growth of cryptocurrencies in recent
times. Electronic money is showing itself to be more advantageous than traditional paper
money with respect to cost, transaction time, liquidity, convenience, compactness, and
ease of use. It is anticipated to become the future's medium of exchange.

Perhaps the most valuable cryptocurrency in the world, Bitcoin was created in 2009.
Although cryptocurrencies are still in their infancy, some have already emerged,
including Linden in Second Life. But Bitcoin has had an amazing journey. Since its birth
in 2009, when it was worth less than $1, the value of this coin has increased significantly.
The Bitcoin craze began in December 2013, when the price of one Bitcoin hit $1,200. At
present, the state of affairs remains unstable, and the price of Bitcoin varies $500 USD.
Currently, Bitcoin is accepted as a legitimate form of payment in close to 20 countries,
including the US, Germany, Canada, Australia, Brazil, Singapore, etc. Why does Bitcoin
have such a high value? Will the future be able to be altered by digital currency?
Together, we will talk about that subject in this report.
 CHAPTER 1: DEFINITION
1.1 Overview of Bitcoin and its origins
1.1.1 Definition about Bitcoin
Bitcoin is an electronic, virtual was launched in January 2009 that has no physical
representation designed to act as money and a form of payment outside the control of any
one person, group, or entity, thus removing the need for third-party involvement in
financial transactions.
1.1.2 Features
The special feature of Bitcoin is its decentralization, it does not depend on any financial
institution or government for control or management. Bitcoin is a decentralized digital
currency that you can buy, sell and exchange directly, without an intermediary like a
bank.
1.1.3 Distinct between Bitcoin & BitcoinS
The term ‘Bitcoin’ often refers to the system (The bitcoin system is a distributed, peer-to-
peer network), while the term ‘bitcoin’ or BTC refers to the unit of currency.

1.2 What is Blockchains

Blockchain is a decentralized, unchangeable database that allows asset tracking and
transaction recording within an enterprise network. An asset can be intangible
(intellectual property, patents, copyrights, branding) or tangible (a house, car, money, or
piece of land). Blockchain is a type of public ledger - a digital system for recording
transactions and related data including the date, time, value, buyer and seller, and an
identifying code for each exchange in multiple places at one time; Transactions are
recorded in a community-built record of all transactions that acts as a proof of work. And
it is extremely difficult to hack the system or forge the data stored on it, thereby making it
secure and immutable. Once entered, information can never be erased. This makes
Bitcoin highly secure and resistant to fraud. Therefore, a decentralized technology,
meaning it is not controlled by any one organization.
1.3 Where do Bitcoins come from?
New Bitcoins are generated by a competitive and decentralized process called
"mining". Individuals are rewarded by the network for their services in this process. In
exchange for collecting new Bitcoins, Bitcoin miners use specialized hardware to process
transactions and secure the network.

1.4 Historical Background

- Early Adoption and Growth (Bitcoin's Development)
Bitcoin network begun in January 2009, Bitcoin was launched in January 2009
“a purely peer-to-peer version of electronic cash ... based on cryptographic proof
instead of trust”
- Emergence of Bitcoin (Where do BitcoinS come from)
- Bitcoin has dramatically risen in value since its inception, but its history is filled
with much volatility.
- In 2009, blockchain was launched. Bitcoin still had no monetary value. The first
block in the blockchain was nicknamed the Genesis block.
- On May 22, 2010, the first economic transaction of bitcoin took place. Two Papa
John's pizzas, valued at $25, were bought with 10,000 Bitcoin. As of late 2021,
10,000 bitcoin is worth over $600 million. Thanks to this purchase and later
purchases, bitcoin could start to be compared to the U.S. dollar.
- In 2011, other networks like Ethereum began to improve the code behind bitcoin's
blockchain.
- That same year, bitcoin was valued at $1 in April and rose to $32 by June 2011.
- In 2013, bitcoin traded at $13.40, which rose to $220 by April, but by mid-April,
the value dropped to $70.
- From March 25 to Dec. 17, 2017, the price of bitcoin rose from $975.70 to
$20,089.
- In June 2019, the value passed $10,000 before falling to $7,112.73 by December.
- In November 2020, bitcoin was trading at $18,353.
 - In March 2021, bitcoin was valued at over $61,000.

1.5 Mining Bitcoins

A network of computers running the Bitcoin code collaborates in a process known as
"mining" (or "Bitcoin mining") to ensure that transactions are valid and added to the
cryptocurrency's blockchain in the right way. Furthermore, mining adds new Bitcoin to
the network.
Currently on the market there are two popular forms of Bitcoin mining:

● Cloud Mining: Cloud mining is a type of mining that makes use of cloud

computing via a particular intermediary. In other words, all miners have to do is sign up
and purchase a mining contract from a middleman that sets up and maintains the mining
rigs. For people who don't want to install software or spend a lot of money on equipment,
cloud mining can be a good option. But since owning the contracts comes with a hefty
upfront cost, users should exercise caution to avoid dealing with less respectable
businesses and entities.

● HardWare Mining: This type of Bitcoin mining involves hardware; miners must

purchase the necessary tools and equipment, such as facilities, network systems, and
diggers. Due to supplier competition, HardWare users take the initiative to modify the
volume, target, and production output while also saving money when buying the
aforementioned tools. However, expenses like electricity, money, maintenance, and other
things will come up during the building, finishing, and use of the excavator system and
must be managed.

Steps to mine bitcoin:

Create a Bitcoin storage wallet
There are two types of Bitcoin wallets that many people choose:

● Cold wallet: A highly secure wallet that is built on a specialized device and that

only the owner and transaction makers can access online. Accessible to new owners.
 ● Hot wallet: A wallet that is always connected to the Internet and easy for users to

access anywhere in the world, as long as there is Internet. But in order to guarantee the
security of your Bitcoin and lower the possibility of a hacker attack, you must safeguard
your login credentials and carry out multi-layer security verification.

Search for mining

MinesToday's mines have a very fierce competition between miners, large companies
as well as giant mining workshops. Therefore, some Bitcoin mines have charged fees on
the profits of each miner. Before participating, everyone should read and learn carefully
the regulations to understand clearly and avoid problems arising later.
Preparing a Bitcoin Miner
Everyone should consider crucial factors like hash rate, electricity consumption,
ambient temperature, and initial purchase cost when selecting the ideal machine. Take
DragonMint T1, Antminer T9+, M3X, etc. as examples.
Install the reasonable Bitcoin mining software
There are 3 most popular software on the market today including:

● EasyMiner: To assist in dividing miners into distinct pools and maximizing

mining efficiency, EasyMiner offers a variety of mining modes. EasyMiner maximizes

the utilization of images in contrast to other command-line applications.

● Awesome Miner: Awesome Miner was born in 2014, it is designed to support

large-scale mining . More than 50 miners enable it to effortlessly manage and add pools,
while also handling multiple pieces of mining hardware at once.

● CGMiner: Most Bitcoin miners use CGMiner as their software of choice. It

operates on several platforms, supports a wide range of well-known hardware, including

FPGA, GPU, and ASIC, and permits Bitcoin mining based on open source code.

Find reputable Bitcoin exchanges

 You just need to place an order to start mining Bitcoin after you have finished setting
up the aforementioned crucial hardware and software. Miners must locate an exchange to
sell their bitcoin to in order to recoup their expenses or make a profit.

1.6 What makes Bitcoin unique and how much Bitcoin is in circulation?
To honor the anonymous creator, the smallest unit of Bitcoin, 0.00000001 BTC, is
referred to as a Satoshi, or simply Sat. One Satoshi is worth approximately $0.00048 at
the current price of Bitcoin.
In addition to spawning a whole new industry of millions of enthusiasts who create,
invest in, trade, and use Bitcoin and other cryptocurrencies in their daily lives, it has also
succeeded in creating a global community. Thousands of rival projects have been
developed as a result of the first cryptocurrency's creation of a conceptual and
technological foundation.
Despite being in the market for more than ten years, Bitcoin is still at the top because
of its innovative nature. With a market capitalization that topped $1 trillion in 2021—
after its price reached an all-time high of $64,863.10 on April 14, 2021—Bitcoin
continues to be the largest cryptocurrency even after its unchallenged dominance has
faded. This is largely because of the increasing interest from institutions in Bitcoin and
the widespread availability of platforms such as wallets, exchanges, payment services,
online gaming, and more that offer applications for BTC.
Limited supply: The maximum quantity of bitcoin is 21 million. Roughly 19.07
million Bitcoins were in use as of June 2022. This indicates that over 90% of all Bitcoin
has been mined, leaving just 1.92 million left for mining.

1.7 How is Bitcoin’s technology upgraded?

The largest tech update to hit the Bitcoin network since 2017 is called Taproot, and it was
just released. Since the new update went live on November 14, developers have been able
to incorporate new features that will enhance the Bitcoin network's security, scalability,
and privacy.
A hard fork creates two distinct versions of a blockchain by altering its code, resulting in
the split of the blockchain into two.
Two incompatible versions of the blockchain are produced by a hard fork. As a result,
network nodes using the updated blockchain will not be able to see transactions made
using the outdated blockchain, and vice versa. For the hard fork to occur, all blockchain
network nodes must consent to the modification.
A software that is compatible with old versions is called a soft fork. Thus, miners who
haven't updated to a more recent version of the program can still take part in transaction
validation and verification.

1.8 Why Is Bitcoin’s Role as a Store of Value?

Bitcoin has emerged as a store of value because of its durability and scarcity, even
though it has no useful applications like gold or oil. Unlike fiat money, which is
comparatively volatile, a store of value is an asset class that maintains its value over time.
A new, modern financial world where transaction amounts are denominated in
smaller units is what many economists and cryptocurrency enthusiasts believe will
happen if the top currency is widely adopted.

1.10 Owning Bitcoin and is it worth?

On a blockchain network comprising thousands of machines, transactions are
processed. In exchange for the efforts of these machines, owners can earn cryptocurrency.
You should not put all of your life savings into cryptocurrency markets. Consider it
more like a kind of gambling, and only put in a small portion of your disposable income
and be prepared to lose a lot. Avoid making larger investments than you can bear to lose.
CHAPTER 2: How Bitcoin Transactions Work - Operation

Motivation
2.1 Distrust of financial institutions
2.1.1 Bitcoin Political
One of the new and innovative "digital" currencies with cutting-edge features,
transparency, and ease of use is Bitcoin (Tiwari et al., 2022). However there are countries
that are Bitcoin-friendly as well as countries that do not accept Bitcoin. The world's first
government to acknowledge Bitcoin - El Salvador, according to President Nayib Bukele,
is expected to draw investors and citizens to take part in economic operations. El
Salvador's GDP might rise by 25% if just 1% of the world's bitcoin flowed there. (Carlie
P, 2022). Bitcoin of America is a well-known exchange for virtual currencies which is
registered by The United States Department of Treasury (CryptoSlate, n.d). Other
countries such as Japan, Germany and Canada accept Bitcoin as a form of payment but
not legal tender.

Throughout 2021, China has cracked down on cryptocurrencies with increasing vigor.
Chinese authorities have frequently warned its citizens to stay away from the digital asset
market and have cracked down hard on both domestic mining and currency trades both
within China and abroad. Similar trends were seen in India, where the government
contemplated making it illegal to own, issue, mine, trade, and transfer crypto assets
starting in 2021 (Orji, 2022).

2.1.2 Bitcoin Undermines the Cycle of Trust

Bitcoin's decentralized and trustless nature challenges the traditional cycle of trust that
underpins the functioning of financial systems and institutions. In conventional financial
systems, individuals and businesses rely on banks, governments, and intermediaries to
facilitate transactions and maintain the integrity of the monetary system. Bitcoin's
network allows two parties to transfer Peer-to-peer means that intermediaries are no
longer required to manage and distribute currency (McWhinney J, 2022).

In this sense, Bitcoin undermines the traditional cycle of trust by offering an alternative
model where trust is placed in mathematics and code rather than in centralized
institutions. This has both positive and negative implications. On the positive side, it can
provide individuals with greater financial autonomy and control. On the negative side, it
can pose challenges for regulators and law enforcement agencies seeking to prevent illicit
activities like money laundering and fraud.

2.1.3 Why Are Governments Wary of Bitcoin

Governments from all across the world have expressed varying levels of caution and
worry about Bitcoin and other cryptocurrencies for a number of reasons.

Regulatory Challenges
Bitcoin operates on a decentralized and pseudonymous network, which means it is more
challenging for governments to control and monitor transactions. Because of
decentralization, the government loses control over the monetary system and is unable to
regulate monetary policy (Amato D, n.d)

Illicit Activities
Many governments are wary about allowing the use of bitcoin and other cryptocurrencies
because of these major worries about criminality. Because Bitcoin is pseudonymous, it
can be used for nefarious acts including money laundering, tax evasion, and funding
terrorist organizations. Moreover, Bitcoin can be used to trade drugs and harmful
chemicals. Governments are worried that cryptocurrency could enable such actions
without the proper supervision (Amato D, n.d).

Technological and Security Risks

Cyberattacks and technological vulnerabilities can affect cryptocurrencies. The
possibility of cyberattacks and their effects on national security and financial institutions.
Hackers are able to alter transactions that the blockchain had not yet validated when they
took control (Reiff N, 2023).

2.1.4 An Opaque Ecosystem

Pseudonymity is one of the problems where in a cryptocurrency system, the reputation of
the trader is not at stake and anonymity hinders accountability ( Bank For International
Settlements, 2023). Only the wallet addresses, which are alphanumeric strings, allow for
user identification. Because wallet addresses are pseudonymous, it is difficult to connect
them to actual people's identities without more details.

Cryptocurrency industry and Bitcoin is characterized by ongoing innovation (Cole et al.,

2023) this can make it difficult for regulators to keep up with the changing landscape,
especially when trading in virtual currencies is still popular with its complex, difficult-to-
control, easily disfigured (State Bank of Vietnam, 2022).

2.1.4 The Bottom Line

Bitcoin has become a touchstone for controversy since it was introduced to the world in
the aftermath of the financial crisis. Governments have become wary, even fearful, of
Bitcoin, and have alternated between criticizing the cryptocurrency and investigating its
use for their ends.
While it has the potential to decentralize and change the workings of the existing
financial infrastructure, the cryptocurrency’s ecosystem is still rife with scandals and
criminals. Until the time that its ecosystem matures and a significant use case for it is
found, Bitcoin will continue to provoke distrust and criticism from established
authorities.

2.2 Transaction costs

 2.2.1 What Are Bitcoin Transaction Fees?
Users must pay a Transaction Fees to get their transactions added to the Bitcoin
blockchain. When a specific quantity of bitcoin is moved from one wallet to another, a
transaction fee is paid. Miners - individuals who are paid to add and valid transactions to
the blockchain, will receive the Transaction Fee as an incentive to prioritize one
transaction over another. The option to pay a greater transaction charge by the user who
wishes to complete a transaction more quickly exists. Miners are more likely to include
those transactions in the next block they mine (Coinmarketcap, n.d).
Transaction fees also prevent spam attacks, protect the network and incentivize good
behavior (Binance Academy, 2021). Transaction fees help prevent spam and denial-of-
service attacks on the Bitcoin network. Without fees, malicious actors could flood the
network with a large number of low-value transactions, causing congestion and slowing
down the network.

Transaction fees in Bitcoin are typically denominated in satoshis per byte (sat/byte),
where a satoshi is the smallest unit of Bitcoin. Users set the fee when creating a Bitcoin
transaction, and it represents the amount they are willing to pay for the transaction to be
processed promptly. The higher the fee, the more likely the transaction will be included
in the next block (Mishra D, 2021)

2.2.2 Institutional Transaction Fees

Institutional transaction fees refer to the fees that large institutional investors and entities
incur when conducting substantial cryptocurrency transactions or managing digital assets
on a larger scale. These fees are distinct from the typical transaction fees that individual
retail users pay for sending Bitcoin between wallets.

Compliance with regulatory requirements can be costly for businesses operating in the
crypto sector (Dalmia K, 2023). Compliance costs typically refer to expenses related to
regulatory compliance and adherence to legal requirements in the cryptocurrency
industry. These costs can vary based on jurisdiction, regulatory environment, and the
nature of the institution's activities.

Primary Concerns
2.4 Double spend
The possibility of using a cryptocurrency more than once is known as double-spending
( (Frankenfield J, 2023). Describes the challenge of preventing easy duplication of digital
money. By privately verifying each transaction, trustworthy third parties like banks
prevent it. The Bitcoin Network avoids double spending by enabling each member to be
able to validate every transaction. (River Financial, n.d). Since Bitcoin is a digital
currency, it exists as a string of data in a ledger called the blockchain. A user could
potentially create two different transactions spending the same bitcoins and broadcast
them to the network simultaneously (River Financial, n.d).

Bitcoin prevents Double Spend by “Proof of Work”. Proof of work is a consensus

process that determines which of these network users—known as miners—are permitted
to take on the lucrative job of validating new data. It's profitable because the miners
receive new cryptocurrency for correctly validating updated data and adhering to the
rules of the system (Napoletano E, 2023). Double-spend was resolved by Nakamoto's
consensus algorithm. Proof of work assists in preventing double-spending by
incentivizing miners to examine the validity of new crypto transactions before adding
them to the distributed record known as the blockchain (Napoletano E, 2023).

2.4 Bitcoin security

2.4.1 How Is the Bitcoin Network Secured?
The security of the Bitcoin Network has multiple layers. Bitcoin is strong because of a
combination of mining, block confirmations, and transaction hashing (Finimize, n.d).

Mining
Bitcoin mining is the process of producing a cryptographic solution that satisfies
predetermined criteria to validate the data included in a blockchain block (Frankenfield J,
2023). Every 2,016 blocks, or approximately every two weeks, the mining difficulty of
bitcoin is changed (Sergeenkov A, 2023). This adjustment mechanism ensures that blocks
are added to the blockchain approximately every 10 minutes, maintaining network
security and stability.

Block Confirmation
The process of confirming a transaction and adding it to the blockchain is referred to as
block confirmation in the field of blockchain technology. A network of nodes must verify
a transaction executed on a blockchain network before it can be added to the blockchain.
In the world of blockchain, block confirmation is an essential procedure since it
guarantees the network's integrity and security. Block confirmation also assists in
preventing double-spending, a problem that affects many digital currencies (Binance,
2023).

Hashrate
Hash rate refers to the computational power or processing speed of a network of
computers (nodes) that are collectively working to secure and validate transactions on the
blockchain. It is a measure of the total computational power dedicated to the network's
mining activity. A blockchain network's health, security, and mining complexity are
assessed using its hash rate (Wade J, 2023).

2.4.2 Why is Bitcoin safe?

Transactions on the Bitcoin network are recorded on a public ledger called the
blockchain. Blockchain explains how transactions are organized into "blocks" and time
stamped. Transactions demand a two-factor authentication procedure (Kaspersky, n,d).
Bitcoin is not easy to hack because of its extensive global network of nodes and miners
with more than 13,000 participants. As more miners and nodes join, the network's
security gets stronger (Cointelegraph, n.d).

Bitcoin and other cryptocurrencies are subject to anti-money laundering (AML) laws in
order to prevent illegal financial activity. These laws require service providers and
cryptocurrency exchanges to follow a number of important guidelines. First, Know Your
Customer (KYC) protocols are crucial; they entail gathering documents and verifying
user identities using personal data. Transaction reporting is an additional critical
component that requires companies to notify authorities of any significant or questionable
transactions. Suspicious activity monitoring systems need to be implemented in order to
identify possible financial crimes such as money laundering. Furthermore, customer due
diligence assists in determining the risk attached to a client, applying stricter scrutiny to
those who pose a greater risk. For transactions and customer data, record keeping is
required in order to support audits and investigations. Given the global nature of
cryptocurrencies, international cooperation is essential, and nations collaborate to stop
cross-border illicit financial activities. Violators of AML laws may face harsh penalties,
such as fines and incarceration. AML laws may change to accommodate new
technologies like non-custodial wallets and decentralized finance (DeFi) as the
cryptocurrency market develops, strengthening the fight against money laundering. It's
critical to be aware that AML regulations can differ between nations and occasionally
change, necessitating that people and businesses involved in the cryptocurrency industry
stay up to date on the specific compliance requirements in their jurisdictions for a safe
and legal financial environment.

2.4.3 Bitcoin security issues

Phishing and Scams
Phishing attacks and scams that Bitcoin users into disclosing their private keys or sending
money to phony addresses are common since cybersecurity is another chief concern for
all holders of digital assets (Hicks C, 2023)
51% Attack
A group of miners who control more than 50% of the network's mining hash rate is said
to be conducting a 51% attack when they target a cryptocurrency blockchain. The
controlling parties theoretically have the ability to change the blockchain by controlling
51% of the network's nodes (Rasure E, 2023).

Regulatory and Legal Risks

The legal implications of these new currencies and the technologies that power them are
becoming more complicated while the popularity of cryptocurrencies rises. The nature
and significance of digital currencies are under investigation by regulatory organizations,
governments, and central banks all around the world. Individual investors can profit
significantly from investing in cryptocurrencies, but doing so comes with some legal
risks (Reiff, 2023). Changes in government regulations and legal actions can impact the
use and exchange of Bitcoin.

2.5 How to buy BTC

To buy Bitcoin (BTC), you can follow these general steps:
Set Up a Digital Wallet: Before buying Bitcoin, you'll need a digital wallet to
store it securely. There are various types of wallets, including online (web-based),
mobile, desktop, and hardware wallets. Each has its own advantages and security
features.
Choose a Reliable Exchange: To buy Bitcoin, you'll need to use a cryptocurrency
exchange. There are many reputable exchanges available, such as Coinbase, Binance,
Kraken, and others. Make sure to choose one that is well-regulated and known for its
security measures.
Verify Your Identity: Most exchanges will require you to verify your identity.
This typically involves providing some form of identification, like a driver's license or
passport. This step is necessary for compliance with anti-money laundering (AML) and
know-your-customer (KYC) regulations.
Link a Payment Method: You'll need to connect a bank account, credit/debit
card, or other payment method to your exchange account. This is how you'll fund your
Bitcoin purchases.
Place an Order: Once your account is set up and funded, you can place an order
to buy Bitcoin. There are different types of orders, but the most common ones are market
orders (where you buy at the current market price) and limit orders (where you set a
specific price at which you want to buy).
Transfer Bitcoin to Your Wallet: After your purchase, you should transfer the Bitcoin
from the exchange to your personal wallet. This adds an extra layer of security, as
exchanges can be targeted by hackers.
Secure Your Wallet: Make sure to follow best practices for securing your wallet.
This includes enabling two-factor authentication, using strong and unique passwords, and
keeping your private keys safe.
Consider Long-Term Storage: If you're planning to hold a significant amount of
Bitcoin, consider using a hardware wallet for added security. Hardware wallets are
physical devices designed specifically for storing cryptocurrencies.
Stay Informed: Keep yourself updated on the latest news and developments in the
cryptocurrency space. Understanding the market can help you make informed decisions
about buying, holding, or selling Bitcoin.
Be Mindful of Risks: Cryptocurrency investments come with risks, including
market volatility and potential security vulnerabilities. Only invest what you can
afford to lose, and consider diversifying your investments.

Remember, this is a general guide, and specific steps may vary depending on your
location, the exchange you choose, and the regulations in your country. Always conduct
your own research and ensure you're using reputable services when buying Bitcoin.
2.6 Bitcoin in the Money Market
Bitcoin as a Store of Value:
Bitcoin's limited supply and decentralized nature have led some individuals and investors
to view it as a potential store of value, similar to gold. They believe that Bitcoin's scarcity
and the fact that it is not subject to inflationary pressures from central banks make it a
hedge against devaluation of traditional currencies. This perception has led to a growing
number of people holding Bitcoin as a long-term investment, akin to holding assets like
real estate or precious metals.

Bitcoin as a Medium of Exchange:

While Bitcoin is primarily seen as a store of value, it can also function as a medium of
exchange. Some merchants and businesses accept Bitcoin as a form of payment for goods
and services.

Bitcoin's borderless nature and lower transaction fees for international transfers can be
attractive for businesses engaged in global trade. Additionally, using Bitcoin for
transactions can provide an alternative to traditional payment methods and bypass
intermediary financial institutions.

However, it's worth noting that Bitcoin's price volatility can be a significant factor in its
adoption as a medium of exchange. Rapid price fluctuations can pose challenges for both
buyers and sellers in determining the value of goods and services.

In summary, Bitcoin's role in the money market is multifaceted. It is increasingly

recognized as a store of value, with some investors using it as a long-term investment.
Additionally, it is gradually being adopted as a medium of exchange by businesses
willing to accept it as a form of payment. However, the ongoing debate over its stability
and suitability for everyday transactions continues to influence its integration into the
broader financial system.
 CHAPTER 3: BITCOIN IN MACROECONOMICS & MICROECONOMICS

Governments around the world have varied viewpoints on the use of Bitcoin and other
cryptocurrencies, and their stances can evolve over time. These viewpoints often depend
on several factors, including the country's economic and political context, regulatory
goals, and understanding of cryptocurrencies.

3.1 Government perspectives on Bitcoin in macroeconomics

- Many governments view Bitcoin as a subject that requires regulatory oversight.
They are concerned about potential risks, such as money laundering, tax evasion,
and fraud, associated with cryptocurrency transactions. Governments often seek to
regulate cryptocurrency exchanges and service providers to mitigate these risks
(Regulation and Oversight)
- Governments are also concerned about protecting consumers who invest in or use
cryptocurrencies. They may enact regulations to ensure that consumers are well-
informed about the risks and potential scams associated with cryptocurrencies
(Consumer Protection)
- Governments typically view Bitcoin as a taxable asset. Depending on the country,
they may tax cryptocurrency gains as capital gains, income, or impose other forms
of taxation. Taxation policies related to Bitcoin can vary widely from one
jurisdiction to another (Taxation)
- Some governments are wary of the impact of Bitcoin on their traditional monetary
policy. Bitcoin's decentralized nature and fixed supply make it immune to
traditional central bank controls. Governments may be concerned about its
potential to undermine their ability to control inflation and interest rates.
(Monetary Policy)
- In some cases, governments view Bitcoin and blockchain technology as drivers of
innovation and economic growth. They may support blockchain research,
 development, and startups to foster innovation in the financial sector. (Innovation
and Fintech Growth)
- In Vietnam, the State Bank of Vietnam declared that the issuance, supply, or use
of illegal payment methods (including Bitcoin and other similar virtual currencies)
was illegal and punishable with a fine of up to 200 million VND. In Vietnam,
using cryptocurrencies to make purchases is illegal, but they are still actively
bought as investment instruments. Shops also have sprouted up around Ho Chi
Minh City using "bitcoin" in their names or offering to accept the currency as a
way to attract customers.

3.2 Government perspectives on Bitcoin in microeconomics

For Individuals:
Speculative Investment: Many individuals view Bitcoin as a speculative
investment opportunity. They buy and hold Bitcoin with the expectation that its
value will increase over time, allowing them to profit from price appreciation.
They may be attracted by the potential for high returns but also acknowledge the
significant price volatility.
Store of Value: Some individuals see Bitcoin as a store of value, akin to digital
gold. They believe it can protect their wealth from inflation and economic
instability, particularly in regions with unstable currencies or economic turmoil.
Diversification: Some investors use Bitcoin as part of a diversified portfolio.
They see it as a non-correlated asset class, meaning its performance may not
necessarily align with traditional financial markets, providing a hedge against
market volatility.
Skepticism and Caution: Not everyone is bullish on Bitcoin. Some individuals
are skeptical of its long-term prospects due to regulatory concerns, price volatility,
and technological risks. They may choose to avoid or limit their exposure to
cryptocurrencies.
On the Organizations front:
Payment Acceptance: Some businesses and organizations accept Bitcoin as a
form of payment for goods and services. They view it as a way to attract tech-
savvy customers and potentially reduce transaction fees associated with traditional
payment methods.
Investment and Treasury Management: Companies may invest in Bitcoin as
part of their treasury management strategy. This is often seen in tech companies or
investment firms that have allocated a portion of their cash reserves to
cryptocurrencies.
Blockchain Technology: Organizations recognize the value of blockchain
technology, which underlies Bitcoin. They may explore using blockchain for
various purposes, including supply chain management, smart contracts, and
record-keeping.
Risk Mitigation: While some organizations embrace Bitcoin, others see it as a
risky asset class. They may choose not to invest in or accept Bitcoin due to
concerns about price volatility and regulatory uncertainties.
Innovation and Fintech Integration: Some forward-thinking companies actively
explore opportunities in the cryptocurrency and fintech space. They invest in
research and development or partner with fintech startups to remain competitive in
a rapidly evolving financial landscape.
 CHAPTER 4: BITCOIN - IS IT MONEY?

Since the express purpose of Bitcoin’s invention is to serve as an alternative form of

money that agents can be used to transact with one another. The classification of Bitcoin
as "money" is a subject of debate and perspective, as it aligns with several characteristics
typically associated with traditional forms of currency. Economists generally consider
money to be an instrument that serves as a medium of exchange, a unit of account, and a
store of value. We therefore discuss, in turn, how bitcoin has fulfilled these three
functions

- To serve as a “medium of exchange,” bitcoin must be accepted as payment for a

sufficiently large set of goods or services, or other assets. A user is willing to
accept a fiat money as payment for other objects of value only if she is confident
that enough others will be willing to accept it in turn from her. Unlike regular fiat
money, however, bitcoin is not backed by any sovereign entity that can compel the
acceptance of its affiliated fiat money within a certain realm. Bitcoin serves as a
medium of exchange for goods and services from individuals or businesses that
accept it as payment. Money is often defined as a medium of exchange that
facilitates transactions. In this sense, Bitcoin is considered money because with a
growing number of businesses and individuals accepting it.
- Moreover, money is also expected to be a store of value, meaning it retains its
value over time. Some people consider Bitcoin a store of value, akin to gold,
despite its known price volatility. Because they believe it can protect wealth from
inflation and economic instability despite its known price volatility.
- Its divisibility allows it to function as a unit of account, even though this
application is not widespread. Bitcoin's portability is a crucial feature, as it can be
easily transferred electronically in our digital age. Additionally, its decentralized
nature, not controlled by any central entity, resonates with the concept of a
decentralized medium of exchange. Fungibility and increasing acceptance by
 merchants further contribute to its status as a form of money, albeit not universally
accepted. Critics argue its high volatility and limited use as a unit of account make
it more of a speculative asset than a conventional form of money. In summary,
whether Bitcoin qualifies as "money" depends on the context and criteria used for
its classification, given its unique attributes and evolving role in the financial
landscape.

Economists say that money performs three functions. It serves as: A unit of account: It
helps people understand how much wealth they have. A medium of exchange: People use
it to facilitate trade, to carry out transactions. A store of value: People feel comfortable
holding their wealth in it.

It is evident that Bitcoin has monetary value. Bitcoin can be used to pay for personal
living expenses as well as goods and services. The fact that Bitcoin can only be used in
locations that accept it as payment is its sole drawback. But it can also be traded for more
traditional currencies, like the US dollar, Euro, Yen, and Yuan. As a result, Bitcoin is a
currency or type of money, and those who want to invest in BTCST must provide an
investment of money. Bitcoin cash machines are another evidence that bitcoins are used
as a medium of exchange in Japan.

With the official recognition of Bitcoin as a "unit of account" that can be used for private
transactions by Germany's Ministry of Finance, the virtual currency's creators and users
of the four-year-old virtual money will now be subject to taxes by the ministry. Bitcoin
has been shown to be used as a unit of account nowadays.Bitcoin has emerged as a store
of value because of its durability and scarcity, even though it has no useful applications
like gold or oil. Bitcoin has emerged as a store of value in this digital age. Russian and
Ukrainian citizens have been trading in their local currency for Bitcoin and other
cryptocurrencies in order to protect themselves from the sharp inflation the conflict has
brought about. Bitcoin appears to have the potential to overtake gold and oil as the
leading value store. According to a recent analysis by Goldman Sachs, as digital assets
gain traction, there is a good chance that Bitcoin will surpass gold in market share by
2022. The Goldman Sachs research claims that Bitcoin presently holds a 20% share of
the "store of value" market, citing the cryptocurrency's $700 billion market capitalization
in comparison to the approximately $2.6 trillion worth of gold held as an investment.

According to 3 conditions of money, Bitcoin has meet 3 conditions and now can also
considered to be a kind of money
CONCLUSION
Overall, since Bitcoin has the largest market capitalization of any cryptocurrency and
the rest of the market tends to follow its trends, it is generally a good indicator of the
cryptocurrency market as a whole.
It has succeeded in establishing a worldwide community and a whole new sector of
the economy, with millions of enthusiasts creating, trading, investing in, and using
Bitcoin and other cryptocurrencies on a daily basis. The first cryptocurrency to appear
offered a conceptual and technological foundation that sparked the creation of thousands
of competing projects.
It remains to be seen if the state- and regulation-free future that proponents of Bitcoin
envision materializes. Governments from all over the world are currently attempting to
ascertain what impact, if any, cryptocurrencies may have on their economies in the near
future.
Despite the relative safety of Bitcoin technology, there are a few things to think about
before investing. Cryptocurrency wallets are not impervious to theft, Bitcoin is not
anonymous, and the price of cryptocurrencies can fluctuate greatly.
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