Cryptocurrency is more than a financial innovation; it is a type of social, cultural, and technological growth. Cryptocurrencies have the ability to boost the economy due to their easily accessible nature significantly. Nowadays, many students consider cryptocurrency thesis topics to do extensive research on them and learn more about them because it is a trending topic.
Cryptocurrencies are digital assets that use cryptographic techniques to manage them. There are various kinds of cryptocurrencies. Although Bitcoin (BTC) is the most well-known cryptocurrency, thousands of others have emerged over time. Naturally, stablecoins are cryptocurrencies whose value is linked to a fiat currency, debt paper, or commodities such as gold.
When cryptocurrency prices correct and the fear and greed index rises, it is important to take a deep breath and recognize that the broader impact of cryptocurrencies extends beyond daily price changes. Cryptocurrency use cases and the underlying blockchain technologies are evolving at a breakneck pace. The significant economic influence of cryptocurrencies on the global economy cuts across sectors and national boundaries, exceeding what was previously thought impossible (helpwithdissertation, 2022).
Like every tool or technology, cryptocurrencies have advantages and disadvantages. The benefits of cryptocurrencies are enormous. One of the most significant advantages is arguably accessibility. With cryptocurrencies, one can send or receive money without the involvement of third parties such as banks. The current financial system’s status quo has arguably failed many people around the world. Over 1.7 billion individuals do not have bank accounts.
Because of their ease of use, cryptocurrencies have the potential to increase global financial inclusion. Cryptocurrencies provide a path to financial inclusion for underserved and unbanked communities, one billion of whom own mobile phones. As a result, it is possible to argue that cryptocurrencies are inherently beneficial to the economy.
Are there any problems with cryptocurrency?
It’s no surprise that some (cyber) criminals use cryptocurrencies, just like cash. Interestingly, with legitimate cryptocurrency usage considerably exceeding criminal usage, illicit activity’s percentage of cryptocurrency transaction volume is relatively low, with illicit addresses representing only 0.15% of bitcoin transaction volume in 2021.
Following that, cryptocurrencies are claimed to be harmful to the environment. BTC’s proof of work (PoW) consensus mechanism is said to have negative (environmental and economic) consequences. In return, Bitcoin fuels a whole economy and the financial inclusion of millions of people worldwide.
Another drawback that most cryptocurrencies face is volatility. As a result, some currencies may lose value swiftly. Economists who view “money” through a traditional lens may claim that cryptocurrencies are, therefore, unsuitable for payment and that consumers face more significant risks.
Economists may also argue that the value of cryptocurrencies is uncertain due to a lack of business or central bank involvement. An economist may believe that a central bank digital currency (CBDC) is a good solution because the central bank maintains control.
Will cryptocurrency survive an economic recession?
The decrease in cryptocurrency markets may be related to the collapse of traditional markets and geopolitical events. Cryptocurrency investors are experiencing a difficult time. The financial climate has shifted dramatically. Inflationary pressures, for example, force central banks to change their policies: they hike interest rates, ensuring a tighter financial market. Rising interest rates, for example, make it more appealing to invest in bonds (Amsyar et.al, 2020).
When stock markets experience a downturn, risk-aversion tactics reduce cryptocurrency investments. It is often asserted that crypto winter is approaching, which is interpreted as a bear market cycle in the stock market but applied to the prices of digital assets on the crypto marketplaces. Winter has some unpleasant (individual) side effects. For example, some crypto-related businesses have reduced costs by laying off employees.
The fact that the bitcoin market capitalization is associated with traditional markets shows institutionalization, which is not always a bad thing. It denotes adoption and acceptance as the first steps toward widespread acceptance of cryptocurrencies and their technological base.
Indeed, prominent thought leaders suggest that the bitcoin market evolves in cycles, which can appear chaotic from the outside. However, there is an underlying logic in which prices, industry developments, and innovation are linked in a positive feedback loop.
How do cryptocurrency investments impact the broader crypto economy?
Although the cryptocurrency market looks to be growing in a positive feedback loop, this does not mean the possibility of (un)expected events influencing the trajectory of the ecosystem as a whole.
Although blockchain and cryptocurrencies are designed to be “trustless” technology, trust is nevertheless essential in situations where humans interact. The broader economy does not just influence the cryptocurrency market, but it may also have a significant impact on its own.
Indeed, the Terra case demonstrates that any business — whether a single company, a venture capital firm or a project issuing an algorithmic stable coin — has the power to initiate or contribute to a cryptocurrency market “boom” or “collapse.”
The impact of such crypto-native events with systemic consequences resembling traditional finance domino effects, as well as the following falls of Celsius and Three Arrows Capital, all indicate that the crypto-economy is not immune to failure. Indeed, unlike traditional finance, the crypto sector lacks organizations too large to fail.
Looking back is always easy, but the Terra project was inherently faulty and ultimately unsustainable. Nonetheless, its collapse had a systemic impact since many projects, venture money, and established businesses were exposed and severely harmed. It implies that thinking about risks and potential benefits is essential while investing in cryptocurrency.
The collapse and domino effect across the board suggest a lack of maturity in the sector itself.
Because innovation and prices are inherently connected, and the crypto economy is still in its early stages, the industry may continue to face circumstances that temporarily restrict growth.
Nonetheless, many in the industry are “trustless” in their belief that good projects will survive temporary corrections and that the cryptocurrency winter will clear the way for a cycle of endless, creating disruptive innovation.
Economic Impact of Cryptocurrency On Job Markets
The rise of cryptocurrency has given rise to an entire industry dedicated to overseeing cryptocurrency exchanges all around the world. While some early adopters became wealthy immediately, others-built businesses that relied on trading as their source of income.
Blockchain employment increased from a little over 1,000 in 2016 to more than 4,000 in 2017. Software developers are the most directly after professionals in the cryptocurrency business. And, while the labor situation has shifted in recent years, interest in these professions has not.
As cryptocurrency becomes more legal outside the Western world, they may expect more significant worldwide investments and job growth.
Conclusion
In the near future, cryptocurrency has the potential to become a popular form of currency. The benefit of investing in cryptocurrency becomes clearer as its value and popularity rise.
The economic impact of cryptocurrencies is expected to be a topic of discussion among economists and investors alike. And economics students want to prefer research and write their dissertation on Cryptocurrency Impact Country economics dissertation topics. Above are some examples of how cryptocurrency’s economic impact has revealed itself.
Reference
HWD, 2022. Crypto Crash: What Investors Need to Know. Online available at https://www.helpwithdissertation.co.uk/blog/crypto-crash-what-investors-need-to-know/ [ Accessed Date: 30-July-2022]
Amsyar, I., Christopher, E., Dithi, A., Khan, A.N. and Maulana, S., 2020. The Challenge of Cryptocurrency in the Era of the Digital Revolution: A Review of Systematic Literature. Aptisi Transactions on Technopreneurship (ATT), 2(2), pp.153-159.
