BEO6600 Business Economics T1 2018: Analyzing Bitcoin & Australia

This report provides an analysis of Bitcoin, focusing on its supply, demand, and elasticity, using relevant diagrams to illustrate these concepts. It examines the reasons behind the increasing price of Bitcoin in recent years, including its recognition as a legal payment method in some countries and growing investor confidence. Furthermore, the report explores the potential impact of Bitcoin on Australia's GDP and monetary policies, considering its adoption as a medium of exchange and its potential to stimulate startup funding and increase export competitiveness. The report concludes that with proper regulatory support, Bitcoin could positively contribute to Australia's economic growth, although its current impact on domestic credit and banking systems remains minimal.

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Business Economics

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Table of Contents
Introduction...........................................................................................................................................3
Task 1.1.................................................................................................................................................4
Task 1.2.................................................................................................................................................6
Task 1.3.................................................................................................................................................7
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10
Friedman, M. (2017) Price theory. UK: Routledge.............................................................................10

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Introduction
The main of the report is to develop an understanding of the supply, demand and elasticity of
Bitcoin with the help of diagram for supply curve, demands curve and elasticity. The report
also explains the reason for increase in the price of Bitcoin in the market. In addition to this
the report analyzes the impact on GDP of Australia and monetary policies if cryptocurrencies
will be used as a medium of exchange and transactions for specific activities.

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Task 1.1
Demand curve
A demand curve graphically represents the relationship between product price and demand of
the product for a specific period (Friedman, 2017). The price is taken on the vertical axis and
demanded quantity is taken on the horizontal axis.
Findings: Demand is referred to the want of customers for Bitcoin. It also reflects that a
customer is willing to pay and can afford to pay a certain price for Bitcoin. The graph
suggests that when the prices were high less customers were able to purchase its. On the
contrary when the prices were down to certain level more customers were able to purchase
Bitcoin.
Supply curve

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A supply curve graphically represents the relationship between cost of the product and
supplied quantity over a given time period (Ehrenberg, et al., 2016). The price appears on
vertical axis and supplied quantity appears on horizontal axis.
Findings: Supply is referred as supplier’s ability to supply Bitcoins in the market. The supply
of Bitcoin is derived from calculation which forms a blockchain. According to the law of
supply, with an increase in the price of the bitcoin, the supplied quantity will also rise as
more profit can be generated from the purchase. There is a direct relationship with the price
and supply of Bitcoin.

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Task 1.2
The price of the Bitcoin has risen immensely over the past few years. It was launched in
2009 and since then it slowly gained the market attention. The price of the Bitcoin continued
to rise in the past few years with one or two downfalls. There are various reasons for the
rising pricing of Bitcoin. Firstly the recognizing of Bitcoin as a legal payment method by
Japan has turn out to be favor of the use of Bitcoin due to which its acceptance has increased
among people and therefore it is one of the major factors contributing to the price hike of
Bitcoin (Madjee, 2015). However Bitcoin will not be used as a currency but it will be
recognized as an asset. Secondly Russia which was against the use of cryptocurrencies has
attempted to legalize Bitcoin so that money laundering can be dealt. Thirdly SEC declared
that they need to review their decision on the disapproval of bitcoin which has favored the
hike in its price. Fourthly efforts are being made to bring products which will be directly
linked with Bitcoin has resulted in raising its demand thereby rising its price (Swan, 2015).
Long term investments plans in Bitcoin for retirement is also available which is approved by
IRS. This scheme has collected $10 million which has raised the investor’s confidence in it

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due to which its prices are hiked. In 2016 huge investments were done by startups in Bitcoin
amounting to $550 million. Apart from this Billionaire like Mike Novogratz also announced
that 10% of his net worth is held in Ethereum and Bitcoin which boosted the price of Bitcoin.
All these factors has colloectovely contributed in the price rise of Bitcoin due to which the
market capitalization of market today has become $23 billion.
Task 1.3
Bitcoin is an economically disruptive innovation which can revolutionize the present
economic structure of Australia and can significantly impact the monetary policies of the
country. The use of Bitcoin will positively impact the GDP of Australia as it will give rise
more numbers of startups in the country. The startups require funding in the beginning which
is not easily available. However they can easily get funding in the form of Bitcoin and also
increase their capital by investing in the Bitcoin (Bohme, et al., 2015). The investment in
Bitcoin will give better returns as compared to any other source. This will aid in funding for
the startups. More the number of startups more will be the generation of revenue in the
country which will ultimately contribute in increasing the GDP of the country. Apart from
this it will aid in growing the export of the country. With the proper regulatory support the
merchant who adopts Bitcoin will have to pay lesser amounts as fees for processing the
international orders (Bohme, et al., 2015). This will make the product of Australia more
competitive in terms of price. Moreover the people who have limited access to the systems of
payment would be able to take part in e commerce through Bitcoin. Allowing the acceptance
of Bitcoin to merchants of Australia will increase the market size to five times. Foreign
customers would be able to access and acquire goods of Australia which will boost the export
of Australia thereby increasing the GDP of the country (Roxas, et al., 2011). The extent of the
impact on monetary policy can be predicted on the basis of the ability of Bitcoin to challenge
currency of Australia as a legal tender. At present the impact of Bitcoin is minimal on the

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domestic credit and deposit taking functions of the Australian system of Banking because
Bitcoin is considered to be superior than cash.

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Conclusion
The rising price of the Bitcoin is a sign that it will soon be going to take over the money
market. The acceptance of Bitcoin by more and more people and the increasing faith of
people toward it is the prime reason of the price hike. Australia can use it positively to raise
its GDP by providing proper regulatory support.

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References
Böhme, R., Christin, N., Edelman, B. and Moore, T. (2015) Bitcoin: Economics, technology,
and governance, Journal of Economic Perspectives, 29(2), pp.213-38.
Ehrenberg, R.G. and Smith, R.S. (2016) Modern labor economics: Theory and public policy.
UK: Routledge.
Friedman, M. (2017) Price theory. UK: Routledge.
Mandjee, T. (2015) Bitcoin, its legal classification and its regulatory framework, Journal of
Business & Securities Law, 15(2), p.157.
Roxas, H.B. and Chadee, D. (2011) A resource-based view of small export firms' social
capital in a Southeast Asian country, Asian Academy of Management Journal, 16(2), pp.1-28.
Swan, M. (2015) Blockchain: Blueprint for a new economy. USA: O'Reilly Media, Inc.