Bitcoin Market and Regulation: A Financial Analysis and Overview

This report delves into the Bitcoin market, examining its rapid expansion and the crucial need for regulatory frameworks. It highlights the decentralized nature of cryptocurrencies, the challenges they pose to traditional financial institutions, and the speculative nature of Bitcoin's value. The report explores the risks associated with unregulated markets, including price volatility, the potential for economic bubbles, and opportunities for fraud. It discusses various regulatory approaches, such as legislative action, the regulation of Initial Coin Offerings (ICOs), and the role of central banks. The report emphasizes the benefits of regulation, including investor protection, increased market legitimacy, and the prevention of illicit activities. It also examines the impact of regulatory changes on institutional investment and market stability. The analysis is supported by references to relevant academic literature and industry sources, providing a comprehensive overview of the Bitcoin market and its regulatory landscape.

Economics and Finance
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Bitcoin market and regulation
•Bitcoin; digital currency
•By pass banks and traditional payment method
• Spreading at a very fast rate
•decentralized cryptocurrency
•Allow instant transfer
•No need of regulatory body
•Successful transaction method
•Easy to transfer
•Cannot be linked to authorized owner

Why Regulation is Needed
•big problem for government
•Not linked to any financial institution
•Speculative demand
•Value rises at a faster rate
•Price increased by more than 900% (theguardian.com, 2017)
•Imminent correction
•Triggering prices of bitcoin
•Formation of economic bubble
•If the bubble crash, economy will suffer highly.

How to regulate the market
•Need for legislative regulation
•Difficult to track individual owing specific wallet
• enforcement of laws
•Track down certain enforcement
•Government can raise warnings
•Probable fraud and volatility
•Financial laws and regulation
•Clear up tax
•Regulate exchange

How to regulate the market
•Build a proper framework for ICOs
•People invest in ICOs
•Without having any idea about future
•Challenge for central banks to regulate
•Manage of exchange through ICOs
•Two benefits; New business model and Reduce illicit activity
•Technology and team should be audited
•Background should be checked
•ICOs should meet certain criterion.

Advantages of legislation
•Reduce scams
• Bitcoin market; full of wealthy people
•People lose millions of money
•Scam coins and ICOs
•Unregulated market
•Scammer launch all sorts of scam coins
•Not properly authorized
•Project owner disappears
•Regulation ensure new coin meet certain criteria
•Safer investment environment

Advantages of legislation
•Attract institution money
•Bitcoin; unregulated market
•Seems illegal to investors
•Regulation will encourage more investor
•Lead to an increase in liquidity levels
•Ceasing huge price differential
•Give market more legitimacy
•Bitcoin; coin for criminals
•Buying drugs, sex trafficking and other crimes
•Regulated market; nothing bad for socity

Summary
•Rapid spread of cryptocurrency
•Regulation is needed
•Different regulatory channels
•Laws and regulation
•Framework for ICOs
•Regulation of exchange
•Area of tax
•Reduce scam
•Attracts institutional money and ensure more legitimacy

References
•Cheah, E. T., & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value
of Bitcoin. Economics Letters, 130, 32-36.
•Partington, R. (2018). Bitcoin: is it a bubble waiting to burst or a good investment?. the Guardian. Retrieved 18 March
2018, from https://www.theguardian.com/business/2017/dec/02/bitcoin-is-it-a-bubble-waiting-to-burst-or-a-good-
investment
Böhme, R., Christin, N., Edelman, B. and Moore, T., 2015. Bitcoin: Economics, technology, and governance. Journal of
Economic Perspectives, 29(2), pp.213-38.
Brito, J., Shadab, H. and Castillo, A., 2014. Bitcoin financial regulation: Securities, derivatives, prediction markets, and
gambling. Colum. Sci. & Tech. L. Rev., 16, p.144.
•Caginalp, C. and Caginalp, G., 2018. Opinion: Valuation, liquidity price, and stability of cryptocurrencies. Proceedings of the
National Academy of Sciences, 115(6), pp.1131-1134.
•Godsiff, P., 2015. Bitcoin: bubble or blockchain. In Agent and Multi-Agent Systems: Technologies and Applications (pp. 191-
203). Springer, Cham.
•Tu, K.V. and Meredith, M.W., 2015. Rethinking virtual currency regulation in the Bitcoin age. Wash. L. Rev., 90, p.271.

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