Bitcoin as Real Money: A Statistical Approach and Analysis Report

This report presents a comprehensive statistical analysis of Bitcoin's viability as a form of real money. The introduction provides background information on Bitcoin, its electronic payment system, and the role of miners in the network. The research aims to understand Bitcoin's relationship with USD, the rate of cryptocurrency introduction, transaction trends reflecting mining firm activity, the correlation between Bitcoin price and vendors, and the impact of inflation. The literature review explores existing research on cryptocurrencies, identifying trends in Bitcoin transactions, the relationship between price and vendors, and the effects of inflation. The methodology involves identifying relationships between Bitcoin and USD, analyzing crypto currency introduction rates, identifying market trends, identifying the relationship between Bitcoin prices and vendors, and identifying the relationship between inflation and Bitcoin prices. The structure of the report includes an introduction, literature review, research methodology, data analysis, and conclusions with recommendations. The study aims to address the challenges and opportunities associated with Bitcoin and its potential as a widely accepted payment method, considering factors like transaction costs, exchange rates, and the influence of government regulations. The research also explores the significance of Bitcoin for business firms, the role of inflation, and the relationship between Bitcoin and USD.

Bitcoin AS A REAL MONEY: A
STATISTICAL APPROACH

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1.1 ...............................................................................................................................................3
1.2 Research aims and objectives................................................................................................4
1.3 Rationale of study..................................................................................................................5
1.4 SignificenceSignificance of research study...........................................................................6
StrcutureStructure of report.........................................................................................................7
CHAPTER 2: LITERATURE REVIEW.........................................................................................9
List of cyptocurrencies introduced............................................................................................10
To identify trends in number of transaction of Bitcoin which will reflect number of mining
firms increase or decrease across the globe...............................................................................14
Relationship between price of bitcoin and vendors...................................................................17
Inflation and bitcoin price..........................................................................................................18
REFERENCES..............................................................................................................................21

INTRODUCTION
1.1 Background of study
Technology is evolving at a rapid pace across the globe. In past few years, a lot of work
is done on the development of technology. Bitcoin is one of the electronic currency that is used
at a wide scale across the globe. Before going in to deep research on Bitcon, it is necessary to
develop broad understanding about it. Under this electronic mode of payment, online currency
is issued that remain in our account. The business firm makes online payments and currency is
not related to specific government or central bank. Under electronic mode of payment that is
done through Bitcoin, there are some entities like miners (Simser, 2015). These entities enter in
to network and try to develop block of Bitcoin. In this regard, they need to perform a tough job.
They need to develop hash below threshold limit that is commonly determined for all miners that
are operating in the network of Bitcoin. When hash value is less than threshold value, one can
successfully build a block and add it to the block chain. Block refers to the vector, which
contains list of the current transactions that are done by people through Bitcoin.
Miners verify the transactions that are covered in block and in return, Bitcoin receive Bit
coin’s and transaction fee, which is their income. This is the entire process that is going on while
transactions take place through Bitcoin. Like bank account, each holder of Bitcoin has some
unique number that is encrypted and linked to specific algorithm (Reynolds and Angela, Irwin.,
2017). Algorithms are set of instructions that execute specific thing on the execution of
command. When anyone enters key with respect to account through algorithm, verification is
done and it is ensured that data will remain safe and no one would steal it easily. Thus, it can be
said that payment through Bitcoin is safe. In the current report, different aspects Bitcoin of
Bitcoin are covered. Along with that, detailed analysis of importance and relevance of Bitcoin as
a payment method is done. Apart from this, application of Bitcoin technology is analysed in
terms of its use that is done by the people and number of countries, which are Bitcoin accepting
Bitcoin for making and receiving payment. Apart from this, in the report, it will be identified
that whether regulation related to Bitcoin is developed or not. It can be said that scope of present
research study is wide in nature and in future, many new things can be observed with respect to
Bitocoin (Ram, Maroun and Garnett, 2016).
Inflation is the factor that largely affects the nation and economic growth as well as
currency exchange rate. Thus, in the research, an attempt will be made to identify the impact that
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inflation rate has on Bitcoin. USD also affects the currency value and in the present study,
relationship Bitcoin between Bitcoin value and currency will be identified. It can be said that
there is significant importance of Bitcoin. Bitcoin for the business firms. Many things can be
covered in research about Bitcoin. With passage of time, use of Bitcoin. Bitcoin is increasing
across the nations. Now, more and more vendors are accepting payments in the mentioned
currency. Due to this reason, demand for same increased in the market. It can be said that time
will come when more payments will be made and accepted in Bitcoin in the market. With
passage of time, it is very important that number of dealers that execute trade related to Bitcoin
must be increased. This is because; when more will be the dealers, less will be control of it on
the network, which is very important in current scenario. This will prove to be good for Bitcoin
across the globe.
1.2 Research aim and objectives
Aim: To develop a broad understanding of Bitcoin and exploring trends related to crypto
currency.
Objectives:
 To identify relationship between Bitcoin and USD
 To identify number of crypto currency introduced
 To identify trends in that prevailed in respect to number of transactions of Bitcoin which
will reflect number of mining firms increase or decrease across the globe
 To identify relationship between price of Bitcoin and number of vendors To identify relationship between inflation and price of Bitcoin
Research questions
 What is the relationship between Bitcoin and USD?
 What is the rate at which crypto currency is issued in the market?
 What are the trends in market with respect to Bitcoin?
 What is the relationship between price of Bitcoin and number of vendors?
 What is the relationship between inflation and price of Bitcoin?
l 1.3 Rationale of study
It is important to identify the reasons due to which research study is carried out in the
specific domain. As this reflect the importance of present research study, it was important to
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perform the current research study as Bitcon is in market for more than 5 years but today also,
Bitcoin is not a popular medium for making a payment. Transaction cost is low and instant
payment happened is case of mentioned virtual currency while doing transactions then also
Bitcoin does not achieve a huge success (S.M. Irwin. and Milad, 2016). Thus, it is very
important identify and evaluate Bitcoin on number of factors. This will reflect the reasons due to
which Bitcoin achieve success of failure in the market. There are many positive sides of the
Bitcoin as a currency. Like a single currency is accepted across the nations.
Thus, one does not need to care or concern about exchange rates in the market. Thus, it
was important to conduct present research study as by doing so, different aspects that are related
to Bitcoin can be covered easily add deep analysis of same can be done in a systematic manner.
Thus, it can be said that there is significant importance of the present research study for varied
entities. In current scenario, while doing trade with any nation, companies have to consider the
exchange rate. Fluctuation in these rates significantly affects the profit that firms earned in their
business. Bitcoin is the currency whose value is increasing rapidly and due to this reason, firms
are increasingly making use of mentioned electronic currency in their business.
l 1.4 Significance of research study
There is huge significance of the present research study as it covers varied aspects of
Bitcoin. In the current research study, importance of Bitcoin will be discussed in detail along
with discussing different areas where Bitcoin benefits the firm. Thus, it can be said that scope of
the present study is wide and many things can be done with making use of Bitcoin as a mode of
payment. In this research, number of people and countries that are covered will be studied in
detail. This will show the extent to which Bitcoin is preferred by the people and business firms.
Bitcoin is one of the important currencies that can be used by business firms to perform business
transactions across the globe. Thus, it is highly important to identify that after having such a
strong positive points what are the reasons due to which still at global level Bitcoin is not
accepted by the firms. Government can impose some of the important rules and regulations as
well.
This research study will help readers in understanding the extent to which government
intervene on use of Bitcoin in Malaysia by imposing strict rules and regulations. This reflects
that there is high importance of the present research study for individuals. Inflation is another
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factor that indirectly affects the currency value. Increase or decrease in currency value heavily
affects the usage of specific currency in nation or across globe. Present research study is
focusing on identifying whether inflation rate has any impact on Bitcoin. This reflects that there
is significance of study as it helps one in understanding whether there is any impact of inflation
on Bitcoin value or not. If there is any impact then to what extent it leads to up and down in the
Bitcoin value. Finally, in the research study, relationship will identified between USD and
Bitcoin. Usually, in case of paper currency, every nation’s currency’s value is compared with
USD as well as strengths and weaknesses are identified. Accordingly, the firm exchanges
payments.l It can be said that like issues are observed in pear currency same are evaluated in
respect to electronic currency. This reflects that at vast level relationship is identified among
variables. Structure of report
 Introduction: In order to prepare dissertation in a systematic manner, first introduction part is
prepared and in this, detailed discussion is carried out on Bitcoin along with its advantages and
issues that can be associated with it (DeWaal and Dempsey, 2015). In this section of report,
rationale and significance of research is explain briefly. It can be assumed that there is huge
importance of the present research study for researchers.
 Literature review: This is the second part and one of the important sections of present research
study. At this stage, literature of different scholars is review in detail and positive and negative
points that they speak with respect to research objectives are explained.
 Research methodology: It is another important segment of the current research study. Research
methodology section reflects the approach that is followed to conduct the present research study.
There are number of sub parts of the research methodology section, which will cover approach
which will be followed for carrying out research study. In this section of report research
philosophy, ethics and limitations of study will also be included. It can be said that there is huge
significance of this part of research as it shows whether research is carried out in a legitimate
way by the researcher or not.
 Data analysis section: In this part of the research report, data is analysed through using relevant
tools like thematic analysis and SPSS. Based on analysis of results, it is find out that in what
specific direction research variable move like customers are satisfied from the firm etc. In many
researches on collected data, SPSS is also used for analysis purpose. The tool reflects
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relationship among variables. It can be assumed that SPSS is one of the most important tools that
is used for analysis purpose by researchers.
 Conclusion and recommendations: Finally, after preparation of data analysis section,
conclusion and recommendations are given in the report. In this, results obtained on analysis are
taken in account to reach at the conclusion and provide recommendations accordingly. It can be
said that in this section of the report, overall conclusion of research study is described in detail.
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 CHAPTER 2: LITERATURE REVIEW
To identify relationship between Bitcoin and USD
According to Bonneau and Narayanan, (2016) there is a strong relationship between
different currencies like USA and Pounds. With change in single currency, automatic change
takes place in other one. It may be seen that there are number of factors like economy of nation
and interest rates that have their impact on a currency. It can be observed that there is a strong
relationship between Bitcoin and USD. With change in USD, variation is observed in Bitcoin.
Mentioned electronic currency is treated as safe heaven by the USA investors. It is very
important to understand the meaning of “safe heaven”. Safe heaven reflects the area where
money invested by investor is safe and value of currency will not be detoriate. In some of the
nations like Cyprus, it is find out that there is interconnection between Bitcoin and domestic
currency. This is because; when crisis occur in this nation, more people become concerned about
the currency. Hence, they store amount in form of Bitcoin. This raises the demand of currency in
mentioned nation. It can be said that difficulties in currency have a huge impact on Bitcoin. In
the past few years, demand of Bitcoin increased at a rapid rate.
Contrary to this, Eyal and Van Renesse, (2016) state that there is no relationship between
electronic currency i.e. Bitcoin and value of USD. It is due to the reason that USD is used at a
large level in order to purchase and sale items in the international market. Whereas, Bitcoin is
the newly launched currency in market and is not used at vast level to make purchase and sale of
items. Bitcoin is employed at a small scale relative to USD and thus, it cannot be said that there
is any kind of relationship between both currencies. People at a large scale no longer use virtual
money. Hence, there is no relationship between Bitcoin and USD. It can be observed that
mentioned same that is operated by other nations of the world affect currency of USA. Thus, it
can be assessed that vicissitudes in those currencies lead to serious changes in the value of USD
in international market in relation to domestic currency. Such things cannot take place with
Bitcoin, as it is not used at a large scale like USD, GBP, EURO or INR. Hence, it can be
assumed that there is no interrelationship between USD and Bitcoin.
According to Scaillet and Trevisan, (2017) there is high relationship between USD and
Bitcoin as interest rate interlinks both with each other. It can be observed that when interest rate
is increased, it is the symbol of strong economic growth. With increase in interest rate, USD
value is increased. In opposite to this, if in any case interest rate is decline, it acts as symbol of
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slowdown in nation’s economy. All these things lead to decline in export of the nation and due
to this reason, currency value reduced sharply. Interesting fact is that due to all these things,
those who make investment in stock market and other risky assets face heavy loss on investment.
Thus, in order to ensure safety of investment amount, people start buying Bitcoins and due to
sudden increase in demand of the product, price of Bitcoin it increased at a rapid rate relative to
USD. Thus, it can be said that there is high but negative correlation between both currencies.
Usually, when stock price declined, USA investor’s sale mentioned security in the market and
invest received amount on gold. This common behaviour is observed in case of USA market.
Same thing is also observed in case of Bitcoin as investors when then think that they can observe
loss on stocks make invest in Bitcoin. It can be said that there is high degree of negative
correlation between USD and Bitcoin.
List of cyptocurrencies introduced
As per views of Narayanan and Goldfeder, (2016) number of crypto currencies increase
with passage of time period. In the FY 2009, Bitcoin was the first currency that was introduced
and after that many new currencies that are digital were launched. This reflects that demand of
crypto currencies are increasing at rapid pace as it can be observed that with passage of time
usage of the virtual currency increased at rapid pace across the globe. Moreover, demand of
currency is increasing at rapid rate. It can be said that there is huge importance of the electronic
currency for the people. It can be observed that in the FY 2014 2 new crypto currencies were
launched namely Dash and Digital note. Whereas, in FY 2015 again two electronic currencies
comes in the market which are Ethereal and Etheric classic. It can be assume that with increasing
in use of crypto currency new one are launches in the market. This is clearly reflecting that with
passage of time transactions through Bitcoin increased at rapid rate.
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It can be seen from the chart given above that number of total merchants accepting Bitcoin
increasing at fast rate. In line graph number of total merchants enhanced. In the April 2014, it
was 40,000 and same increased to July 2014 to 65000 which means that plunge of 2500 comes
in the overall number of merchants that are accepting Bitcoin as currency. In the April 2015, this
number increased to 9000 from the value that is observed in case of July 2014. This means that
from July 2014 to April 2015 total merchants increased by 35000. All these things are clearly
communicating that two-fold increase happened in number of total merchants accepting
transactions from Bitcoin. These figures are sufficient to assume that at fast rate more and more
shops.
Contrary to this Tschorsch and Scheuermann, (2016) state that it is true that in past
couple of years demand of crypto currencies increased at fast rate due to wide acceptance of
Bitcoin by the retailers and business firms. However, this does not mean that all crypto
currencies will be successfully operated in the market. It can be observed that there are some of
similar currencies that are failed in the market and today are inactive. For example, Connie was
launched in the FY 2014 but become inactive, as today there is no demand of mentioned
electronic currency in the market. It can be said that those make investment in mentioned
electronic currency face heavy loss in it. This is because one who buys Coniye is not getting any
buyer. Hence, there is heavy risk in making investment in any crypto currency. This is the reason
due to which in future demand of virtual currency will not increase at fast rate in the market.
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According to Morgan, (2016) there are number of factors that lead to acceptance of
Bitcoin across the globe. One of them is that people now become more habitual of doing trading
in the digital currency. Means that in today time one can make online payment and can buy
anything. In this regard, bank accounts are used to make payment. It can be observed that
Bitcoin is completely online currency that cannot be touched physically by human being. More
and more people are currently purchasing Bitcoin because in the current time period price of
paper currencies are fluctuating and declining at rapid pace. In order to manage loss in value of
currency people are using Bitcoin whose value is increasing consistently. Due to rise in price of
currency more and more people are using it as weapon to use against inflation. Thus, in
comparison to previous time period in order protect self from inflation more and more people
purchase Bitcoin and use same to purchase products in the international market. It can be said
that this is the reason due to which large number of people are taking interest in Bitcoin and
using it to make online payment for purchasing product. With passage of time same trend may
be observed consistently because economy are operating in uncertain environment and it became
difficult to make accurate decisions in respecting to hedging positions that are open in the
market. Investment in the Bitcoin is the only way that is available to the people to handle such
kind of situations.
Opposite to this Ali and Hao, (2016) state that Bitcoin will never be surpass the usage of
current currencies in the domestic and international market. This is because people are more
familiar with usage of USD and other currencies not Bitcoin. Moreover, nation’s governments
do not give any recognition to the Bitcoin. Due to this reason, there will be limited use of
Bitcoin in the market. Due to non-recognition of Bitcoin as legal tender, it will no longer used
widely as method of making payment. If contrast to this happened then in that case also demand
of Bitcoin will remain low in the market. It can be said that in the upcoming period Bitcoin
usage will not increase at rapid pace in the market. There is common assumption among the
people that investment in Bitcoin will provide then safety against market. This is true that when
all instruments of market failed to give good return on investment people resort to Bitcoin.
However, it is not considered as currency in most of nations of the world. Due to the reason even
one accumulate huge benefit of mentioned currency cannot be derived because same is not used
at rapid pace by the general public.
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As per views of Wiseman (2016) number of transactions in Bitocin may increase at rapid
pace because some of the nations like Japan are accepting Bitcoin as legal tender. Gradually, it is
possible that other nations of the world start accepting Bitcoin as money. If same will happened
then in that case value of Bitcoin will increase at rapid pace in the market. In such kind of
situation, demand of Bitcoin will further increase and more it will be used to make online
payment and purchasing products to meet needs. It can be said slowly acceptance of Bitcoin by
most of nations of the world it become legal tender across the globe and due to this reason
assumption that there is not much importance of Bitcoin is wrong.
To identify trends in number of transaction of Bitcoin which will reflect number of mining firms
increase or decrease across the globe
According to Brière, Oosterlinck and Szafarz, (2015) with passage of duration number of
transactions in Bitcoin increased at rapid rate. It can be observed that from FY 2012 number of
these transactions is increasing at fast pace and until 2014 this trend skyrocketed. Growth rate in
number of transactions increased at fast rate from FY 2014 to FY 2017. This clearly reflects that
with passage of time period number of Bitcoin transactions are increasing at rapid pace. This
reflects that business firms as one of the important mode of payment accept more and more
currency. This reflects that miners are also increasing in respect to Bitcoin. This is because
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