The Impact of Crypto Currencies on the Economy and The Financial Industry

Abstract

This paper is based on the discussion about the cryptocurrencies and its impact on the financial industry. However, the adoption of cryptocurrencies is a different matter because right now the Bitcoins is considered as for wealthy, developed and tech-savvy cultures. Based on the analysis about the points of differences of the currency a countries profile can be developed who are more likely to adopt the Bitcoin. The cryptocurrencies are considered a potential solution against the accessibility, exchange, fraud, and inflation. Moreover, the prices are considerably increasing because the demand for core good is growing rapidly relative to supply. As per the analysis the fiat currency system is considered as the main reason for the future inflation however it will not cause any significant problem in the overall financial industry. The growing demand for housing is also increasing the price of lumber that also increased in the prices of wood.  Consequently, all the related goodwill becomes more expensive following the trickle through the economy. Moreover, the asset market also contributes considerably to the inflation. An increase in the price of certain commodity incentivizes the people who are producing those commodities. In this regard, the producers withhold the supply of those commodities that eventually results in increased prices. Furthermore, the inflation can also be caused by the supply shock like the interruption in oil supply to Southern US caused by Katrina devastated. It caused fluctuation dramatically in the real exchange rates instead of producing desired results. The fluctuation also triggers the development of three asymmetries in the exchange market. The first factors that come into play is the loss aversion which means that the losing side will suffer more loss vocally and acutely as compare to the less vocal winning side during the time of depreciation or appreciation. Hence, the fiscal policy will experience more disturbances.