MOD006612 Financial Management Assignment sample

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Financial Management Assignment Sample

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Introduction

Finance is the term that describes the activities of money and money related operations. Finance depended largely on the physical cash transfer from one point to another point. However from 190 the nature of the cash transfer saw an evaluation. In 1990, an electronic platform called “cash” first invented the process of digital cash transfer. Over time this simple digital cash transfer started to face problems of hacking. To prevent the hacking the technology of digital cash transfer or crypto currency also started to develop. With the development of different types of crypto currencies such as Bit coin, Tether, Monero, Dash evolved. The technologies of these different crypto currencies vary from each other. However the main goal of these crypto currencies is to secure the digital cash transfer from one point to another point. Digital or virtual money is a crypto currency that employs safe cryptography. For this security characteristic, a crypto currency is impossible to falsify. A defining property of a crypto currency and its biological nature perhaps it’s most attractive attraction. No central authorities are granted to make it theoretically resistant to intervention or exploitation by the government. It is created for the benefit of the internet and how it functions from the ground. The crypto currency transactions are confirmed by the machines signed in into the currency network instead of using traditional commercial banks to check and guarantee the transactions. Since the money is safeguarded and encrypted, a predetermined algorithmic rate cannot grow the money supply. This project explores the market of “Bit coin” in a globalized world. In this particular report, the business analysis of Bit coin is also described.

Background

This particular section describes the background of the crypto currency Bit coin. Bit coin is a form of money which is totally virtual and frequently described as a crypto currency, digital money or digital cash. This is basically an online cash equivalent. One can buy items and services with it, although Bit coin is not yet acceptable to many stores and is completely prohibited in other countries. However, some corporations are starting to purchase their rising influence. For instance, PayPal said in October last year that it would allow the online payment firm to purchase and sell bit coin to its clients. In the images you see the tangible Bit coins are a new feat. Without the confidential codes inside of them, they would indeed be worthless. Basically, every Bit coin is a file format that is saved on a Smartphone or computer in the “digital wallet” program (Yi et al. 2018). Bit coins (or some of them) are sent to the wallet app and Bit coins can be sent to others. The block chain is a distributed list of every single transaction. This enables the record of bit coins to be tracked so that users can avoid spending money, copying or cancelling transactions they do not control. The individuals may make their computer execute transactions for everyone to enable the Bit coin network to operate. The machines are designed for extraordinarily hard amounts. Sometimes the owner may reward them with a Bit coin. People are creating sophisticated machines to attempt to obtain Bit coins. It's known as mining. However, the amounts are more impossible to halt the generation of too many bit coins. It may be years before one has a single Bit coin if they begin mining. They could spend a lot of money on power than the Bit coin would have been worth on their computer (Bouri et al. 2019). Bit coins are precious because individuals are prepared to share real products, services and even cash with them. Some enjoy the idea that the country or banks don't control Bit coin. People may spend Bit coins quite anonymously, too. Even though all transactions are registered, no one would know the bank details unless one has informed them. It is incredibly impossible to duplicate, create or spend false Bit coins users don't possess every transaction is logged publicly. One can lose or delete their Bit coin wallet and lose it permanently. Websites that allow people to access their Bit coins securely have also been thieved. Over the years, the value of Bit coins has increased, and some people believe that converting their real money into Bit coins is not safe.

Research Aim and Objective

The main aim of the project is to explore the market of crypto currencies. The selected crypto currency is Bit coin and the analysis is done on the basis of that. The main objectives of the project are as follows.

  • To describe the business analysis of Bit coin.
  • To explore the market of the bit coin
  • To research the related works based on the analysis of bit coin.
  • To search the effect of bit coins in the market.

Data collection process

The particular section of the chapter will describe the data collection process for the analysis of the bit coins in the market. The collection of data is described as the collected, measured and analyzed method for effective research insight utilizing established procedures that are validated (Song et al. 2019). On the basis of data obtained, a researcher might assess its theory. The most crucial and fundamental stage for research is data gathering, in most situations, regardless of the study topic. Depending on the data sought, the technique of collecting is varied for various areas of research. The data collection process used in this is quantitative data analysis. The quantitative data are data that may be tallied or expressed numerically. It is often used to investigate events or competition levels. And the questionnaire gathered starts with “how many” or “how many” via a structured questioning. Since the quantitative facts are numerical, it is both final and objective. In addition, computational and numerical analytics may be sorted with large quantitative information, which is illustrated in the form of tables and charts. The quantitative data collection process is done using various processes described below (Mikhaylov et al. 2021).

Probability Sampling: A definite sample approach by using some type of random selection and which allows researchers, on the basis of data gathered alone from the target population, to produce a probability assertion. It enables researchers to gather data from members of the population that they want to investigate, as one of the finest things about probability sampling. Moreover, the data are gathered by random means of excluding the option of sampling distortion. It enabled each unit to be selected from a certain group of the desired sample population. It is essential to include a certain number of employees, e.g. just men or women, managers, employees in a specific industry, etc.

Interviews: The approach utilized to collect data is the conventional interviewing procedure. However, the quantitative data-built interviews are more organized, with researchers simply asking a predefined set of questionnaires. Data collection from participants is a proven approach. It assists in the acquisition of quality data since it gives opportunity for extra inquiries and testing for rich and useful data collection. Participant literacy needs are irrelevant since F2F conversations give numerous possibilities for collection by observing non-verbal data or exploring difficult and unaware problems. While the success rates for F2F conversations are frequently greater, they can be expensive and time-consuming.

Questionnaires: In online gathering of data, quantitative plays a key part in surveys or questionnaires made utilizing on-line survey software. The polls are meant to justify the respondents' conduct and confidence. Checklists and questionnaires of scale rating constitute the majority of quantitative surveys so that the attitude or behavior of respondents may be simplified and quantified.

Chapter 2: Literature review

Literature review section discusses the findings of different peer researchers related to the subject of this research. The main objective of the literature review is to search the effect of Bit coins in the market.

Bit coin uses a “peer to peer protocol system” which enables it to be transferred from one point to another point without being interfered with by any third party or potential hacker. From 1990, when Bit coin was first introduced it has increased its market at a large portion. Bit coin had 6.56 million customers or users in 2016. Its user number increased from 6.56 million to 11.05 million in 2017. Bit coin uses the block chain technology which is updated constantly and automatically. As a result Bit coin transfer eliminates the third party requirement (Grobys, 2021). 

The main purpose of Bit coin is to be used as a money transfer process. Bit coin technology decreases the transfer cost at minimum. However, nowadays bit coin seems to be used only for speculative purposes. This is increasing the market volatility, which is higher than similar crypto currencies. The below figure represents the market volatility of Bit coin respective to USD/GBP exchange rate. The increased volatility creates uncertainty about the valuation of Bit coin, which makes it a highly risky and speculative investment.

In the above figure, the red line shows the volatility of USB/GBP exchange rate and the blue line represents the volatility of Bit coin. From the graph it can be observed very easily that the high and low differences of Bit coin are much higher compared to the USD/GBP exchange rate (Breidbach and Tana, 2021).

According to the market study conducted by Taskinsoy, 2020, the supply of bit coin was issued at a high rate within the first three year of its introduction, reaching more than 10.5 million. The Bit coin website (2021) states that the “number of new Bit coins created each year is automatically halved over time until bit coin issuance halts completely with a total of 21 million bit coins in resistance”.

The study of Ji, 2019, reflects that the main reason for its popularity of bit coin is due to the anonymity it provides to its customers and the fast and sacred transferring service it provides on a global scale.

Mikhaylov, 2020 argues that even with so much popularity and security, Bit coin is not hundred percent secured. There are some cases where Bit coin systems were hacked by hackers. Hackers accrued the passwords of the Bit coins to steal it from their owner.

According to Ferreira and Pereira, 2019 the most confusing aspect of bit coin is how the value of bit coins are decided. Bit coin violates the “Misses regression Theorem”. According to this theory all the money derivatives such as gold or any other materials that can be measured in the term of money should be valued with having historical ties. However Bit coin does not follow this theory and its value cannot be found in the historical measurement process and its value is measured only on present day market demand basis.

Soloviev and Belinskiy, 2018 reflects that bit coin value is unreliable because its value purely depends on market demand and fluctuates at a high rate. The study accepts Bit coin only as a medium of exchange which does not have a value of its own.

The study of Sun et al., 2020 reflects that the crypto currency market has seen a large level of interest from investors after the introduction of Bit coin. Due to its large popularity the bit coin had an increase of 1500 percent since its first introduction. However the market of Bit coin is complex compared to other crypto currency. The value of Bit coin is rising to new records in one day and then on the next day it falls at a record rate. The high volatility makes the Bit coin as one of the most risky investments. However due to the high risk, the chance of having a higher rate of profit is also possible. This draws a large number of customers hence increasing the popularity of Bit coin at a rapid speed.

 According to the study of Stosic et al., 2019 crypto currencies appear and disappear frequently. However due to the high level of the internet among investors the market capitalization on Bit coin is increasing at a steady rate. This helped to create a stable market share distribution and turnover. The research also reflects that there are a large number of people who still do not prefer to use crypto currency technology. The main reason for this trend is due to the lack of awareness about block chain technology. However, the trend is shifting due to the massive popularity of social networking. More people are becoming aware about crypto currencies and their applicability.

The study of Makarov and Schoar, 2019, reflects that the term of money has widened over the years due to the introduction of crypto currencies. For example the value of money stored and transferred must be identified in a home currency. However in the case of Bit coins they do not require the identification of particular currencies. This creates legal problems from the government when it comes to controlling bit coin. The bit coins ownership also states anonymous. Due to these factors governments fail to track the transfer of crypto currency properly. As a result bit coins can be used very easily for the transfer of money from one country to another country or one person to another person. This creates an ethical threat for the usage of Bit coins. For handling ethical problems related to Bit coins many countries blocked the usage or trading of bit coins in their home market. In this list Bolivia is the first country to ban the usage of Bit coin. However, even though Bit con has some ethical questions the usability of the coin cannot be denied. Due to these factors many large countries such as the USA; Canada removed the ban of Bit coin on their economy.

The literature review reflects that Bit coins popularity increased at a high degree after its introduction to the market. However the valuation process of Bit coin is complex and does not follow the traditional regression valuation process. Bit coins value is largely dependable on the present market demand (Conrad et al., 2018). As a result the price of Bit coin changes at a rapid degree within a short time. This increases the chance of speculation.. Bit coins also do not reveal their customers datas which raises some ethical questions. Due to the high level of secrecy, governments do not have control over the bit coin transaction process. Bit coin is also not bounded or dependent on any particular country. Due to this boundlessness many researchers denied bit coin as a type of money. The research finds that Bit coin is identified as a medium of money transaction rather than having value of its own (Dro?d? et al., 2020). However the literature review also reflects that the popularity of bit coin is growing despite its ethical considerations. Various countries such as the USA, UK have also allowed the usage of the Crypto currency. From these findings it can be said that the world is still in a dilemma on the usage of crypto currency. One group of countries are interested in applying Bit coins and other countries such as Bolivia, China, Turkey are voting against the usage of Bit coin due to its anonymous nature. The study also finds that even with the high rate of speculation and obstacles faced by multiple countries, the overall market of Bit coin is stable. It generates a stable rate of revenue even though the market volatility is high. From this it is expected that the market of bit coin will keep growing and countries which have banned the currency will remove the ban with the increase of its usage.

Chapter 3: Conclusion

The report describes the overall business analysis and the market analysis of the crypto currency “Bit coin”. The technology of these many cryptocurrencies varies. But the fundamental objective of the crypto currencies, from one point to another, is to secure digital currency transmission. A crypto currency that utilizes secure cryptography is digital or virtual cash. A crypto currency cannot be falsified for this security feature. Perhaps its most enticing draw is a defining feature of a crypto currency and its organic nature. No central powers must be allowed to oppose government interference or exploitation hypothetically. Bit coin utilizes a peer-to-peer protocol mechanism that enables it to be transmitted from place to place without any third party or possible hacker tampering with it. Bit coin's main function is to be utilized as a mechanism of money transmission. Technology Bit coin minimizes transmission costs. Nowadays, though, bit coin mainly appears to be utilized for speculation. This increases the volatility of the market, which is greater than similar crypto currencies. The following figure shows Bit coin's market volatility relative to the exchange rate of USD/GBP. The increasing volatility increases insecurity with regard to Bit coin's price, making it a highly speculative and hazardous investment. After its debut onto the market, Bit coins' popularity rose dramatically. However the Bit coin assessment method is complicated and does not follow the standard regression assessment process. The value of bit coins is primarily dependent on current demand on the market. Consequently, in a short period, the price of Bit coin fluctuates fast. This makes conjecture more likely. Nor do Bit coins expose data from consumers which present some ethical issues. Because of the great level of confidentiality, governments do not regulate the process of bit coin transactions. Nor is Bit coin confined or dependent on any country. From the report it can also be said that even if all transactions are logged, nobody would be aware of the bank data unless they were notified. It is unbelievably difficult to replicate, manufacture or spend fake Bit coins users that don't have every publicly documented transaction. You may misplace, remove, and permanently lose your Bit coin wallet. Sites which enable individuals to safely access their Bit coins were also thieved. However, given the increased internet level among investors, Bit coin's market capitalization is steadily rising. The result was a steady distribution and turnover of market share. The report also shows that many consumers still do not want to adopt crypto currency technology. The major cause is the lack of awareness of block chain technology. However, because of the huge popularity of social networking, the tendency is changing. More individuals are aware of the application of crypto currencies.

Reference List

Journals

Bouri, E., Lau, C.K.M., Lucey, B. and Roubaud, D., 2019. Trading volume and the predictability of return and volatility in the cryptocurrency market. Finance Research Letters29, pp.340-346.

Breidbach, C.F. and Tana, S., 2021. Betting on Bitcoin: How social collectives shape cryptocurrency markets. Journal of Business Research122, pp.311-320.

Conrad, C., Custovic, A. and Ghysels, E., 2018. Long-and short-term cryptocurrency volatility components: A GARCH-MIDAS analysis. Journal of Risk and Financial Management11(2), p.23.

Dro?d?, S., Minati, L., O?wie?cimka, P., Stanuszek, M. and Watorek, M., 2020. Competition of noise and collectivity in global cryptocurrency trading: Route to a self-contained market. Chaos: An Interdisciplinary Journal of Nonlinear Science30(2), p.023122.

Ferreira, P. and Pereira, É., 2019. Contagion effect in cryptocurrency market. Journal of Risk and Financial Management12(3), p.115.

Ghimire, S. and Selvaraj, H., 2018, December. A survey on bitcoin cryptocurrency and its mining. In 2018 26th International Conference on Systems Engineering (ICSEng) (pp. 1-6). IEEE.

Grobys, K., 2021. When the blockchain does not block: on hackings and uncertainty in the cryptocurrency market. Quantitative Finance, pp.1-13.

Ji, Q., Bouri, E., Lau, C.K.M. and Roubaud, D., 2019. Dynamic connectedness and integration in cryptocurrency markets. International Review of Financial Analysis63, pp.257-272.

Makarov, I. and Schoar, A., 2019, May. Price discovery in cryptocurrency markets. In AEA Papers and Proceedings (Vol. 109, pp. 97-99).

Mikhaylov, A., 2020. Cryptocurrency Market Development: Hurst Method. Finance: Theory and Practice24(3), pp.81-91.

Mikhaylov, A., Danish, M.S.S. and Senjyu, T., 2021. A New Stage in the Evolution of Cryptocurrency Markets: Analysis by Hurst Method. In Strategic Outlook in Business and Finance Innovation: Multidimensional Policies for Emerging Economies. Emerald Publishing Limited.

Soloviev, V. and Belinskiy, A., 2018. Methods of nonlinear dynamics and the construction of cryptocurrency crisis phenomena precursors. arXiv preprint arXiv:1807.05837.

Song, J.Y., Chang, W. and Song, J.W., 2019. Cluster analysis on the structure of the cryptocurrency market via Bitcoin–Ethereum filtering. Physica A: Statistical Mechanics and its Applications527, p.121339.

Stosic, D., Stosic, D., Ludermir, T.B. and Stosic, T., 2019. Multifractal behavior of price and volume changes in the cryptocurrency market. Physica A: Statistical Mechanics and its Applications520, pp.54-61.

Sun, X., Liu, M. and Sima, Z., 2020. A novel cryptocurrency price trend forecasting model based on LightGBM. Finance Research Letters32, p.101084.

Taskinsoy, J., 2020. Bitcoin could be the first cryptocurrency to reach a market capitalization of one trillion dollars. Available at SSRN 3693765.

Yi, S., Xu, Z. and Wang, G.J., 2018. Volatility connectedness in the cryptocurrency market: Is Bitcoin a dominant cryptocurrency?. International Review of Financial Analysis60, pp.98-114.

WebPages

bitcoin.org, 2021, Bitcoin home page, Available at: https://bitcoin.org/en/ [Accessed on: 15.07.2021]

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