BITCOIN: IS IT AN INVESTMENT MIRACLE OR FINANCIAL BUBBLE? IS IT A MAGNET FOR CYBER THIEVES AND HACKERS OR A CONDUIT FOR FUNDING ILLICIT ACTIVITIES?

Abstract

ABSTRACT In recent years, the words Cryptocurrency and Bitcoin have appeared frequently in print media and have also become the focal points of discussion on social media and at any gathering of the millennials. Bitcoin, originally conceived as a Peer-to-Peer Network of computers that can serve as a communications channel to transfer funds anonymously from one person to another, has evolved into an investment vehicle and a unit of currency. When it was originally coined in 2009, the bitcoin was considered worthless. However, as of November 15, 2017, its market price was higher than 6000 U.S. dollars. In this paper, we trace the evolution of bitcoin from a simple computer network to a highly volatile high-priced currency unit. We compare the returns of the last six years from the bitcoin investment to the highest returns from the NASDAQ 100 index of dotcom era. The only reasonable conclusion we could reach was that the bitcoin, as an investment vehicle, is a financial bubble. In addition, we also provide a brief narrative about the losses suffered by the people who maintain accounts with the bitcoin exchanges and also the illicit acts committed by some people using the bitcoin network. However, there is a bright side to the bitcoin story. It has given rise to a new technology called the Blockchain, which seems to have an impact on every type of transaction involving people or organizations. A few of the potential applications of the Blockchain technology are described in the paper. Keywords Cryptocurrency, Bitcoin, Blockchain, Triple-entry Accounting System, Double-spending