Corporate Finance

Corporate Finance

Is cryptocurrency a fad or a significant future trend?

Cryptocurrency is a new form of currency where currency appears in digital or virtual form and uses cryptography to secure transactions ( Irwin, 2016). It does not necessarily have a central regulating authority like the banks. It has been received differently by different people, organizations and even governments across the globe since it has both pros and cons and is still new. For instance, when we look at advantages. Cryptocurrency is more secure than bank transactions since the owner’s address cannot be identified. This can help in fraud and theft management. Cryptocurrency does not require the user to have transaction fees such as sending or receiving costs. This is more convenient for users. This is also a reason why cryptocurrency has been gaining popularity among people recently.

Another reason cryptocurrency seems to be a future trend is that, unlike the standard currency, crypto does not weaken some countries’ currency value when trading. Traditional money will make one country’s capital weaker than others. For instance, most third-world countries would have their currency more vulnerable than the dollar or euro. This makes cryptocurrency gains a lot of popularity among more fragile currency countries. This will, in turn, mean a future trend for cryptocurrency. However, cryptocurrency has some downsides. For instance, cryptocurrencies are irreversible; hence the wrong transaction means a loss since the currency can’t be traced. Most people prefer everyday transactions because of the fear of making losses. Crypto is commonly used in illegal activities such as money laundering and drug dealing. This makes many people avoid crypto transactions for fear of being frauded by drug dealers. Lastly, crypto is still new to most people, organizations, and countries and has not been entirely accepted everywhere across the globe. Looking at both the pros and cons, though, it may take time since people are still getting it slowly, but other exceedingly first-class countries have entirely accepted it’s already a trend in them (Di Silvestre, 2020).

Is Bitcoin a currency?

Bitcoin is a cryptocurrency that was the first to be noticed in 2019. It was invented through blockchain technology. It gained popularity quickly and has since been used by many people and companies as a form of digital exchange to control the creation of monetary units and verify the transfer of funds. It is still the most popular cryptocurrency (Farell, R. (2015. Assume you are the CFO of a Fortune 500 company. Would you have any firm cash reserves in Bitcoin?

As the CFO of a Fortune 500 company, I would reserve part firm’s cash in Bitcoin since it’s highly liquid and can lead to a short-term profit. Bitcoin is also in high demand. Thus, I would reserve a significant portion of the Bitcoin to boost returns and avoid losses due to value fluctuation.

If you were the CFO of a Fortune 500 company, would you accept payment in Bitcoin?

As the CFO of a Fortune 500 company, I would receive payment in Bitcoin since the payments received in Bitcoin can act as an investment of future assets.

Assume you have opened a coinbase account for your personal use; which of the three leading digital currencies (Bitcoin, Ethereum and Litecoin) would you buy first? Why?

I would buy Bitcoin for my account because it would be convenient and affordable for me as a beginner. Though Ethereum and Litecoin maybe be faster, it would be costly for me as a new investor due to the gas fees I would be charged. ( Farell, 2015)

References

Irwin, A. S., &  Milad,  G.  (2016). The use of crypto-currencies in funding violent jihad. Journal of Money Laundering Control.

Di Silvestre, M. L., Gallo, P., Guerrero, J. M., Musca, R., Sanseverino, E. R., Sciumè, G., … & Zizzo, G. (2020). Blockchain for power systems: Current trends and future applications. Renewable and Sustainable Energy Reviews, 119, 109585. Farell, R. (2015). An analysis of the cryptocurrency industry.

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Corporate Finance

In your first post of up to 600 words, use the information presented to address: a) Is cryptocurrency a fad or a significant future trend? b) Is Bitcoin a currency? c) Assume you are the CFO of a Fortune 500 company. Would you hold any firm cash reserves in Bitcoin? d) If you were the CFO of a Fortune 500 company, would you accept Bitcoin as payment? e) Assume you have opened a Coinbase account for your personal use. Which of the three leading digital currencies (Bitcoin, Ethereum and Litecoin) would you buy first? Why?

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