Virtual trading and the global economy
We have seen the rise of virtual trading in the twenty-first century, which is a world that exists entirely on the internet. This has had an effect on the global economy. Bitcoin has now become a widely used currency, especially in China, the economic powerhouse. However, the lack of physical form makes it completely different to what money should be.
A long time ago, the value of money was worth exactly what it was made of. The value of gold coins depended on the amount of gold in circulation. Nowadays, most money is printed on paper, which does not have that much value. Therefore, the government can print as much money as it wants as long as it has the cheap materials needed to print the money.
Bitcoin is the next step in this worrying trend regarding the creation money. They have no physical form, and they cost almost nothing to create. However, using this currency is very convenient. Online transactions can be carried out using a currency which is suitable for expediting simple financial transactions.
China has become a common user of Bitcoin, and its population uses it for purchases from abroad. The widespread use of Bitcoin in China has resulted in it becoming noted as a large factor in China’s overall economy. A sudden, unexpected drop in the value of Bitcoin has resulted in a slowing down of China’s economy; a negative trend in China’s economy will definitely have an effect on the global economy as a whole.
Most Bitcoin transactions used Yuan, the Chinese currency. When China’s economy suddenly slowed down, the value of Bitcoin began to fall as there wasn’t a large demand for it as before. As a consequence, many Chinese consumers who bought items using Bitcoin owned a currency that was worth less; this discouraged consumers from buying from abroad as they just couldn’t afford it anymore.
The fall in imports requested from China was critical, and it sent shockwaves all over the financial world. The decrease in value of the Bitcoin has decreased trade, and this has resulted in a certain slow down of the global economy. Many businesses dealt with Chinese customers entirely because they were able to purchase their items using Bitcoins.
Businesses had less money to spend in the global economy after a loss of Chinese customers. Less spending in the global economy mainly reflects a lack of trading which in turn has a devastating effect on the world’s economy.