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Why Crypto is Not the Currency. The Rise and Fall of Digital

Why Crypto is Not the Currency. The Rise and Fall of Digital

Journal of Economic Regulation, , Vol. 10 (no. 2),

This article is devoted to the prospects of development and the ability of cryptocurrencies to perform the functions of money. The variety of reasons and factors influencing the market of digital assets is considered. The history of cryptography, as well as the features of the now popular blockchain technology, is briefly presented. The first virtual coin – bitcoin, was used as an example and object of research. The first part of the paper reviews the possibility of digital currencies to take over monetary functionality and examines the structure of money as such, as well as the possibility of replacing fiat money with digital. In the second part of the work, the author examines the causes and consequences of the cryptocurrency boom and compares it with the events that took place at the time of the «Tulip fever» in the Netherlands. A brief analysis of the causes, mechanisms and events that took place in the Tulip market at the turn of 1636‒1637 in the Netherlands revealed a positive correlation with the events in the digital market during the cryptocurrency boom, when the cost of the most expensive cryptocurrency – bitcoin reached astronomical 20,000 us dollars per coin. These and other factors make it possible to predict the behavior of digital money in the medium term.

Keywords: money; cryptocurrency; bitcoin; mining; Tulip fever

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