Crypto Currencies (Financial Economics) | tutor2u Economics
Study notes

Crypto Currencies (Financial Economics)

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

This reference section brings together a curation of study resources on crypto currencies such as Bitcoin.

Bitcoin price index from November 2016 to November 2018 (in U.S. dollars)

The rise of digital "crypto" currencies

A digital currency is a means of payment that only exists electronically. Like traditional money, cryptocurrencies can be used to buy physical goods and services. The most well known is Bitcoin but other examples include LiteCoin, Ethereum and Ripple. These are examples of private digital currencies, which are not issued, and hence controlled, by central banks.

Crypto currencies such as Bitcoin which allow a medium of exchange, store of value and unit of account outside of the traditional banking system. There are growing calls for cryptocurrencies to be regulated but it not clear how this could be achieved effectively in the global financial system.

The head of the Bank for International Settlements (BIS) has described bitcoin as “a bubble, a Ponzi scheme and an environmental disaster”. The economist Nouriel Roubini has argued that crytocurrencies have a fundamental value of zero.

Bit Coin

  • Bitcoin is a digital currency that was launched by a secretive entrepreneur in October 2008, with the aim of being “a new electronic cash system that is fully peer-to-peer with no trusted third party”.
  • Bitcoins are created by users (a.k.a. “miners”) who allow the Bitcoin system to use their computing power to process Bitcoin transactions
  • These miners are also rewarded with the some of the transaction fees paid by those who use Bitcoin.
  • Underneath BitCoin is the blockchain technology which supporters argue is more trustworthy and reliable than traditional financial systems
  • A few retailers, especially online, accept Bitcoin, partly because the transaction fees are lower than those of credit cards.
  • However, Bitcoin’s value has been hugely volatile
  • Fewer retailers than expected have signed up to accept Bitcoin because any transactions made in Bitcoin are not protected by standard forms of financial regulation.
  • Bitcoin is special it is made possible by special cryptographic techniques so that it can not be faked
  • Each Bitcoin can only be spent by the same person just once.
  • The peer-to-peer nature of Bitcoin bypasses the need for banks, allowing people to lend to or borrow directly from others.
Bitcoin explained: How do cryptocurrencies work? (BBC)

Leading virtual currencies globally as of January 2018, by purchase volume (in million U.S. dollars)

Number of Bitcoins in circulation worldwide from 1st quarter 2011 to 4th quarter 2017 (in millions)

BitCoin and the BlockChain

What is Cryptocurrency?

A selection of articles on Bitcoin

Will cash die out? Bank of England article (which mentions BitCoin and other digital currencies)

Bitcoin: the crypto-currency with a bad reputation but legitimate users too (Channel 4 news, December 2017)

Bitcoin trading starts on the huge CME exchange(BBC news, December 2017)

How Iceland became the bitcoin miners’ paradise (Guardian, February 2018)

Bitcoin biggest bubble in history, says economist who predicted 2008 crash (Guardian, February 2018)

Panorama - who wants to be a bitcoin millionaire (BBC, available until Jan 2019)

Virgin Money joins ban on buying Bitcoin on credit cards (BBC, February 2018)

What's The Fuss about Bitcoin? Uncovering the cryptocurrency (BBC Newsbeat, February 2018)

Bank of England - Digital currencies: how do they work and what makes them different?

Subscribe to email updates from tutor2u Economics

Join 1000s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.

You can also follow @tutor2uEconomics on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.

Job board

Head of Economics

New Hall School, Chelsmford

Related Collections

You might also like

Teaching Vacancies


Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u

A New Home for tutor2u Resources

We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores.

For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

Simply add the required resources to your cart, checkout using the usual options and your resources will be available to access immediately via your mytutor2u account.