How does the aggregate demand and supply of cryptocurrency affect the Economy?

Expert Solution

How does the aggregate demand and supply of cryptocurrency affect the Economy?
The cryptocurrency or digital currency permits individual-to-individual transactions independent of the banking system. It is not a physical coin that a person can keep in wallet or purse. Instead it is a digital code on computer, which means a virtual currency that a person can store in a virtual wallet in cyberspace and may access with the smart phone app or computer. It is often considered to be a fiat money; which means that value is not backed by gold or any other commodity. The bitcoin's value is not pegged or tied to the value of any other currency instead it is determined by selling and buying in the open market, thus the bitCoin price is an outcome of interaction between aggregate demand and supply. The BitCoin's supply is determined with the amount of units in circulation and therefore scarcity on the market. The BitCoin's demand is determined mainly by transaction demand as a medium of exchange. It is not issued or controlled by any government or bank rather it is an open network which can be managed by its users

Rahul Sunny answered 2 years ago

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