Virtual Trading and its Direct Link to the Global Economy Slowdown

The twenty first century has seen the rise of virtual world, a world that exists solely on the internet. There is now a currency that is actually used that does not possess any physical form whatsoever. This currency is known as bitcoin, and has now become a widely used currency, especially in the economic powerhouse that is China. However, the lack of physical makes bitcoin the complete opposite of what money should be.

There was once a time, long ago, when money was worth exactly what it was made of. Gold coins were made, and their value depended on the amount of gold in circulation. However, nowadays, the vast majority of money is printed on paper, which is not worth that much. Hence, the government can print as much money as it wants as long as it has the relatively cheap materials required to print the money.

Bitcoin is the next step in this concerning trend regarding the creation money. Bitcoins possess absolutely no physical form whatsoever, and it costs virtually nothing to create. However, using bitcoin is extremely convenient as it allows one to conduct online transactions using a currency tailor made for the very purpose of facilitating easy financial transactions.

China, in particular, has become a common user of Bitcoin, and its population uses bitcoin for several purchases from abroad. However, this widespread use of bitcoin in China has resulted in it becoming noticed as a large factor in China’s overall economy. As a result, a sudden, unexpected drop in the value of bitcoin has resulted in a slowing down of China’s economy, which is so strong that a negative trend in its economy is certainly going to have an effect on the global economy as a whole.

The vast majority of bitcoin transactions were made using Yuan, the Chinese currency. Hence, when China’s economy unexpectedly slowed down, the value of the bitcoin began to plummet as there simply wasn’t as large a demand for it as there had been before. As a result, many Chinese consumers that purchased items from abroad using bitcoin were stuck with a currency that was worth less than it had been, something the discouraged these consumers from making purchases from abroad as they simply couldn’t afford it anymore.

The drop in imports being requested from China was a serious event. It sent shockwaves throughout the financial world. The effects of this decrease in trade stemming from a decrease in value of the bitcoin has resulted in a veritable global economy slow down, with many businesses that dealt with Chinese customers solely because they were able to purchase their items using Bitcoins.

After losing these customers, these companies had less money to spend in the global economy. When there was less money being spent in the global economy, it generally indicates a lack of trading, and when there is less trading being done the effects on the world’s economy can be disastrous.