Question

Exchange rate

5.1. Speculate about why buying bitcoins in person is generally more expensive than

buying from an online exchange.

5.2. Moore and Christin observe that security breaches and other failures of exchanges

have little impact on the Bitcoin exchange rate. Speculate on why this might be.

Answer 1

5.1 Buying bitcoins in person is more expensive than buying the bit coins from an online exchange because in person all the credentials are required to be submitted and this are cross checked and generally there is an agent involved in the process which leads to increase in the price. On the other hand, buying bitcoins from an online exchange is less expensive as the process is speeded up and there is no agent involved in the entire process which reduces cost of buying bitcoin.

5.2 This is because exchange rate market and Bitcoin market are two distinctly separate markets where impact in one market does not affect the other market. Thus, security breaches and other failures of exchanges have little impact on the Bitcoin exchange rate.