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Case Code: BSTR561
Case Length: 15 Pages 
Period: 2008-2018   
Pub Date: 2019
Teaching Note: Available
Price: Rs.400
Organization : Bitcoin
Industry :Cryptocurreny
Countries : -
Themes: Services Marketing
Case Studies  
Business Strategy
Human Resource Management
Leadership & Entrepreneurship

Bitcoin: A Disruptive Innovation or A Bubble Set to Burst?

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The business model of bitcoin was rather complex as its value and verification were provided by a global peer-to-peer network, rather than any centralized authority (See Exhibit III). Bitcoins were blocks of secured data that were treated like money; and spending money was equivalent to moving this data from one person to another in a verified transaction...

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One of the key features of bitcoins was that that they were a completely decentralized form of currency without the backing of any government. They did not have any issuing authority nor was any central banking system involved. The lack of government control over bitcoin provided people an escape from the highly controlled and manipulated market and money supply of the traditional paradigm. Thus, bitcoin offered people the liberty to transact without any check. With the automated issuance mechanism of bitcoin through mining, the need for printing money and the control of banks over such money was also removed...


By the end of 2017, the Internal Revenue Service of the US federal government decided to treat and tax bitcoin transactions like property transactions. Similarly, bankruptcy courts were also treating virtual currencies like property. In December 2017, the Chicago-based exchange – the Chicago Board Options Exchange – launched bitcoin futures. Venezuela launched an oil-backed cryptocurrency which could help the country move out of a crippling inflation while North Korea used cryptocurrency to get out of tough economic sanctions. Japan also considered bitcoin as legal tender...


Though bitcoin seemed to be a disruptive economic innovation with the potential of transforming the operating and economic structure of banks and financial institutions, it faced its own share of challenges. Some economists, lawyers, and analysts across the globe disapproved of the whole bitcoin system – claiming it was a bubble that could burst anytime and cause a crash...


Christine Lagarde, head of the International Monetary Fund, warned that cryptocurrencies like bitcoin could disrupt the central banking system and revolutionize the concept of money. “So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money,” she said. In countries like India, analysts and economists called for regulation and monitoring of bitcoin before it was assigned a legal status. Jack Dorsey (Dorsey) CEO of social platform Twitter said that bitcoin would become the single global currency of the internet within a decade...


Exhibit I:Daily Trading Volume
Exhibit II: Top 10 Cryptocurrencies by Market Capitalization (as of September 2018)
Exhibit III: Business Model of Bitcoin
Exhibit IV: 2018 Cryptocurrency Survey (Broadly Accepted Cryptocurrency)
Exhibit V: Bitcoin Energy Consumption Relative to Several Countries
Exhibit VI: Bitcoin Network v/s VISA Network Average Energy Consumption
Exhibit VII: Daily Closing Prices of Bitcoin
Exhibit VIII: Value of Bitcoin (in USD)
Exhibit IX: Performance Range of Bitcoin v/s Stocks and Indexes