Case
CRYPTOCURRENCY: A CASE STUDY OF INVESTING IN DIGITAL CURRENCY
INDUSTRY :-
AREA :FINANCE
ORGANIZATION :-
LENGTH :10
LUMS No :02-649-2019-1
PUBLICATION YEAR : 2019
ABSTRACT:
The case starts with an undergraduate student of Lahore University of Management Sciences, Muhammad Asad, wanting to explore investment opportunities in cryptocurrencies after recalling the events of his Fall semester after the end of his final exams. He got excited when a guest speaker talked about cryptocurrencies and blockchains. During a discussion on investment avenues with his father, Mr Muhammad Mubashir Ahmad, Asad showed his interest in investing in cryptocurrencies. Mr Ahmad was an experienced businessman and in avid investor who had multiple investments within and outside Pakistan. Mr Ahmad suggested Asad to do some homework and evaluate the investment opportunities in cryptocurrencies before he could talk to his broker on December 20, 2017. Through searching the internet, Asad collects a lot of information on the currencies. While the price charts for different cryptocurrencies were showing extraordinary returns in the past few months, the volatility of the prices seemed high as well. He is left confused as he explores the internet and collects information. He considers a few possible questions regarding the possibility of investment in cryptocurrencies and makes comparison with investing in gold. Which cryptocurrency seems to be a better investment? Should he go for a cryptocurrency that provides a higher return or should he worry about the volatility also? Should he invest in the cryptocurrency after all? He is also exploring the idea of solving the puzzles that generate the cryptocurrency. Use of the Case The case is designed to expose students to cryptocurrencies and provides information on the digital currencies to analyze the currencies as an alternative investment vehicle. It provides students with sufficient background on the history of the currency, development of the digital currency, mechanics behind different digital currencies, and how to invest in them. The case also details the process of generating new currencies and its pros and cons, along with a detailed comparison between different currencies. Furthermore, the case provides students with data on five cryptocurrencies to perform a risk and return analysis of the currencies coming up with a suggestion on the investment. The case presents an excellent opportunity to learn about cryptocurrencies through a case study method. The case is suitable for both undergraduate and graduate level courses on introduction to the mathematics of finance (application of risk-return) and investments (alternative investments).(Please contact CRU for Excel files for students and Instructor)