1. Introduction

1.1. Research Background and Significance

The founding background of Bitcoin can be traced back to 2008, when the global economy was experiencing a severe financial crisis. The crisis exposed the vulnerabilities of the traditional financial system, particularly the shortcomings of the centralized banking system. Against this backdrop, A mysterious figure going by the pseudonym Satoshi Nakamoto published a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System." The white paper details a new digital currency system that aims to solve problems in traditional money and payment systems in a decentralized way.

Satoshi proposed a new type of currency system based on blockchain technology that would allow users to conduct transactions without a central authority. The core of blockchain technology lies in its distributed ledger, where each participant (node) keeps a copy of the transaction record of the entire network. This design ensures transparency and immutability of the system, while also reducing the risk of fraud and double-spend attacks [1].

The creation of Bitcoin marked the beginning of the cryptocurrency era, which not only provided a new form of money, but also promoted the development of decentralized finance (DeFi) and blockchain technology. Bitcoin's design philosophy emphasizes individual freedom and privacy, as well as challenges to the existing financial system. Its emergence has sparked a wide debate on monetary, financial and economic policy around the world, while also drawing the attention of regulators.

Since the Bitcoin network officially launched in 2009, it has gone through a number of major price fluctuations and market corrections but has always maintained its position as the leader of the cryptocurrency market. Although Satoshi Nakamoto's true identity remains a mystery to this day, his/her/their innovative ideas (there is a lot of speculation about Satoshi's true identity) have profoundly influenced the world of finance and technology.

In the context of the current Fintech revolution, this study aims to explore how Bitcoin, as an emerging decentralized monetary system, is having an impact on the traditional financial system and what this impact means for the academic and practical communities. Specific research questions include: How the origins and development of Bitcoin reflect challenges to the traditional financial system, especially after the 2008 global financial crisis, how the emergence of Bitcoin revealed the vulnerability of the centralized banking system. How the blockchain technology behind Bitcoin enables decentralization and how this technology can improve the transparency, security and efficiency of transactions. Differences in acceptance and regulatory attitudes towards Bitcoin in different countries, and how these differences reflect national considerations regarding financial innovation, monetary policy, capital flow controls and anti-money laundering. The volatility of Bitcoin's price and its potential impact on investors, financial markets, and the global economy, and how these impacts have shaped risk management and investment strategies for cryptocurrency markets.

The significance or value of research lies in providing an in-depth understanding of Bitcoin and its underlying technology, the blockchain, is essential for academics and practitioners in the Fintech field. An analysis of how Bitcoin impacts global financial regulatory policy provides policymakers with insights on how to manage risk while promoting innovation. Explore the value of Bitcoin as an investment tool to help investors understand the risk and return characteristics behind its high volatility and how to properly allocate bitcoin in their portfolios. Anticipate the future development trends of Bitcoin, including technology upgrades, integration of privacy-protecting technologies, and potential applications in the fintech sector to provide forward guidance to industry participants.

1.2. Literature Review

The emergence of Bitcoin and its subsequent rise in cryptocurrencies has sparked academic discussion about its potential impact on finance, technology, and society. This literature review synthesizes research from different disciplines to provide a comprehensive overview of the current state of knowledge on Bitcoin.

The economic impact of Bitcoin has been the focus of researchers. Yermack studied the price dynamics of Bitcoin, identifying speculative bubbles and their bursting as key features of the cryptocurrency's early history [2]. More recently, Baur et al. have contributed to Bitcoin's role as a potential store of value, medium of exchange, and unit of account, highlighting its unique properties in the context of traditional financial assets [3].

The technical underpinnings of Bitcoin, specifically the blockchain, have been extensively studied. Bonneau et al. conducted a detailed analysis of the security and privacy aspects of the Bitcoin protocol, emphasizing the importance of cryptography [4]. Tschorsch and Scheitle provide a technical survey of decentralized digital currencies, including an exploration of consensus mechanisms to ensure blockchain integrity [5].

The regulatory environment for Bitcoin is a complex and evolving one. Arner et al. discuss the challenges that cryptocurrencies pose to the existing financial regulatory framework and propose a balanced approach to regulation [6]. Over the past five years, the regulatory environment has continued to evolve, with countries adopting different strategies to manage the risks and opportunities presented by cryptocurrencies, as documented in the latest review by Zhang et al. [7].

Bitcoin's investment value has attracted significant attention from practitioners and academics. Tschorsch and Scheitle analyzed the correlation between Bitcoin and traditional asset classes, hinting at its potential as a tool for diversification [5]. Ciaian et al. further explored market dynamics and investor behavior, examining the impact of institutional participation on the Bitcoin market [8].

In summary, the literature on Bitcoin is extensive and multidisciplinary, reflecting the impact of cryptocurrencies on various fields. The selected references provide a snapshot of the research that has shaped our understanding of Bitcoin, from its economic and technological underpinning to its regulatory challenges and investment potential.

1.3. Research Contents

This study explores how Bitcoin emerged as an innovative digital currency system after the 2008 financial crisis, and how the blockchain technology behind it enables decentralization and improves the security and transparency of transactions. The study analyzes Bitcoin's acceptance and regulatory challenges in different countries and regions around the world, and how these factors affect its market performance and price volatility. The study also assesses Bitcoin's value as an investment vehicle, including its comparison to traditional assets, potential risks and rewards, and its role in an investment portfolio. Through these analyses, the research aims to provide investors, policymakers, and participants in the Fintech space with insights into Bitcoin and its impact on the existing financial system.

The idea of this study is to comprehensively understand the impact of Bitcoin on the modern financial system through a comprehensive analysis of its historical background, technical foundation, market performance, regulatory environment, and investment value. The study starts with the origin and design concept of Bitcoin, delves into the blockchain technology principles behind it, and then assesses the acceptance and regulatory policies of Bitcoin worldwide, and how these factors work together to shape the market dynamics and price trends of Bitcoin. The study will then analyze the characteristics of Bitcoin as an investment asset, including its comparison to traditional asset classes, risk management strategies, and its potential role in a portfolio. Ultimately, the research aims to present predictions for the future development of Bitcoin, as well as recommendations for regulatory policies and investment practices, to provide decision support for relevant stakeholders.

Through this multi-dimensional, systematic research approach, this research aims to provide insight into the complexity of Bitcoin and its role in the global financial system.

2. Bitcoin's Underlying Technology and Global Regulatory Landscape

2.1. The Technical Basis of Bitcoin

Blockchain technology is a distributed ledger technology that allows data to be stored encrypted on multiple nodes in a network, rather than a single central server. The core features of this technology include decentralization, immutability and transparency, which together improve the security and efficiency of transactions [9].

2.1.1. Decentralization

Blockchain is decentralized through a distributed network. In this network, each participant (node) keeps a copy of the entire blockchain. This means that no single entity controls the entire network, reducing the risk of a single point of failure [10]. Decentralization also means that control of the network is distributed among all participants, which helps prevent manipulation by any single entity.

2.1.2. Transaction Transparency and Security

This section will analyze from two aspects, one of which is immutability and the other is encryption technology.

First, for immutability, once a transaction is recorded on the blockchain, it is almost impossible to change it. This is because each block contains the hash value of the previous block, forming a chain structure. To change the information in one block would require changing the information in all subsequent blocks at the same time, which is computationally infeasible.

Second, for encryption technology, transaction data is encrypted by encryption algorithms, ensuring that only users with the correct private key can access their assets. This provides an extra layer of security for transactions.

2.1.3. The Working Principle of Bitcoin Network

The working principle of Bitcoin is relatively complex, and the following will introduce the working principle of Bitcoin's network from the following aspects.

Transactions: Users create transactions that contain information about the sender, recipient, and transaction amount. Transactions are broadcast across the network, waiting to be packaged into blocks.

Mining: Mining is a key process in the Bitcoin network, where miners verify transactions and create new blocks by solving complex mathematical puzzles (Proof of Work). Solving this puzzle requires a lot of computing power, a process known as "mining."

Consensus Mechanism: Once the miners solve the puzzle, they add the blocks they create to the blockchain and broadcast them to other nodes in the network. Other nodes verify the validity of the new block, including checking the legitimacy of the transaction and the hash value of the block. Once a majority of nodes reach a consensus, the block is permanently added to the blockchain.

Rewards: Miners who successfully create new blocks receive newly generated Bitcoins (block rewards) and transaction fees as rewards. This incentivizes miners to continue to participate in the maintenance of the network.

Chain Growth: As new blocks are added, the blockchain continues to grow, recording all verified transactions. This process ensures the continuous operation of the Bitcoin network and the security of transactions.

Through these mechanisms, the Bitcoin network implements a decentralized, secure, and transparent transaction system, which makes Bitcoin an innovative form of digital money.

2.2. Global Acceptance and Regulatory Environment

There are significant differences in the acceptance and regulatory attitudes towards Bitcoin in different countries, which reflects different considerations on financial innovation, monetary policy, capital flow control and anti-money laundering.

Japan, for example, was one of the first countries in the world to legalize Bitcoin, passing laws in 2017 to allow bitcoin as a legal payment method. Japan has one of the largest bitcoin exchanges in the world and has a high level of acceptance of the cryptocurrency.

China, on the other hand, is wary of bitcoin, banning cryptocurrency exchanges and initial coin offerings (ICOs) and restricting bitcoin mining activities. China emphasizes financial stability and capital controls, and the regulation of cryptocurrencies is relatively strict.

The impact of Bitcoin on traditional finance is numerous, and the emergence of Bitcoin and other cryptocurrencies has provided new business opportunities for traditional financial institutions, such as providing cryptocurrency trading services. They also compete with traditional banking, particularly in cross-border payments and remittances. The anonymous and cross-border nature of cryptocurrencies poses challenges for regulators, and how to balance innovation with risk management is a question for governments and regulators to address. The decentralized nature of Bitcoin could influence the country's monetary policy, as it is not under the direct control of a central bank. This could lead to challenges to the effectiveness of monetary policy, particularly with regard to capital flows and exchange rate management.

3. Analysis of Influencing Factors of Bitcoin Price

3.1. Bitcoin Price Trend Analysis

The price action of Bitcoin has experienced a number of significant fluctuations since its birth, with the price high in late 2017 being a key turning point.

Figure 1: Historical Bitcoin Price Chart (US $)

In 2017, Bitcoin experienced one of the most violent price swings in history. During the year, the price of bitcoin soared from around $1,000 at the beginning of the year to nearly $20,000 by the end of the year (see figure 1). This increase was mainly influenced by several factors:

As more and more investors and institutional investors have become more interested in Bitcoin, the market sentiment has become very optimistic, driving the price up. The widespread coverage of Bitcoin in the mainstream media has increased public awareness of the cryptocurrency and attracted more investors to the market. Despite the uncertainty, the positive attitude and legalization of Bitcoin in some countries (such as Japan) has injected confidence into the market. The infrastructure and technological advances of the Bitcoin network, such as the introduction of the Lightning Network, have increased its usefulness as a means of payment.

However, this rapid growth did not last. After reaching a high in late 2017, bitcoin prices quickly fell back, entering the so-called "cryptocurrency winter." The price fluctuations during this period were mainly driven by several factors:

After the rapid growth, there was a natural correction process in the market, and many investors began to take profits. As the price of bitcoin soared, regulators around the world began to tighten regulations on cryptocurrencies, adding to the uncertainty in the market. Scaling issues in the Bitcoin network (such as limited transaction processing capacity) and security issues (such as exchanges being hacked) have also affected investor confidence [11]. Changes in the global economic environment, such as the Federal Reserve's interest rate decisions, have also had an impact on risk assets such as Bitcoin.

From late 2017 to the present, the price of Bitcoin has experienced multiple fluctuations, including a sharp decline in 2018 and another rise in 2020. These fluctuations reflect the immature and high-risk nature of the cryptocurrency market, while also demonstrating the market's sensitivity to new technologies and global economic dynamics. Investors need to be alert to these factors and do a good job of risk management when participating in Bitcoin trading.

3.2. Factors Affecting the Price of Bitcoin

The price of Bitcoin is affected by a number of factors that interact to determine the dynamics of the market. Here are the main influencing factors.

3.2.1. Supply and Demand Relationship

Supply: The total supply of Bitcoins is limited, up to 21 million. Over time, the rate at which new bitcoins are produced slows down, which is known as a halving event. Halving typically results in a reduction in supply, which can push up prices.

Demand: Investor demand for Bitcoin is influenced by a number of factors, including its attractiveness as an investment, safe-haven asset, or payment instrument. Increased demand, such as in times of economic uncertainty, can push up prices.

3.2.2. Market Sentiment

Investor sentiment has a significant impact on Bitcoin prices. Positive news, technological innovations, or endorsements from well-known personalities can boost market confidence and lead to higher prices. Conversely, negative news, security incidents, or market panic can cause prices to fall.

3.2.3. Macroeconomic Factors

Monetary policy: Interest rate decisions by global central banks, money supply, and inflation expectations all affect Bitcoin's appeal. For example, a low interest rate environment could make Bitcoin more attractive relative to traditional assets.

Economic uncertainty: In times of economic uncertainty, investors may seek Bitcoin as a safe-haven asset, which could increase demand and drive up the price.

3.2.4. Policy Changes

Regulatory policy: Government regulatory attitudes and policy changes on cryptocurrencies have a significant impact on the market. A relaxed regulatory environment may attract more investors, while strict regulation may lead to market uncertainty and capital outflows.

Tax policy: Changes in tax policy, such as taxes on Bitcoin transactions and holdings, can also affect investor decisions and market liquidity.

3.2.5. Technological Development

Network upgrades: Technical upgrades to the Bitcoin network, such as scaling solutions (such as the Lightning Network) and privacy protection technologies (such as Taproot), can improve its utility, which may increase demand.

Security issues: An exchange being hacked or having a security breach can lead to a drop in investor confidence, affecting prices in the short term.

3.2.6. Competing Currencies

Other cryptocurrencies: The development and innovation of other cryptocurrencies may distract investors' attention and funds, affecting Bitcoin's market share and price.

Understanding these factors is essential for investors to develop strategy and risk management. However, due to the volatility of the Bitcoin market, predicting its price movement remains challenging.

3.3. The Investment Value of Bitcoin

The valuation of Bitcoin as an investment vehicle requires consideration of its risk and return characteristics, as well as comparison to traditional assets.

Bitcoin's price is extremely volatile, with short-term price fluctuations far exceeding those of traditional assets. This means that investors may face a greater risk of capital loss, but at the same time they may receive a higher return [12]. The Bitcoin market is smaller than traditional financial markets and less liquid than the stock and gold markets. In extreme market situations, lack of liquidity can make it difficult for investors to buy and sell Bitcoin at a reasonable price. Because the regulatory environment for Bitcoin is constantly changing, policy changes can have a significant impact on prices. For example, a government could suddenly announce a ban on bitcoin trading, which could lead to a sharp drop in prices. Bitcoin relies on blockchain technology, and any technical flaw or security issue could affect its value. In addition, there are security risks associated with the storage and trading of Bitcoin, such as the loss or theft of private keys.

Gold is often seen as a safe haven asset; its value is relatively stable and widely recognized around the world. Compared to Bitcoin, gold is less volatile, but also has limited growth potential. Bitcoin offers a higher potential return, but also more risk. Stock investments are often linked to the performance of companies and the overall performance of the market. The stock market is relatively mature, with strict regulation and good liquidity. Stock investments generally offer more stable returns compared to bitcoin, but can also be affected by company performance and macroeconomic factors. Bonds typically offer fixed interest income and are relatively low risk. Bonds typically offer lower returns compared to Bitcoin, but they are also less risky. Bitcoin offers a higher potential return, but also greater risk and uncertainty. Including Bitcoin in a portfolio can provide the effect of diversifying risk, especially during times of economic uncertainty. Investors should determine the weight of Bitcoin in their portfolio based on their risk tolerance and investment goals. Given the volatility of Bitcoin, holding it for a long time may provide a more stable return than trading it for a short time.

In conclusion, as an emerging asset, Bitcoin's investment value lies in its potential high returns and ability to diversify portfolio risks. However, investors should also be aware of its high-risk nature and put in place appropriate risk management measures. Bitcoin offers different risk-return characteristics compared to traditional assets and is suitable for investors who are willing to take higher risks in pursuit of potentially high returns.

4. Suggestions

4.1. Regulatory Issues with Bitcoin

The regulatory issue of Bitcoin has been a hot topic around the world, as the nascent digital currency challenges traditional financial regulatory frameworks. Here are some ideas on how to balance innovation and risk management through regulation to ensure a healthy market.

Countries should clarify the legal status of Bitcoin, defining it as a currency, a commodity or a security. This helps to provide clear guidance to market participants while providing a legal basis for regulators. Establish a regulatory body to oversee the cryptocurrency market and protect consumers from fraud and market manipulation. This includes ensuring the transparency of trading platforms, fair trading and the security of funds. Develop technical standards and best practice guidelines to help crypto businesses improve security and operational efficiency. This can include requirements for security auditing, data protection and transaction processing capabilities for blockchain technology.

Strengthen international cooperation and share regulatory information and experience. Due to the cross-border nature of Bitcoin, it is often difficult for a single country's regulation to fully control the market. International cooperation can help to develop uniform regulatory standards and reduce regulatory arbitrage. Create a regulatory sandbox that allows innovative companies to test new products and services in a controlled environment. This helps regulators better understand emerging technologies while providing a flexible regulatory environment for businesses.

The regulatory framework should be flexible enough to adapt to technological developments and market changes. This means that regulatory policies need to be regularly reviewed and updated to ensure their effectiveness and relevance.

Through these measures, regulators can ensure the stable and healthy development of the Bitcoin market while promoting innovation. This will not only help protect consumers and investors, but also lay the foundation for the long-term success of cryptocurrencies.

4.2. Future Development Trend

As an early application of blockchain technology, the underlying technology of Bitcoin is still evolving. Future directions could include the implementation of scale-up solutions, such as the Lightning Network and sidechain technology, which are designed to increase the transaction speed and reduce costs of the Bitcoin network, making it more suitable for everyday payments. In addition, the integration of privacy protection technologies such as the MimbleWimble protocol may enhance the anonymity of Bitcoin and attract more users. Bitcoin is likely to be further integrated into the Fintech space, combining with other financial services and products. For example, Bitcoin may be combined with smart contract platforms such as Ethereum to enable more complex financial transactions and automated financial services. In addition, Bitcoin's cross-border payment capabilities may drive changes in the global payment system and reduce the cost of cross-border transactions.

5. Conclusion

The core thesis of this study is that Bitcoin, as a pioneering digital currency, has fundamentally changed the financial landscape by introducing a decentralized, secure and transparent transaction system. The study demonstrates how Bitcoin's underlying blockchain technology addresses the vulnerabilities of the traditional financial system, particularly in terms of centralization and vulnerability to fraud. The study also highlights the important role of the regulatory environment in global acceptance and the dynamics of the Bitcoin market, with countries like Japan accepting it as a legal payment method and countries like China imposing strict regulations due to concerns over financial stability and capital controls.

However, one limitation of the study is the inherent volatility and fast-moving nature of the cryptocurrency market, which makes it difficult to draw definitive conclusions about the long-term impact of Bitcoin. Furthermore, the study uses Bitcoin as the focus of a case study and does not cover the broader context of cryptocurrencies and their potential impact. The regulatory environment may also change, which could alter the findings and recommendations presented in this study. This research provides academic and practical insights into understanding and understanding Bitcoin and its underlying technology. It provides a framework for future research to explore the impact of decentralized finance, the integration of cryptocurrencies with traditional financial systems, and the development of effective regulatory policies. The insights gained from this research can inform policymakers, financial institutions, and investors to help them navigate the complex and evolving world of cryptocurrencies. In addition, the study encourages dialogue on how to balance technological innovation with the need for risk management and regulatory oversight to ensure the sustainable growth of the cryptocurrency market.