← IGCSE Computer Science Paper 1

Using digital currency as an investment

Buying digital currency and holding it, hoping its value rises so you can sell it for a profit. Its value can also fall, so you could lose money.

Part of: IGCSE Computer Science 0478 — 5.2 Digital Currency — Module 9

Understanding Using digital currency as an investment in IGCSE Computer Science Paper 1

What it does: The same coin can rise above the buying price (profit) or fall below it (loss), showing that value changes both ways. $60 is less than the $100 paid, so selling now would lose $40. To get another currency such as dollars, the investor sells the digital currency in exchange for it. Because the value can fall, you should only invest money you could afford to lose. Borrowing makes the risk much bigger. Investors buy to hold and wait for the value to rise. Spending it straight away is using it to pay, not investing. The claim ignores that value goes up and down and that investing carries risk.

Common mistakes: Buying 2 coins to hold should add them to what you own. It should be coins ← coins + 2, not subtract 2. The program needs the current coin price before it can work out the value. Line 1 should be INPUT price. OUTPUT would leave price with no value.

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This module's key terms are also in a printable crossword (Modules 500–509) and word search (Modules 490–509).

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Learning
Duo
Which describes using digital currency as an investment?
Using it only to pay for a bus ticket todayBuying it and holding it, hoping its value rises
Matches
Investing in digital currency always makes a profit
↓
Wrong: the value can fall as well as rise, so an investor can lose money and there is no guaranteed profit.
Applying
Meanings
Term
investment
Meaning
Buying digital currency and holding it, hoping its value rises so you can sell it for a profit. Its value can also fall, so you could lose money.
Practice
buyPrice ← 100
Testing
Gaps
profit ← nowPrice -
Check Answer
Spots
1coins ← 0
2coins ← coins - 2

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Quick Questions

1. Which describes using digital currency as an investment?
A. Buying it and holding it, hoping its value rises ✓
B. Using it only to pay for a bus ticket today
An investment means buying and holding digital currency in the hope that its value will rise so you can sell it later.
2. True or false: the value of a digital currency can go down as well as up.
A. False
B. True ✓
Digital currency values change often. They can rise or fall, so an investor could make a profit or lose money.
3. A student buys 1 coin for $100. Later it is worth $60. What has happened?
A. The value rose, so selling now would make a profit
B. The value fell, so selling now would make a loss ✓
$60 is less than the $100 paid, so selling now would lose $40.
4. Which statement about investing in digital currency is correct?
A. It carries risk because you could lose money ✓
B. It is risk-free because the blockchain guarantees the price
Blockchain keeps the records safe, but it does not fix or guarantee the price. The value can still fall.
5. An investor wants to turn their digital currency into a different currency. What do they do?
A. Sell it in exchange for another currency ✓
B. Hold it until it changes into another currency by itself
To get another currency such as dollars, the investor sells the digital currency in exchange for it.

Match the Pairs

buy and hold → Buying digital currency and keeping it for a long time, hoping its value will rise
sell for another currency → Swapping your digital currency for money such as dollars, ideally at a higher price than you paid
The value of digital currency can go up and down, so an investor can make a profit or a loss → bought at $100, now worth $150 or $60
Investing carries risk, because you could lose some or all of the money you put in → risk: price falls from $500 to $200, loss of $300
Investing in digital currency always makes a profit → Wrong: the value can fall as well as rise, so an investor can lose money and there is no guaranteed profit.
You make a profit as soon as you buy the digital currency → Wrong: a profit only happens if the value rises and you sell for more than you paid. Buying alone makes no profit.

Key Term

investment
Buying digital currency and holding it, hoping its value rises so you can sell it for a profit. Its value can also fall, so you could lose money.

Fill in the Blanks

1. profit ← nowPrice - buyPrice
Hint: Type the variable that holds the price you originally paid. It is taken away from the current price to find how much the value has changed.
2. IF nowPrice > buyPrice THEN OUTPUT "Value has risen" ENDIF
Hint: Type the comparison operator that checks whether the current price is higher than the price paid.
3. IF nowPrice < buyPrice THEN loss ← buyPrice - nowPrice ENDIF
Hint: Type the keyword that begins the block of code which runs when the condition is true, here when the value has fallen.
4. cash ← coins * exchangeRate
Hint: Type the arithmetic operator that multiplies the number of coins by the rate when selling for another currency.
5. buyPrice ← 100 nowPrice ← 80 IF nowPrice < buyPrice THEN OUTPUT "Loss"
Hint: Type the pseudocode keyword that displays a message to the user when the value has fallen below the price paid.

Spot the Error

Question 1
A coins ← 0
B coins ← coins - 2
C OUTPUT "Holding: ", coins
Line B — Buying 2 coins to hold should add them to what you own. It should be coins ← coins + 2, not subtract 2.
Question 2
A OUTPUT price
B INPUT coins
C value ← price * coins
D OUTPUT value
Line A — The program needs the current coin price before it can work out the value. Line 1 should be INPUT price. OUTPUT would leave price with no value.
Question 3
A balance ← 500
B price ← 50
C cost ← price * 4
D balance ← balance + cost
E OUTPUT balance
Line D — Buying digital currency spends money, so the cost must be taken away from the balance. It should be balance ← balance - cost.
Question 4
A buyPrice ← 200
B sellPrice ← 150
C IF sellPrice > buyPrice THEN
D OUTPUT "Loss"
E ENDIF
Line C — A loss happens when the selling price is lower than the buying price. The condition should be sellPrice < buyPrice.
Question 5
A value ← 100
B // value rises by 20
C value ← value - 20
D // value falls by 35
E value ← value - 35
Line C — The comment says the value rises by 20, so 20 must be added. It should be value ← value + 20.

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