Are you an investor looking to invest in cryptocurrency because you’ve heard somewhere that cryptocurrency is the future and gives high returns?
If that’s the case, then you have to read this article till the end because, in this article, we will conduct the PESTLE Analysis of The Cryptocurrency Industry.
This PEST analysis will provide us with complete insight into the Cryptocurrency industry and help us analyze how various external factors impact the Cryptocurrency industry.
So let’s proceed further and look at what cryptocurrency is and how it came into being. Cryptocurrency is a completely decentralized digital currency, which means no government or central bank is present to regulate cryptocurrency.
People justify its complete decentralization by stating that the decentralized characteristics of cryptocurrency make it completely transparent and allow secured online transactions.
People have been trying to make digital currencies since the internet emerged. The idea of digital currency surfaced in the 1980s and 1990s. In 1998, Wei Dai created B-Money, which laid the foundation of a decentralized digital currency.
After that, the latest attempt to make digital currency was made in 2005 when Nick Szabo came up with Bit Gold 2005. The Cryptocurrency industry experienced sudden growth when Bitcoin emerged in 2008.
Bitcoin was pitched in a very mysterious way. It didn’t have any specific founder; instead, its whitepaper was published by an individual or group called Satoshi Nakamoto. In 2009, the first block of the Bitcoin blockchain was mined by Nakamoto.
In the coming year, people looked deeply into the facilitating concept of Bitcoin. They found the concept of a decentralized digital currency attractive. In 2010, Bitcoin was used in a real-world transaction when a man bought two Pizzas for 10,000 Bitcoins!
After people learned that transactions could be made via Bitcoins, people started trading Bitcoins. Soon exchanges like Mt. Gox began to facilitate the trade of Bitcoins.
Around 2014, the market of Bitcoin got extremely saturated. The price of a single Bitcoin went skyrocketing. Hence, people weren’t able to trade Bitcoin.
That’s when the need for an alternative currency arose. People created various alternative Cryptocurrencies such as Ethereum, Dash, and Litecoin. All these new currencies varied from Bitcoin in one way or another.
The creation of these Cryptocurrencies provided an opportunity for people to trade in the Cryptocurrency industry. Moreover, they helped the Cryptocurrency industry to grow.
In 2017, Bitcoin touched its all-time high. In the same year, Initial coin offerings (ICO) started. ICOs helped companies in raising funds for blockchain-based projects by issuing tokens.
However, many frauds took place under ICOs. This forced regulatory bodies and governments to pay close attention to Cryptocurrencies. This increased the check and balances in the Cryptocurrency industry.
Today the Cryptocurrency industry is worth billions of dollars. In 2023, the revenue generated by the Cryptocurrency industry would be $37.87 billion. The Cryptocurrency industry is expected to grow at 14.4%, and it is expected to reach $64.87 billion in 2027.
Now that we have discussed what cryptocurrency is and how its industry evolved over the years, let’s proceed and discuss what PESTLE analysis is. PESTLE analysis is a tool to analyze how different external factors impact different industries.
In today’s PESTLE analysis, we will examine how external factors affect the Cryptocurrency industry. So, let’s proceed and conduct the PESTLE analysis of the cryptocurrency.
Political factors are the government and political factors that impact the operations of an industry. In this section of the PESTLE analysis, we will discuss how various political factors impact the Cryptocurrency Industry.
Government regulation plays an important role in deciding the future of the Cryptocurrency industry. There are countries where governments embrace innovation and allow the trade of Cryptocurrencies.
For example, the government of El Salvador allows the trade of Cryptocurrencies. On the other hand, there are countries where the government has prohibited the exchange of Cryptocurrencies. The Cryptocurrency industry can’t prosper in such countries, at least for now.
International political tensions impact the Cryptocurrency industry significantly. Political conflicts among countries can result in restrictions on the use of Cryptocurrencies.
Moreover, political tensions can limit the cross-border transactions of cryptocurrency. This would have a negative impact on the Cryptocurrency industry.
Moreover, government support can positively impact the Cryptocurrency industry. For example, if governments invest in cryptocurrency and declare it an alternative currency, people would invest and trade more cryptocurrency volumes. As a result, the Cryptocurrency industry would grow.
Moreover, if the government invests in R&D to make Cryptocurrency transactions more efficient and a permanent medium of exchange, the Cryptocurrency industry can flourish and achieve milestones.
Economic factors take the economic conditions of an economy into account. This section will examine how different macroeconomic variables impact the Cryptocurrency industry.
The cryptocurrency industry has a strong link with the economy and the fintech industry. If an economy has a high GDP per capita and is observing high economic growth, people living in such an economy would have high disposable income to invest in the Cryptocurrency industry.
Furthermore, inflation has a significant impact on the Cryptocurrency industry. If a country is undergoing hyperinflation, in that country, people wouldn’t have enough disposable income to invest in the Cryptocurrency industry.
Moreover, interest rates also play a significant role in determining the number of investors investing in cryptocurrency. If a country has a high-interest rate, people won’t take risks to invest in such a volatile industry.
People would simply deposit their money in bank accounts and enjoy returns. Hence, higher interest rates take away the incentive from people to invest in cryptocurrency. Besides that, the Cryptocurrency industry is largely impacted by global economics.
If countries are open to trade, this would positively impact the Cryptocurrency Industry. On the other hand, if sanctions are imposed on countries, this would negatively impact the Cryptocurrency industry.
Social factors are the societal and cultural factors that impact different industries. This section will examine various social factors’ impact on the cryptocurrency industry.
Awareness plays a significant role in helping the Cryptocurrency industry to grow. In a country where people know what cryptocurrency is and how to invest in it, the Cryptocurrency industry will grow since many people would be willing to invest in it.
Besides that, the percentage of the young population also has an essential impact on the Cryptocurrency industry. The young population is mostly more tech-savvy and open to innovation and new ideas.
Hence, any country with a significant percentage of a young population will be more interested in investing in the Cryptocurrency industry.
Moreover, it is well known that the Cryptocurrency industry is highly volatile. The value of Cryptocurrencies can go up and fall in a very short time. People that are willing to take risks invest in the Cryptocurrency industry.
Taking risks is a cultural thing. Some countries are risk-averse, while others don’t mind taking risks. The Cryptocurrency industry will grow in societies that don’t mind taking risks and have invested in the financial services sector. On the contrary, people from risk-averse societies won’t invest in the Cryptocurrency industry.
Technological factors in the PESTLE analysis discuss the technology and innovation-related factors that affect any industry. This section will analyze how multiple technological factors impact the Cryptocurrency industry.
The vast access to the internet is very important to get involved in the Cryptocurrency industry. A fast, speedy, and stable internet connection is important if you want to mine, trade, or forecast Cryptocurrencies. Any country with a deep internet penetration will likely be more involved in the Cryptocurrency industry.
Besides that, mining different Cryptocurrencies, such as Bitcoin, holds great significance in the Cryptocurrency industry. However, to mine a Cryptocurrency, great computational power, and energy consumption is required.
As a result, only countries with developed infrastructure and stable power supply can mine Cryptocurrencies and help the Cryptocurrency industry grow.
Moreover, developing wallets and exchange infrastructure is essential to growing the Cryptocurrency industry. With an advanced mechanism of wallets and exchanges, it will become easy to access Cryptocurrencies.
Furthermore, innovation in wallet and exchange infrastructure, for example, increased security measures and improved user interfaces, makes it easier for people to access the Cryptocurrency Industry.
Other than that, AI and data analytics can help people forecast the trends of Cryptocurrencies. This has reduced the volatility of the Cryptocurrency industry, making it more attractive and risk-free for investors.
Industries need to abide by the laws to ensure smooth operations. Various legal factors impact the operations of industries. In this section, we will look at what legal factors impact the Cryptocurrency industry.
Any country where cryptocurrency is considered legal should have effective consumer protection laws. These laws will protect consumers against any fraud and ensure transparency.
Moreover, effective consumer protection laws will encourage people to get involved in the Cryptocurrency industry. As a result, the Cryptocurrency industry will grow. Besides that, governments may make it necessary for wallet providers and exchanges to obtain licenses.
However, obtaining licenses can discourage many wallet providers and exchanges from operating in the Cryptocurrency industry. Furthermore, anti-money laundering law has a significant impact on cryptocurrency.
This law ensures that no illegal transfer of money or money laundering occurs in the Cryptocurrency industry. Strict implementation of anti-money laundering ad similar laws can increase scrutiny and make it difficult for people to carry out transactions in cryptocurrency.
The Cryptocurrency industry operates across the globe. Hence, international regulation and cross-border transaction laws impact cryptocurrency significantly. Strict cross-border transaction laws can have a negative impact on the Cryptocurrency industry, and they can make the industry shrink.
Environmental factors are significant since they represent how environmental factors impact different industries. This section will shed light on how environmental factors impact the Cryptocurrency industry.
Cryptocurrencies require frequent mining. However, mining is considered harmful to the environment since a lot of energy is consumed in mining. Moreover, the computers used for mining emit heat that creates a negative impact on the environment.
Governments and environmental watchdogs criticize mining due to these environmental drawbacks. As a result, the reputation of the Cryptocurrency industry is damaged.
Furthermore, governments may impose environmental regulations on companies in the Cryptocurrency industry to limit their negative externalities. However, this can discourage companies that might abandon the Cryptocurrency industry. This would cause the cryptocurrency to shrink.
Moreover, many computers and devices are involved in the Cryptocurrency industry. This results in significant E-Waste. The Cryptocurrency industry’s hardware components and mining rigs contribute to the E-Waste. This E-Waste must be disposed of properly, or it will pollute the environment.
Besides that, governments might force companies in the Cryptocurrency industry to adopt green technologies with the least harmful environmental impact.
This would increase the cost of operations for companies in the Cryptocurrencies. As a result, they might consider leaving the industry because of the added costs involved.
Cryptocurrency is a multi-billion dollar industry, and it is expected to grow further in the future. People have been trying to create a digital and decentralized currency since the internet arrived.
A few people did come up with such currencies in the 1990s and 2000s. However, their currencies were never accepted worldwide.
Later, Bitcoin arrived in 2008, and people found the perfect digital and decentralized currency. Bitcoin and the Cryptocurrency industry evolved over the years.
The Cryptocurrency industry is worth billions of dollars, and several other Cryptocurrencies exist besides Bitcoin.
After discussing the history of the cryptocurrency industry in this section, we proceeded further and discussed what PESTLE analysis is. After analyzing the PESTLE Analysis framework in detail, we decided to conduct the PESTLE analysis of the Cryptocurrency industry to see what external factors impact the industry.
If you found this article interesting and want to see how the PESTLE analysis technique is applied to see the impact of external factors on businesses, industries, and countries, do look at some of its examples.