Thinking that cryptocurrencies are not subjected to the arbitrary interference of domestic and international law, as well as international financial markets, is a pretty narrow perspective which relies on blind faith. A great technology and the ability to transfer value without the need to sign up with real data does not automatically mean that cryptos are completely private and exist in a legislative void. Perhaps we could have an introspection on the theories of governance just to see how other commodities, assets, and goods are treated by decision-makers, but it’s easier to give out a few examples.

Remember how China makes use of the world’s most advanced internet firewall in order to effectively block foreign websites? Well, as of 2018 the politicians from Beijing have also decided to restrict access to cryptocurrency exchanges and put an end to anyICO participation. Likewise, the United States IRS has been treating Bitcoin and other digital assets as property which gets taxed accordingly. It’s not a restriction per se, but those who engage in trade with these new means of exchanging value and make a profit have to pay a share to the federal budget.

But now let’s talk about the financial system and how traditional institutions influence the price of cryptocurrencies: when Jamie Dimon of JP Morgan Chase declared his skepticism in regards to Bitcoin, the price collapsed for a little while and the media spread a lot of FUD. The fact that an influential person from the financial market, who decides the rise or decline of many stocks during his morning coffee, possesses this kind of manipulative power should not be neglected.

The cryptocurrency sector is a young and blossoming market which, in spite of its revolutionary decentralizing ideas, is bound to the rules of the old world it’s trying to disrupt. If we take into account history and how the world has been working for thousands of years, it’s unlikely that our libertarian dreams of complete institutional decentralization will come true easily. And if we view cryptos as mere investments, then following the political, economic, and social events is absolutely crucial.

The science behind determining price fluctuations according to influential external factors is called PESTEL analysis.

The term, which is an abbreviation for Political, Economic, Social, Technological, Environmental, and Legal analysis, encapsulates every variable that can influence the price of an asset. The method of taking into account all of these measures isn’t new and brokers from the stock market have been making use of it for a long time.

If you may, PESTEL is an extension of the slightly more popular and less elusive SWOT analysis — the one where you determine the Strong points, Weak points, Opportunities, and Threats. The difference is that you nuance your introspection and regard events taking place around the world as either favorable or threatening for your portfolio. And this is exactly why you should always build a trading portfolio according to all of these factors.

In the crypto world, it’s pretty tempting to make a purchase according to some projected good news. An airdrop, an expected partnership announcement, a successful technological update, a long-term bullish run, or even a positive rumor can draw the attention of many and convince them that it’s a good idea to invest their money on the spot.

But is it really a good idea? Does this “I know they’re launching that service and they’re going to get featured on two more exchanges, so it will grow” approach really function? Well, only in some cases, and it’s mostly pure luck. By taking into account only events that take place within the market, you completely mark out the outside threats and become vulnerable to trend reversals which seem completely obvious to smart investors.

The crypto market requires more rationality and transparency.

If you got into Bitcoin or Ethereum, it’s likely that you’ve made your choice after reading a news article or seeing television coverage on their meteoric rise. It’s completely normal to desire to join the latest trend and make some profits off of your hard-earned savings, but you should also be cautious when making investments in a volatile market.

To those who are informed about all the factors, volatility means opportunity, even when the phenomena that cause it are unpredictable. When you know that the government from Venezuela is authoritarian in its nature and that its own currency is losing popularity due to hyperinflation, then you won’t be taken by surprise by an official decree which bans Bitcoin trading. It’s economic protectionism at its finest and many states in the same situation would act just the same, fearing that they would lose control.

The Otcrit vision in regards to PESTEL analysis is very simple: cryptocurrencies are changing the world, but it’s inevitable that the world will also change the cryptocurrencies. Therefore, doing such analyses is a mandatory prerequisite in order to be successful. A smart investor can always predict future events based on the status-quo, and plays a continuous game of chess where every possible move is taken into consideration. When you know all the scenarios, then you can already calculate the most favorable scenario for your financial well-being.

As Sun Tzu said in “The Art of War”, “If you know your enemy and you know yourself, you need not fear the result of a hundred battles”.

This quote is often used because it’s powerful and reveals an irrefutable truth: you must master your means and methods and prepare for the battle by knowing all about the enemy (or, in this case, the market and the PESTEL factors) if you want to succeed. The Chinese philosopher went as far as describing the other two cases where there is uncertainty: “if you know yourself but not the enemy, then for every victory you gain you will suffer a defeat. And if you know neither the enemy nor yourself, you will succumb in every battle”.

PESTEL analyses are important because investing your money wisely, by creating a balanced and well-thought portfolio is essential for making profits. Nobody wants to lose in this game, and you want those 100 battles to always have a positive outcome for your own pocket. That’s why the Otcrit platform will collaborate with proficient and experienced trend researchers who will do their best to determine the future developments from the cryptocurrency market.

Also, it’s important for you to remember: just because the market is unregulated and trading is mostly dictated by emotion, it doesn’t mean that you can’t use PESTEL analyses in your own interest. There are big actors involved who only make decisions according to rational facts, and following their tendencies is essential for success.

The reports, analyses, and charts that are going to get featured on Otcrit will rely heavily on political, economic, social, technological, environmental, and legal factors. With the help of our platform’s experts we will bring information and transparency into the cryptocurrency market — and drive investing in blockchain-based assets to the next level!

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