Over the last few years, the term cryptocurrency has rapidly gained visibility in the public eye. In today’s day and age, Cryptocurrency such as Bitcoin is fast becoming essential to people who value privacy and for whom the idea of using cryptography to control the creation and distribution of money does not sound too far-fetched.
Today, Cryptocurrency, led by Bitcoin, Litcoin, Ether, etc. is taking the financial world by storm as more people invest and buy these currencies. At the same time, there is still widespread confusion and bias, which retracts for the overall effectiveness of Cryptocurrency. Educating users about such alternative forms of currency is significant given its volatile nature.
PEST Analysis on Bitcoin By Whale Tank
P: Political Impact on Bitcoin
Findings reveal that the political risk tends to increase when moving from the pre-election period to the post-election one. This is mainly attributed to the new challenges faced by the newly elected government. The quantiles regression shows that the political risk index negatively affects Bitcoin return when the market is bearish during the pre-election period.
In contrast, a positive impact on volatility is found in bearish and bullish markets. When the political situation becomes severer during the post-election period, the quantiles plots show that the increase of the political risk index leads to a significant rise in Bitcoin return, whereas Bitcoin volatility remains relatively stable. This means that Bitcoin can be adopted as a hedging tool when the political situation becomes severer.
E: Economic Policy on Bitcoin
The rapid growth of Bitcoin, its great capacity to recover during periods of turbulence, and its high volatility, amongst other characteristics, has motivated a growing interest in the literature to understand the economic and financial determinants that could influence the price of Bitcoin.
These results suggest that Bitcoin does not only act as a means of exchange or store of value, but it also has characteristics of investment assets, such as its dependence on investor sentiment and high volatility. In turn, the fact that Bitcoin returns increase in the highest quantiles, as gold does, supports the role of Bitcoin as a haven during more uncertain times and discards its role as a simple speculative asset, such as shares. Also, knowing that Bitcoin acts as a safe haven allows it to be considered a tool to protect savings in times of economic uncertainty and qualifies it as a relevant asset for constructing diversified portfolios.
S: Social Impact of BTC
I am sure all of you have heard of Western Union and PayPal. These are platforms, which help people send and receive money all over the world. However, between their fees, wire transfer fee, conversion fee, and another hidden fee, you are looking at close to 16% of your entire transferred amount.
If you are using Bitcoin, this 16% vanishes. The receiver in full receives the amount you send or transfer. No part of it gets deducted. This means that if we are going to implement this when it comes to the global economy or even charitable avenues, the most affected people are going to gain the most.
Bitcoin’s social impact also involves a psychological effect on how people handle their money. The control over your own money is liberating in nature. In today’s world, even if it is your money, you will have to listen to the permissions of the bank and authorities to exercise control over your own money.
Blockchain technology consists of a shared databank that enables consumers to complete trades without relying on a central body, such as financial banks. Users utilizing cryptocurrency technology generate more excellent value for each user such that the number of transactions determines the currency ability, which is an effect of public acceptance.