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Scientific Study: Cryptocurrencies Trading Strategy Based on SWOT Analysis

Analysis of SWOT to get paid per investing in crypto
SWOT Analysis of Cryptocurrencies Trading Process

The general truth about the main purpose of trading is to make profits. Cryptocurrency trading does not differ in its goal of financial profit from any other trading, but any trading needs a strategy to avoid losses as much as possible, and to make a roadmap for this trading process depending on scientific methods, All of this is due to the privacy of digital currency trading as it is still an emerging market and many people may be tempted by its high profits, or on the contrary, the level of price fluctuation may be a deterrent factor for investors. 

Since humans naturally have a fear of loss, it is necessary to find a plan to organize the process of trading in encrypted digital currencies in a way that reduces the possibility of loss as much as possible.

Research problem

Many people consider trading cryptocurrencies (digital assets) a source of excitement due to what they hear from their friends and the media about its sometimes imaginary profits and at the same time about the losses that occur when prices suddenly fall after news of the bankruptcy of one of the platforms or the great powers passing laws prohibiting trading in this field within their borders.
This may make them confused about their matter, as they want to enter the field, but with great reservations, because they are basically not aware of the hidden secrets in it, but this difficulty can be overcome through strategic planning and its means, including identifying the strengths and weaknesses of the investor, as well as knowing the opportunities and threats in the field of Cryptocurrency trading market. Not forgetting to keep the balance between risks and returns in this investment.

This study will try to depend on SWOT analysis to answer the question:

Does cryptocurrency trading need a strategy

 The following sub-questions are branched from this question:

  1. What are cryptocurrencies, and what is trading, and what is cryptocurrency trading?
  2. Why trading in general? And in particular, why cryptocurrency trade?
  3. What is a strategy, how to create one, and why to create one?
  4. What is SWOT analysis?
  5. How to create a strategy for cryptocurrency trading?

The importance of this research

The research derives its importance from the following points:

  1. The importance of maintaining profitable trading so that the returns are higher than the risks.
  2. The importance of creating a strategy that is based on the individual capabilities of each investor, his capital, and the platforms through which he can trade.

Objectives of the study

The study aims to:
  1. Define cryptocurrencies, and define trading, and define cryptocurrency trading.
  2. Define a strategy, and define how and why to create one.
  3. Give an introduction to SWOT analysis.
  4. Define how to create a strategy for cryptocurrency trading based on a SWOT analysis that is suitable for every investor.

Research hypothesis

Cryptocurrency trading is an easy kind of trading that suits anyone, and it doesn't need any strategy or any previous preparation.

Research methodology and its limitations

The scientific method followed: descriptive and analytical based on data available on the Internet.
Temporal boundaries: The period between 2008 - 2024.
Spatial boundaries: The whole world.

Research variables

The independent variable: Cryptocurrency trading strategy and its indicators: investment timing, trading type, Individual differences between traders, 
The dependent variable: Cryptocurrency trading and its indicators: Crypto market, the news, the rumors, the bull run, the bear market.

Chapter one
Expected returns from investing in cryptocurrencies

The first topic: is the concept of cryptocurrencies, the concept of trading, and the concept of cryptocurrency trading.

Cryptocurrency as the name refers to is some kind of currency that is cryptofied not to be stolen, alsobut to be sent to others anonymously.

First- cryptocurrencies definition:

1- cryptocurrencies definition according to Britannica encyclopedia:

Cryptocurrencies are digital assets that rely on an encrypted network to execute, verify, and record transactions, independent of a centralized authority such as a government or bank.

2- Cryptocurrencies definition according to Oxford learners' dictionaries :

Any system of electronic money, used for buying and selling online and without the need for a central bank.

3- cryptocurrencies definition according to Cambridge Dictionary:

A digital currency produced by a public network, rather than any government, that uses cryptography to make sure payments are sent and received safely.

4- other cryptocurrencies definitions:
Cryptocurrencies use methods of cryptography to ensure properties of transactions such as integrity, authenticity, and more, a digital means of payment, a digital presentation of value, and digital assets with no physical form or format, can be traded on the Internet. They are also similar to traditional central bank reserves and cash due to their inconvertibility but differ from bank deposits because those promise convertibility into cash. Cryptocurrencies also have the typical functions of money and a medium of exchange. Cryptocurrencies have no intrinsic value but they have their own denomination. Due to their digital nature, cryptocurrencies are easy to transport and as a matter of the underlying cryptography, they are also difficult to forge. They are only accepted as a means of payment by a certain virtual community. They are not legal tender.
Cryptocurrencies are issued and controlled by a network of computers and can furthermore be described as the digital format of the actual coin. (Influence of Cryptocurrencies on the Economy, Sven Niklas Langer, Rhine-Waal University of Applied Sciences - 2021)

From the previous definitions, we can form our own simple definition:
Cryptocurrencies are a new technology that only can be used on the Internet using a special type of software called blockchain to be bought and sold with real money because it has a financial value or price determined by supply and demand. It is also of an encrypted nature so that it cannot be stolen and can be sent and received without knowing the identity of the sender or the recipient.

Secondly- trading definition:

1- trading definition according to Cambridge Dictionary:
The activity of buying and selling goods and/or services,
The buying and selling of shares and money.
2- Cryptocurrencies definition according to Oxford learners' dictionaries :
Here they define trade as the activity of buying and selling or exchanging goods or services between people or countries.
While there was no definition for trading in Britanica, the search will take you to the definition of market: a means by which the exchange of goods and services takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions.

 From the previous definitions, we can form our own simple definition:

Trading is the process of buying and selling or exchanging goods and services in a market, between two financial entities according to preconditions, we can also buy and sell money or shares, and from the word exchange, we can understand the possibility of exchanging goods, shares and services with each other or with money.

Third- cryptocurrency trading definition:

Now cryptocurrency trading can easily be defined as exchanging these currencies with other cryptocurrencies or fiat currencies so the primary purpose of trading is for the trader to obtain a financial profit.

Fourth- Reasons for trading in cryptocurrencies:

The main reason for every person who trades in cryptocurrencies is simply the high profit it gives to holders when its prices extremely rise. During the bull run the prices go insanely high, even after good news about any currency project it may have a quick sudden jump in price.

All above means cryptocurrency trading is profitable trading that can be done from home with very high returns.

The second topic: is the concept of a strategy, the concept of developing a strategy.

First- a strategy definition:

1- A strategy definition according to the Cambridge Dictionary:

A detailed plan for achieving success in situations such as war, politics, business, industry, or sport, or the skill of planning for such situations.

2- A strategy definition according to Oxford learners' dictionaries :

A plan that is intended to achieve a particular purpose

3- A strategy definition according to Britannica encyclopedia:

A careful plan or method for achieving a particular goal usually over a long period of time

From the previous definitions, we can form our own simple definition:

A strategy is a plan that serves a goal that can be achieved after a time, this way the goal is not immediate and not easy to achieve.

Secondly-  developing a strategy for cryptocurrency trading:

Strategies in business are broad goals that, as accomplished, help the organization move forward toward its vision. Defining strategy is not simple. Strategy is a complex concept that involves many different processes and activities within an organization. (Strategic Management, Reed Kennedy and others, Pamplin College of Business - 2020)
Trading encrypted digital currencies for the purpose of profit is considered a goal that is not easy to achieve for every trader, which makes it necessary for traders to think of an action plan that, on the one hand, reduces the possibility of them making mistakes that lead to financial losses, and on the other hand, contributes to maximizing their profits.
Creating a strategy for trading cryptocurrency: includes determining the final goal of the investment (achieving financial returns), the risks surrounding the investment (loss of capital), and knowing what may mitigate the risk of loss and increase the chances of achieving a return, maximizing returns, and perhaps the decision to invest in trading or not.

Third-  SWOT analysis and the relationship between it and strategy:

Organizations that wish to remain competitive in any business need to adapt to the rapid changes in the work environment by following what is called a business strategy that helps managers make decisions to adapt to the permanent changes. There are business analysis tools used with the strategic planning process that help improve the strategy's response to changes in accordance with the organization's mission and goals.
One of these tools is SWOT analysis which is a business analysis technique that an organization can perform for each of its products, services, and markets when deciding on the best way to achieve
future growth. The process involves identifying the strengths and weaknesses of the organization, and the opportunities and threats present in the market that it operates in. The first letter of each of these four factors creates the acronym SWOT. It helps you to determine:
  • Your position against your competitors
  • Identifies best future opportunities
  • Highlights current & future threats
 (SWOT Analysis Tool - - 2013)
How to create a strategy using SWOT analysis?
1- Determine strengths: from the inside the organization (the trader himself)
2- Determine weaknesses: from the inside the organization (the trader himself)
3- Determine opportunities: from the outside of the organization (trading market)
4- Determine threats: from the outside of the organization (trading market)
Which can be summarized as follows:
Table of points
Cryptocurrencies Trading Strategy Based on SWOT Analysis
Or from this Word file HERE
5- Determine conclusions: from the table of all points related to cryptocurrency trading

Fourth- creating a strategy for cryptocurrency trading depending on SWOT analysis:

  • The main goal of the strategy is to decide whether an individual can trade cryptocurrencies or not. 
  • The second goal of the strategy is to make a financial return by this trade or at least reduce the risks and the probability of a financial loss.
  • Create a safe trading plan regarding the risks and potential returns, the country of the trader, the psychological health an investor has, and the amount of money he can risk.
  • The investor's knowledge that there are tricks in the market based on the media, fear, and greed and that market makers are doing their best to make the trader's task difficult.
  • Take advantage of opportunities, keeping in mind that many of them depend on a price decrease.
  • Identifying strong projects to invest in their currencies, reviewing everything new around them, knowing currencies with similar projects, and staying away from currencies that have no project and that could collapse at any time.
  • Determine the profit that achieves satisfaction for the investor, while paying attention not to get involved in trading based on emotions, which may lead to the loss of any profit achieved.
  • Knowing all the risks resulting from the environment surrounding the trading process, anticipating them, and anticipating the best way to deal with them if they occur.

Chapter two
Conclusion and recommendations 

First- Conclusion:

Regarding the study hypothesis, which states that: Cryptocurrency trading is an easy kind of trading that suits anyone, and it doesn't need any strategy or any previous preparation. In light of what was discussed in the theoretical and analytical framework, the hypothesis can be divided into two parts as follows:
1- Cryptocurrency trading is not a simple trade that any person can use profitably. Therefore, the hypothesis is not accepted.
2- Cryptocurrency trading strategy must consider many factors and it requires preparation, knowledge, and mental and psychological preparation,

Second- Recommendations:

Based on the above, recommendations can be formulated as follows:
Determine the strategy: whether it is trading with a certain profit rate or storing, waiting for a significant rise in prices.
Determine the trading platforms that suit the trader in terms of security, account activation, and payment methods.
Stay away from emotions in judging your investment in trading.
Stay away from scam currencies and avoid getting carried away by rumors, especially the phrase “to the moon”.
Knowing that loss is possible and not risking all the money the investor has that he may need later.