I'm looking for a Porter's 5 forces analysis for the new virtual currency exchange
As requested, a Porter's 5 Forces Analysis has been completed in order to examine the new virtual currency exchange. Over-the-Counter platforms are affected similarly, although they are usually used by smaller businesses. Responses to each of the 5 Forces were compiled from sources on Bitcoins, innovative e-commerce efforts and cryptocurrency. The cryptocurrency market size and e-commerce as a whole is expected to increase from $11 Billion in August 2016 to $114 Billion in August 2018. Although the e-commerce market is growing at a current rate of 23% worldwide, the success of the virtual market exchange relies largely on the ability to be used in the real financial industry; for example, currency such as Bitcoins are not tied to physical assets. Please review the following 5 Forces for a look at opportunities and drawbacks to the virtual currency exchange.
The exchange and demand of goods and services allows customers to become the supplier power while still existing as buyers. With tens of millions of buyers and investors, supplier power is not a high risk for virtual currency exchange. Cryptocurrency users grew 38% from 2.1-2.9 million last year, to 2.9-5.8 million, and is expected to continue to grow. It is also inexpensive to switch suppliers, with only a $1.5 to $5 rate per change.
The largest effect the buyers can have on platforms and suppliers is their dissatisfaction rate due to transaction disputes, loyalty systems, and customer-friendly interfaces. However, with millions of buyers, the risk that buyers pose to the marker is only of moderate concern, and buyers usually do not switch suppliers unless there are significant price differences, or extreme dissatisfaction.
"Virtual currency has already impacted the payments and transaction banking space, which are the most prone to the threat of the evolving medium." The competition within the virtual currency exchange poses the greatest risk to a new system. There are a relatively small number of exchanges in global terms, meaning prices, product selection and payment methods are quickly effected, and noticed. Low prices are generally the key to attracting new buyers and keeping returning customers, creating pressure within the market to continuously beat the competition. With an opportunity for high profits, the high risk is worth the investment, however, it will remain imperative for platforms to balance prices of goods and services with operational costs.
THREAT OF NEW ENTRY
Virtual currency is an "unregulated medium of exchange controlled
by its developers and is acceptable among the members of
a speciﬁc virtual community. It is accepted and operated as a
currency and commodity." Adoption is currently at a "nascent stage," but is expected to grow significantly in the next five years.
Because of the industries high growth rate, the virtual currency exchange is an attractive, profitable avenue to newcomers. Anyone bringing new business to this market will have experience with the current upsides and downfalls of other competitors, and may be offering innovations to buyers and sellers, particularly in new strategies for payment. The positive side to more competitors is that matters such as pricing and dissatisfied participants will have a smaller impact on the industry as a whole. The digital payments industry is projected to see the biggest disruption.
THREATS OF SUBSTITUTION
Substitution poses a moderate threat to new virtual currency exchanges due to direct competitors' sources for goods and services being competitively priced. Price drops for the same item on different platforms presents the most likely reason a buyer would search elsewhere for a purchase or investment. "While virtual currency may never be a comprehensive substitute or replacement for existing currency or transaction models, it can be a major disruptor in sectors such as banking, e-commerce and
The virtual currency exchange has great profitability based on the overwhelming number of buyers and sellers (e-commerce participants) globally. The Supplier and Buyer powers are reliant upon each other, making these two aspects of the Porter's 5 Forces relatively balanced. Competition is easily the greatest threat in new virtual currency exchanges, including anyone looking to get into the industry with upgrades to the current means in which transactions take place. Substitution is not a huge hindrance, except with dramatic price differences or product/service quality and source.