Should your business invest in crypto?
Managing a business and its finances can be a challenge in itself. Investing in crypto can help your business, but if you don’t know enough about the world of cryptocurrency, it’s best to educate yourself.
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Many people have heard of Bitcoin, but only a small percentage fully understand how crypto investments work.
According to 2021 data from the Pew Research Center, nine out of ten Americans say they know a bit about crypto. Yet only 16% say they have invested, traded, or used some form of crypto. While you may not need to know how the technology behind crypto works, it is important to learn how investing in crypto can benefit your business.
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Is it common for businesses to invest in crypto?
It has become increasingly common for mainstream businesses to get involved in the cryptocurrency space. For example, Tesla bought $1.5 billion in Bitcoin in 2021, adding that the company would also start accepting Bitcoin as payment for its products.
Bitcoin and other cryptocurrencies are becoming more than a confusing trend or a risky investment opportunity – businesses of all sizes are accepting crypto as a viable payment alternative.
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However, it can still be difficult to determine if your business is ready to invest in crypto. Where to start ?
Benefits of investing in cryptocurrency
It is important to consider the pros and cons of investing in crypto. For example, does fit into your business plan, and will it help your business achieve its financial goals? Is crypto too confusing for my business?
Consider the following advantages associated with crypto investments to make the decision a little easier.
Reduced transaction fees
Since crypto essentially eliminates the third parties you would work with for traditional transactions, it can reduce your operating costs. Crypto allows you to make or receive payments directly to or from customers without an intermediary. If there are transaction fees, they are usually very low.
Decentralized payment method
Cryptocurrency is considered decentralized, meaning there is no governing body to track or store your transaction history. Accepting traditional payments is very common, but it also means that your financial history could be vulnerable to online hacks.
Intrinsically Safe Technology
The main technology behind cryptocurrency transactions is blockchain, a distributed ledger which stores digital data. Blockchain is an inherently secure technology that is very difficult to tamper with or manipulate. All transactions are authenticated to ensure they are correct.
Many crypto platforms to use
There are already several types of crypto platforms available, and more are likely to emerge. The exchanges are easy to use for businesses and the market operates 24/7, so you can trade at any time of the day. This can be useful if you have international customers or customers in different time zones.
Portfolio diversification
Crypto is growing rapidly and more and more consumers are realizing the benefits of investing in crypto. Companies that invest in crypto can diversify their company’s investment portfolio and even help you attract new customers of various demographic groups.
Disadvantages of investing in cryptocurrency
With most investments, it’s also important to consider the potential downsides your business might face. Let’s discuss why you might not want to invest in crypto.
Very volatile
The crypto market is very volatile, so you take risks when investing in crypto. The value of cryptocurrencies can vary greatly depending on several different factors. For example, a major cryptographic hack can occur, as seen with the recent Ronin hack. The Ronin Network has lost approximately $622 million due to breakage.
Not widely accepted (yet)
In general, cryptography has not become entirely mainstream in the business world. When considering investing in crypto, you may want to learn more about your clients or clients and decide if offering crypto payment options will benefit them. As mentioned in one of the stats above, crypto is still foreign to some people.
Complex setup
Although setting up a crypto transaction channel is not extremely difficult, it does take some extra time and effort to get it up and running. You may need to set up your company’s crypto wallet or use a third-party service provider to manage this. While the setup process isn’t a huge factor, it can hold you back from investing in crypto at first.
Potential scams
The technology behind crypto is still relatively new, and because it is decentralized, crypto regulations are still lacking. Cybercriminals can try to scam your business if they know you have invested in crypto. Although not guaranteed, it may influence your decision whether or not to invest.
Deciding to invest in crypto as a business can be difficult. Hopefully, the pros and cons outlined above can guide you in your decision-making and help you feel better informed about crypto investments.
Understand the risks and rewards of crypto investments
It is worth considering investing in crypto if you own or want to start a business. Nonetheless, it’s also important to consider speaking with a financial advisor to ensure you make an informed decision. The last thing you want is to invest in crypto and jeopardize the financial stability of your business.
Managing a business and its finances can be a challenge in itself. Investing in crypto can help your business, but if you don’t know enough about the world of cryptocurrency, it’s best to educate yourself.