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 10 Americans say they know a little bit about crypto. Still, only 16 percent 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.
It has become increasingly common for mainstream businesses to get involved in the cryptocurrency space. For example, Tesla purchased $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. However, it can still be a challenge to determine if your business is ready to invest in crypto. Where can you start?
Advantages of Investing in Cryptocurrency
It’s important to consider the advantages and disadvantages of investing in crypto. For example, does it fit into your business plan and will it help your business meet its financial goals? Is crypto too confusing for my business to get involved with? Consider the following advantages associated with crypto investments to make the decision a bit easier.
Reduced Transaction Expenses
Because crypto essentially eliminates the third parties you would work with for traditional transactions, it can reduce your cost of doing business. Crypto allows you to make or receive payments directly to or from clients without an intermediary. If there are any transaction fees, they are typically very low.
Decentralized Form of Payment
Cryptocurrency is considered decentralized, meaning there’s no governing body tracking or storing your transaction history. Accepting traditional payments is very common, but it also means your financial history could be susceptible to online hacks.
Inherently Secure Technology
The main technology behind cryptocurrency transactions is blockchain, a distributed ledger that stores digital data. Blockchain is an inherently secure technology that is very difficult to tamper with or manipulate. All transactions are authenticated to be sure they are correct.
Plenty of Crypto Platforms to Use
There are already several types of crypto platforms available, and more will likely emerge. Exchange platforms are easy for businesses to use and the market runs 24/7, so you can make transactions at any time of the day. This could be helpful if you have international customers or clients in different time zones.
Portfolio Diversification
Crypto is rapidly growing and more consumers are becoming aware of the benefits of investing in crypto. Businesses that invest in crypto can diversify their company’s investment portfolio and even help you garner new customers from various demographic groups.
Disadvantages of Investing in Cryptocurrency
With most investments, it’s also important to consider the potential disadvantages your business could face. Let’s discuss why you may not want to invest in crypto.
Highly Volatile
The crypto market is highly volatile, so you are taking on risks when investing in crypto. The value of cryptocurrencies can vary significantly depending on several different factors. For example, a major crypto hack can occur, as seen with the recent Ronin hack. The Ronin Network lost around $622 million due to the breach.
Not Widely Accepted (Yet)
In general, crypto has not become entirely commonplace in the business world. When considering investing in crypto, you may want to learn more about your clients or customers and decide whether offering crypto payment options will benefit them. As mentioned in one of the statistics above, crypto is still foreign to some people.
Complex Setup
While 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 handle this. While the setup process may not be a huge factor, it may turn you off from investing in crypto at the start.
Potential Scams
The technology behind crypto is still relatively new, and because it is decentralized, crypto regulations are still lacking. Cybercriminals may try to scam your business if they know you’ve invested in crypto. While this is not guaranteed to happen, it may sway your decision on whether or not to invest.
Deciding to invest in crypto as a business can be challenging. Hopefully, the advantages and disadvantages outlined above can help guide your decision-making and help you feel more educated about crypto investments.
It’s worth considering making crypto investments if you own or want to start a business. Still, it’s also important to consider speaking with a financial advisor to ensure you’re making a well-informed decision. The last thing you want is to invest in crypto and put your business’s financial stability at risk.
Managing a business and its finances can be challenging in and of itself. Crypto investments may help your business, but if you don’t know enough about the world of cryptocurrency, it’s best to educate yourself.
This post originally published on Worth.com. It was written by Devin Partida.
