Things Small Businesses Should Consider Before Using Cryptocurrencies

Cryptocurrencies made the headlines recently after Tesla CEO Elon Musk revealed his $1.5 billion investment in bitcoin. The price of the cryptocurrency soared to nearly $60,000, but it later went down to less than $50,000. It later recovered and climbed back to the $50,00 mark.

Even as cryptocurrencies, particularly bitcoin, are gradually gaining mainstream acceptance, their volatility remains. But its value has gone a long way since its introduction over a decade ago. At this point, its value was less than a cent.

With this, businesses are still cautious about using bitcoin for transactions. But if these businesses will use cryptocurrencies, they will have to consider several factors that can affect them.

small businesses and cryptocurrencies

Transactions

Cryptocurrency transactions are cost-effective options for businesses in transferring funds. It is secure, safe, and is a good alternative to conventional financing services. The transfer requires the use of public and private keys to ensure transparency for all transactions. This also prevents fraud. This method of transfer applies to transactions between a business and a customer. It is also the same method used for business-to-business transactions.

Many companies have started using cryptocurrency as a method of payment. For instance, PayPal already allows US account holders to buy, sell, and hold cryptocurrencies. But it limits its support to selected cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. The company will also allow the use of cryptocurrencies as funding sources within its network of merchants. It is also planning to make the service available to select markets outside of the US in the future. This indicates a gradual acceptance of cryptocurrencies as a method of payment.

However, it is important to note that negating a sale or disputing charges isn’t possible when using cryptocurrencies. This protects businesses from chargebacks once the cryptocurrency transaction is final. It also protects businesses against consumer fraud. This enhances the risk management practices of a business. Additionally, this feature allows businesses to manage their return policies better.

Volatility

The volatility of cryptocurrencies is one thing that makes businesses wary about accepting them as a method of payment. Despite this, many businesses are accepting bitcoin as payment for products and services. These companies include Twitch, Rakuten, Whole Foods, Home Depot, UK BMW dealerships, Microsoft, and PayPal.

On the other hand, some businesses are investing in these cryptocurrencies hoping for bigger payoffs in the future. Aside from Tesla, MicroStrategy also bought over $1 billion worth of bitcoins recently.

Small businesses can invest in cryptocurrencies during their initial introduction. Since PR services for ICOs normally provide information about new offerings. Small businesses can watch out when these come out in the market since the value is still quite affordable. They should consider it a long-term investment similar to how bitcoin grew in value from less than a cent to around $50,000 recently.

Marketing

Accepting cryptocurrencies as payment also allows small businesses to attract new customers who invest in them. A lot of people are investing in cryptocurrencies with the recent news about the increasing value of bitcoin. Due to this, businesses that accept cryptocurrencies as payment make them appealing to this segment in the market.

small businesses and cryptocurrencies

The safe and secure nature of this payment method allows both the business and customer to feel at ease with the transaction. Additionally, since it is decentralized with no third-party entity facilitating the transactions, both sides can save on fees that financial institutions normally charge in transferring funds.

Contracts

When talking about cryptocurrencies, digital contracts or smart contracts typically come out. These contracts are virtual agreements that remove the formalities normally associated with regular contracts. While the contracts do not go through these formalities, the contracts remain credible and authentic. These contracts also do not require any intermediaries or mediators and take place in nearly real-time. It is also transparent to the parties involved in the contract. The contract is translated into computer codes and stored on the system.

Read also, Internet 911: How the Online Space Saved Small Businesses

Funding

Small businesses normally do not have the funding available to big companies. They may have even taken advantage of the financial assistance offered by the government due to the pandemic. But they have to deal with interest rates that may drain most of their available cash.

But cryptocurrency is ideal for businesses aiming to expand in the future. For instance, bitcoin’s price history shows a rise in its value of less than a cent during its initial introduction up to over $50,000. While it is volatile, it still offers good long-term value if businesses invest in cryptocurrencies at the right time.

Cryptocurrencies have come a long way since they were introduced over a decade ago. With large companies starting to accept them, small businesses can also consider accepting them as a payment method or an investment tool for their future.

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