With the growing popularity of cryptocurrency, more businesses are looking to cash in on the possible future boom by accepting cryptocurrency payments.
The few who are already collecting crypto based payments –particularly bitcoin and ethereum- are facing a few challenges, all of which could have been mitigated if they had the facts.
Top 9 Crypto Facts Business Owners Should Know
This is why we wrote this article for you. You should know and have all the facts about cryptocurrency before deciding to offer it as one of your payment options. That said, let’s jump right in.
Eliminates The Need For Intermediaries
One of the best things about cryptocurrency is that it puts your money back in your hands. You have full control over the funds available to you.
With traditional financial institutions, you need to trust the bank and other financial bodies to keep your money safe, expedite transactions through their networks and ensure accountability.
Of course, all of these come with associated costs; some quite expensive. While the entire conventional financial transaction system is largely automated, and has its benefits, the reality is that it costs too much sometimes, mostly because of all the third parties involved.
Cryptocurrency’s elimination of these third parties is what makes it so appealing. With a coin’s network, you can carry out transactions all over the globe for a sizable fraction of what it’ll cost you to use traditional financial institutions.
Bank wire transfers for instance, cost anywhere from 2-5 percent depending on the amount, presence of absence of a third party institution and destination country. This means if you process $100 million in transactions, the banks can take as much as $2-5 million.
But, with cryptocurrencies, that entire transaction may cost you less than $200. In fact, a $99 million transfer that was executed on the Litecoin platform cost a mere 40 cents –yes, you read that correctly. The elimination of third party intermediaries is an incredible benefit.
Can Be An Excellent Way To Park Money
Want to avoid paying huge amounts of money to the tax man? You can do this using cryptos, thanks to the IRS’ categorization of cryptos as a personal income or asset vehicle.
Business owners can easily park their monies by converting them to cryptocurrencies, and labeling them as investments. As long as there’s no direct proceeds from the sale or trade of those cryptos, you won’t have to pay Uncle Sam anything from there.
So, let’s assume your company made $15 million net in a given year, and you converted $14.5 million to cryptocurrency. The IRS or any other tax agency can only tax the remaining $500,000, as long as you don’t pull that money out of cryptos.
Of course, parking such a huge amount of money is a risky move given the volatility of cryptos, but you would have to weigh the pros and cons of both and then decide on the best option for you.
Consistent Cryptocurrency Prices Fluctuation Is Normal
Most people don’t talk about this, but it’s a reality. Cryptocurrency prices tend to fluctuate. Sometimes, the margins are small, sometimes they’re huge. It all depends on a variety of factors like token price manipulation –aka pump and dump-, capital inflow, news items, market perception, and investor sentiments.
All of these factors will determine if the price of your intended coin will go up or down. A good example of this is bitcoin’s and ethereum’s price fluctuations. As at January 2018, 1BTC was exchanged for over $18,000 and 1ETH was exchanged for over $1,300.
As at May 2018, the prices had dropped to between $7,000 and $8,000 for bitcoin, and between $600 and $800 for ethereum. As you can see, those are huge price drops.
However, you should be aware that those prices are still higher than their prices at in June of 2017. It appears that well established cryptos typically settle at a higher price than they were the previous year.
The Market Is Currently Unstable
Cryptocurrencies as assets or investments are best considered as high risk, high yield investments. They are too volatile. It is possible for a coin to grow by 1000 percent and lose all that momentum or growth a few days.
This is often attributed to a variety of factors. The more grounded cryptos however, aren’t really subject to price manipulations.
Cryptos that mostly vulnerable to price manipulations and pump and dump schemes are the smaller sized, lower priced and minor ones. You might want to take this into consideration during your crypto vetting process.
Some Cryptocurrencies Are Easier To Exchange
The most popular cryptocurrencies are bitcoin, ethereum, Litecoin and bitcoin cash. In fact, most businesses just go with bitcoin because it’s easier to exchange.
The problem with bitcoin these days is the slow transaction speed –something that their new Lightning Protocol intends to remedy. So, business owners opt for the next best alternative which is ethereum.
With either of these options, business owners can easily withdraw their funds through bitcoin ATMs or vice versa, simply withdraw on exchanges or look for local exchangers.
Cryptocurrency Scams Abound
Many startups are launching their own initial coin offerings (ICOs) and creating their own cryptocurrencies in the bid to raise funds from investors and the general public. Many of these tend to be legitimate enterprises with actual products and interesting services.
However, scammers are fast realizing the potential of ICOs and token creation in helping them generate fast money. As a result, unsuspecting investors are consistently fleeced of their hard earned money.
The spate of fraudsters creating cryptocurrencies is fast growing, and probably won’t let up until there’s some form of official regulation to help weed out the scammers. For now, the SEC is doing its best to call out fake and scam ICOs, coins and tokens.
But even with that, there’s a limit to just how effective that is. Those announcements aren’t usually broadcast in the mainstream media, so you would have to have your fingers on the pulse of the crypto industry by monitoring twitter feeds, reddit posts and even setting up google alerts.
There’s The Possibility Of A Bubble
With traditional currencies, there’s at least the certainty that they’ll be around for the next few years. Cryptocurrencies on the other hand, aren’t so guaranteed.
This is probably why traditional financial experts think that the cryptocurrency “bubble” will burst soon. They don’t believe that cryptos will be around in near future. Whether this will happen remains to be seen.
However, if the past is anything to go by, cryptos just might remain viable. In the past, there have been speculations about cryptos going away. This started with bitcoin in 2009.
The reality is that even if it doesn’t oust traditional financial currencies, cryptos may eventually be considered as an investment tool of sorts. We don’t think this industry is going away any time soon. Regulations or not, we think it might be around for a long time.
Regulation Is Nonexistent
This means high security risks and vulnerabilities. Cryptocurrencies by their very nature, are designed to be self-regulated. Unfortunately, that’s not widespread among all of them.
While many of them are doing pretty well with self regulations, the market as a whole is unregulated. This poses serious problems that can jeopardize the security and safety of investor funds.
This is why many people have been scammed of their monies. The ease of creating tokens has made it incredibly easy for just about anyone -with or without a legitimate need for fund raising- to get on these platforms, create their tokens and rip off people.
Possible Severe Security Risks
Most of the popular coins already have their security measures in place. These security measures have prevented and repelled hacking attempts by unsavory elements.
But, there are some cryptos that have severe security vulnerabilities that is capable of costing investors their monies.
If you will be using cryptocurrencies, you should not only be wary of those lesser known ones, you should also put good security measures in place to secure your wallets and investments.
Otherwise, all it takes is a malware and a keylogger to access your wallet and empty it completely.
Top 9 Cryptocurrency Facts Conclusion
Cryptocurrency acceptance in business is fast becoming common. But, the smart ones are not going with those lesser known currencies. Stick to known and highly secure cryptos like Bitcoin, Litecoin, Bitcoin cash and Ethereum if you’ll be accepting cryptos.
These are currently the top leading cryptocurrencies with the commensurate working product, capital, infrastructure and security to keep your funds safe. And even then, make sure to double check them, seeing as the crypto market is very volatile. Cryptos that are solid today can be duds tomorrow. Just keep that in mind.