More than one-third of small businesses in the USA accept virtual payments today. With the exponential rise of cryptocurrency in the past decade, more and more online businesses are considering using crypto as a payment method.
Since its humble beginnings in 2009, crypto has taken the world by storm. The biggest cryptocurrency, Bitcoin, is currently valued at over 20,000 USD, signifying its dominance in the market and attracting businesses and investors alike.
However, it’s not immune to drawbacks. It’s an extremely volatile market, and the crypto crash of 2022 has once again shown businesses that they need to be uber-careful when investing in crypto in any capacity.
The big question for businesses is whether they should get on the crypto train. Directly investing is one way to do it. The other is by accepting crypto as a payment option. You also need to see that you have the structure to support crypto in your business to ensure a smooth induction.
The ultimate goal with incorporating crypto, like with anything else, shall be to grow your business. Let’s assess some pros and cons of using cryptocurrency as a payment method for your business.
Pros of Cryptocurrency Payments
With more than 21,000 cryptocurrencies today, anyone can enter the market by investing in the crypto of their choice. You don’t have to get involved with the big ones like Bitcoin, Ethereum, or Cardano.
You can invest in relatively smaller cryptos such as Polkadot (DOT), Dogecoin, and Litecoin to understand the market first. Buy DOT to learn the tricks of the trade before making big moves for bigger profits.
Over 500 exchanges in the world trade in crypto, and the most common payment methods, such as bank transfers, credit and debit cards, and payment wallets, such as PayPal and Google Pay, can be used to make purchases.
Other than that, crypto investors have cultivated a widespread community that helps each other out in times of crisis. As a business, you have immense accessibility to the crypto market that makes the induction of crypto in your business structure virtually seamless.
2. Decentralized Nature
Cryptocurrencies are decentralized in nature, meaning their regulation is not controlled by any authorities. For this reason, crypto is also called ‘digital gold.’ In a regular financial market, the exchange of commodities is governed by regulatory authorities.
This authority can be a bank or a financial institution, and every transaction has to go through it. This puts several restrictions on what traders own and how they operate in the market. In a cryptocurrency exchange, there is nobody overseeing transactions.
Transactions happen peer to peer with mutual trust and understanding. You don’t have to pay hefty processing fees to a third party and get greater control over the assets you purchase without interference from any third party.
Your business will enjoy greater freedom in the transactions it makes and the ones it receives by accepting crypto as a payment method. It will be the one payment method you offer that will give you complete control over how you regulate it.
3. Liquidity and transparency
Cryptocurrencies offer a high amount of liquidity as they can be traded in the exchange 24/7, i.e., at any time of any day. Bitcoin and Ethereum, being the pioneers of the Crypto world, are the most liquid digital assets in the market.
Smaller and newer cryptos are less liquid. Cryptos, in general, offer more liquidity than financial markets, such as stock markets that open for set time periods in a week. Traders around the globe have to work around the local time zones of where the market is physically situated.
Crypto uniquely offers transparency in transactions while giving users anonymity. Every user is assigned a unique public key when they enter the market. This way, their identity stays hidden and protected.
When they conduct transactions, it’s through the unique public key, which can be identified and associated with, say, fraudulent transactions. The key is used to identify transactions on the blockchain and track every transaction for transparency.
4. Diversifies portfolio & business
Adding cryptocurrency to your business helps diversify it in more ways than one. It diversifies your portfolio as a formidable investment option. Even if you have a small amount of crypto, it’s an investment that harbors the potential for big gains.
By adding cryptocurrency as a payment option in your business operations, you offer your customers a wider variety in making payments. You’ll be able to attract more customers in general by tapping into the demographic that favors crypto.
Adding crypto payments to your business has serious marketing potential as well. You can go ahead and advertise that you accept crypto payments to attract those customers and make it a USP of your business.
Cons of Cryptocurrency Payments
1. Extremely volatile
Crypto tracking website Bitinfocharts.com reported that the profitability of Bitcoin sank lowest in July 2022 even though it had soared to its highest just a few months ago in November 2021 with 69,000 USD.
Bitcoin faces such extreme volatility despite being the biggest crypto. It’s even direr for smaller or relatively newer cryptos. This is because most cryptos have a cap on the maximum number of them that can exist.
So, the only element that drives their value is their demand, with no supply to offset the equation. Businesses need to be more vigilant than regular investors regarding the market’s volatility when dealing with crypto.
A significant loss can majorly disrupt your business’ structure over and above being a financial loss. To combat this issue, learn about the market before venturing into it. Talk to your financial advisors and only invest small amounts in the beginning before moving to bigger investments.
2. Unregulated market
While decentralization in the market offers myriad benefits to investors, it also has drawbacks. Since it is not governed by any authority or government, investors are not protected by law if they fall victim to fraud.
The unregulated world of cryptocurrency is highly prone to cybercrime and fraud among investors. This has emerged as a controversial topic in many countries. Countries like China, Qatar, and Russia have also banned cryptocurrency because of this reason.
A business needs to be extremely careful when dealing in the cryptocurrency market. You need to check the traders you deal with and the customers who opt for crypto payment when they deal with your business.
Don’t deal with suspicious traders, exchanges, websites, and platforms. Keep your digital currency under your control and inform your crypto exchange in case of any discrepancies in transactions with customers or fellow traders.
3. Hard to understand
Cryptocurrency is notoriously hard to understand. Many traders make the mistake of treating crypto markets the same as they would other financial markets, such as stock exchanges. Stock markets in themselves are tricky subjects to understand and master.
Crypto, on the other hand, works completely differently from stock markets with blockchains and decentralization. On top of that, they have the added element of technology complexity to them. Traders need to treat them as a completely new domain.
To get a grasp of crypto, you need to first do your own research on it. Then, you need to trade in the market on your own to understand how it works and learn its nuances. With the budding crypto community, you can also take the help of fellow traders to understand the market, especially entrepreneurs.
4. No intrinsic value
Cryptocurrencies are digital assets through and through. They are not backed by real assets. This is why they have no intrinsic value of their own. This contributes to their volatile nature as they have nothing holding them up, so to speak.
Compared to crypto, stocks are backed by real assets, such as gold or silver, that give them their value and the potential to earn money. Crypto, on the other hand, is a risky prospect for businesses as they’re not backed by any assets or governments.
More and more online businesses are adopting crypto, both as an investment and a payment option.
Crypto offers many benefits, such as the high potential for exponential gains and the widespread acceptability of its fast gain. However, it’s also marred by some drawbacks, such as the extremely volatile market it operates in and being prone to cyberattacks.
A business needs to be vigilant in incorporating crypto into its structure. Learn about the market and begin with small amounts before moving to bigger gains and wider operational use of crypto.
I hope this article gave you a clear idea of the benefits and limitations of accepting crypto payments for your business. If you want to accept crypto payments on your eCommerce website, here are a few hand-picked articles you should read next –