Few concepts in the financial world are as divisive as cryptocurrency. It’s either the next big wave to generate wealth in the not-so-distant future or the biggest pyramid scheme. When Bitcoin first entered the mainstream market, it was considered so volatile that hardly anyone would consider it an investment. Fast-forward to 2024, and we’re seeing a more mature economic outlook.
The sector has clearly grown. Currently, there are nearly 9,000 different cryptocurrencies with an adoption rate in the US of approximately 40%. This translates to roughly 93 million Americans who have used, traded, or owned crypto, and 63% of those are people looking forward to buying more.
While people wait with bated breath for central banks to adopt cryptocurrency, many governments hold crypto. The countries leading the charge are the US, China (despite banning trading), the UK, Germany, and El Salvador. Combined, they hold approximately $36 billion worth of Bitcoin.
With the growing adoption rates and increased confidence in the technology and market, crypto can offer small to medium businesses a new lifeline. Coins like Bitcoin, Ethereum, and Litecoin have been performing well, increasing steadily in value over the past year. Business owners are looking to crypto as a worthwhile investment to beat inflation, fund growth expansion projects, and reduce some transaction costs.
Businesses will need to weigh the opportunity cost of playing it safe, by avoiding crypto investments, against the possibility of securing a lucrative investment. Take a closer look at how businesses could benefit from a crypto portfolio:
Access to Global Markets
In the digital age, businesses need to be accessible to customers worldwide. According to Airwallex, 54% of customers expect to increase their cross-border online shipping, contingent on payment transparency and reliability.
Bitcoin and other cryptocurrencies enable a boundless retail ecosystem; businesses and consumers can engage across borders, time zones, and currencies. The benefit of using crypto rather than existing international payment gateways is the improved security and lack of exchange rates and fees.
Digital wallets provide a seamless payment experience, and with crypto’s growing popularity, there are numerous reputable crypto-ATMs and brokers.
A word of caution: Be sure to check the prevailing laws in every region where you conduct business to remain compliant. Some countries have a zero-tolerance policy on crypto, while others are open for business.
Reduced Transaction Expenses
One of the often-cited benefits of using cryptocurrency is the reduced transaction costs. For small and medium businesses (SMBs), using traditional banks to facilitate these processes is no longer viable; they’re slow and costly.
According to research, cross-border transactions cost SMBs approximately $800 million, primarily due to hidden fees. With cash flow being a significant consideration for SMBs, the slow processing times are an additional hindrance.
Businesses are increasingly looking to crypto to reduce costs and enable real-time transactions. Bitcoin and Ethereum are key to unlocking this value and remain relatively stable throughout crypto market fluctuations. Retailers also use crypto to pay vendors and employees due to the lower fees and quick transaction time.
Protection Against Inflation
SMBs face a higher risk during inflationary periods. Holding fiat currency that depreciates with time while costs continue to increase can place these retailers in a precarious position. With little to no bargaining power, they often can’t keep up with supplier demands.
Inflation also makes access to finance more expensive, with higher interest rates impeding plans for growth and expansion.
Holding cryptocurrencies like Bitcoin is considered a safe bet against inflation, minimizing risk and exposure to regulated markets. This is attributed to their decentralized nature, which makes them immune to central bank fluctuations.
A strategy increasingly employed by SMBs is holding cryptocurrencies to convert into fiat currency (traditional money) when the conditions are favorable and using this cash injection to fund growth and expansion projects.
Tax Benefits
This particular point is still murky and hinges on the Trump administration’s delivery of campaign promises. Having secured a governing trifecta (a Republican president, Senate, and House), passing legislation should technically be easier.
If Trump is true to his assertions, holding crypto could become incredibly valuable for small and medium businesses (SMBs). Without the capital gains tax, SMBs could really build capital for re-investment purposes.
Potential for Growth
Like any investment, getting in early is the best bet to success. Business owners will naturally question whether it’s too late to invest, considering we’ve seen the rise and fall of crypto billionaires. Despite the hype and early volatility in the market, crypto is slowly settling into a secondary, decentralized market that can offer a younger demographic new opportunities for wealth creation.
Experts provide a balanced outlook and consider the many positive signs that indicate growth is not only possible but very likely.
Crypto is still a new industry, and business owners concerned that they’ve “missed the bus” can rest assured that there’s still plenty of opportunity for growth. They are encouraged to take a long view of their investment and ride out any short-term fluctuations.
Although the cryptocurrency market is volatile, it’s still worth considering if you want to expand your business or increase your profits. And best of all, this option has plenty of advantages for both companies and consumers. Investing in crypto gives you better security, access to larger markets, and an increased chance for growth.
Conclusion
As cryptocurrencies like Bitcoin continue to gain popularity, businesses are increasingly considering whether to invest in them. This article evaluates the potential benefits for companies in holding crypto, offering insights into several key areas.
Cryptocurrencies provide access to global markets without the hassle of foreign exchange rates or fees, allowing businesses to expand internationally. Additionally, transaction costs are often lower than traditional payment methods, such as credit cards or wire transfers. The decentralized nature of crypto also offers protection against inflation, ensuring that a business’s holdings maintain value over time.
Depending on jurisdiction, crypto investments may also provide tax benefits and offer financial anonymity, enhancing security for businesses concerned about data breaches. Furthermore, cryptocurrencies’ potential for long-term growth presents an opportunity for companies to diversify their portfolios and increase their value.
While there are risks, such as market volatility and legal considerations, businesses willing to research and navigate these challenges may find that cryptocurrencies offer substantial advantages, including cost savings, global reach, and growth potential. However, businesses must stay informed on regional regulations and implement strong cybersecurity practices when dealing with crypto transactions.
