As crypto continues gaining in popularity, businesses should be actively exploring ways to make the most out of it. Private investors have long been involved in trading and other activities related to crypto and some have made tidy sums of money. So, the question is: why haven’t businesses?
Many people still have no idea about cryptocurrencies, so we will take a look at what they are. A cryptocurrency, such as Bitcoin, is a virtual medium of exchange and store of value. The virtual currency uses something called blockchain technology to document transactions on a global ledger that is decentralized and not under the control of any authority. Digital currencies allow people to trade without any need for a middleman, such as a bank, by transacting directly through the use of encrypted virtual exchanges or wallets.
Ways businesses can increase their financial potential with cryptocurrency
Below are some ways through which businesses can use cryptocurrency to maximize their business potential:
Borrowing crypto loans
Many small and medium companies struggle to get funds from lenders to help them run their operations and generate profits. Fortunately, businesses finding problems accessing traditional loans can go for a crypto loan—which can be a great alternative.
For your business to get a crypto loan, you must own some digital currencies and aim to have a specific loan-to-value (LTV) ratio. This way, your company can use the cryptocurrencies to take out a loan, instead of selling them when it needs some money.
The amount of loan accessible to a business is determined by the amount of crypto collateral that it can pledge. Thus, if the business needs to offer a collateral of $10,000 worth of cryptocurrency, and needs 50% LTV, it will receive a $5000 loan.
It is vital to note that crypto loans carry some risks, such as the risk of losing your assets if the value of the crypto pledged as collateral dips, and the lender needs you to top up the assets but you are unable to do so.
Accepting payment in cryptocurrencies from customers
You can add crypto like Bitcoin as one of the accepted modes of payment for your business and enjoy several benefits from it. And if you need to have fiat currencies, it is easy to sell BTC for cash through various routes such as crypto exchanges, P2P platforms, and others.
Some of the benefits of accepting crypto as a mode of payment include:
- Lower fees: unlike conventional credit card payments that cost businesses 2%-4% per transaction, crypto payments could bring transaction charges down to a level as low as 1%.
- No risk of being reversed: while customers can reverse credit card payments, crypto payments have no risk of reversal, and without a third party getting involved, digital currency payments are final.
- Chance of going international: with cryptocurrencies now being embraced globally, accepting them for payment could help your business to go international. This means an expanded market and more revenue.
Trading cryptocurrencies to enjoy profits
As a business, you can also engage in trading cryptocurrencies where you buy them and sell them at a profit. Of course, you need excellent technical and analytical skills because all of these currencies are volatile and their prices fluctuate unexpectedly. But, with a good trading strategy, you can make some good profits, and boost your business.
As you can see, businesses have several options to use cryptocurrency to increase their financial potential. Some possible options they can consider include taking out crypto loans, especially when accessing conventional loans is a challenge, trading in crypto to make profits, and accepting virtual currencies as a means of payment.