Cryptocurrency has proven to be immensely popular among investors these days. With the sheer amount of money there is to be made from digital assets, it comes as no surprise that they are being embraced even by former skeptics. As Hyunsoo Kim writes, resources like the Ranking of promising coins recommended by Cryptonews are very popular these days.
But while we can agree that investing in crypto might be a good idea, what about inserting crypto into your startup business? Business owners considering this should be aware the following pros and cons.
Pros of Crypto Adoption For Startups
The Potential For Added Profit
As we’ve said before, a lot of people are investing in crypto assets in the hopes of making additional profit. And with tokens like Bitcoin and Dogecoin performing so well, many are seeing healthy returns.
These benefits can also be applied to startups who adopt crypto into their operations. If you were to accept cryptocurrency as a form of payment from customers or otherwise use crypto assets, there is always the chance that they will increase in value.
If this does happen, your business enjoys yet another revenue stream and can see its income multiply.
Expanding Your Customer Base
The truth is that a lot more people are using cryptocurrency these days and many are looking to spend their tokens with various businesses. If you begin accepting crypto or make it a part of your operations, you open your business up to a world of people who already use crypto and this expands your customer base. This is especially true if you operate in very tech-forward areas with a lot of young people.
For this reason alone, many entrepreneurs choose to adopt crypto as part of their business model and with the growing number of crypto ATMs and active wallets, it seems to be a good move.
Reputation Boost and Visibility
These days, it is quite ‘hip’ to be a startup that accepts or deals in crypto. Digital assets are considered the money of the future, so having a connection to it can make your business seem a lot more forward-thinking than others. With the increase of people that buy XRP or crypto, businesses that adopt digital assets can position themselves as modern and innovative in the market.
On top of this, there is a lot of visibility for businesses that deal in or accept crypto. From directories helping customers find places to spend their crypto to profiles on new crypto companies, your business has a lot to benefit publicity-wise from adopting crypto. If you plan to pursue this, however, you’ll have to take proactive steps to be highlighted in the media.
Access to Web3 Benefits
Besides the financial benefits attached to crypto itself, dealing with digital assets offers access to the world of Web3 and all the benefits that come with it.
For example, DeFi platforms offer services like loans, insurance, and much more to customers and these are done using crypto and smart contracts. Then there are things like NFTs, the metaverse, and others that have frequent overlap with the crypto sector.
If your startup is having difficulties with the mainstream financial world or simply wants to explore Web3, adopting crypto can be a very good place to start.
Cons of Crypto Adoption For Startups
Even with all the benefits, crypto adoption comes with a few complications that startups should be aware of.
Market Volatility
As much as crypto assets might spike in value, they might also face a decline. Major tokens like Bitcoin and Ether have seen months of market winter where investors lost money.
If a new startup chooses to adopt crypto they also run the risk of losing money they collect from customers and invest. Those with a lower cash flow that cannot withstand a prolonged winter period will especially be affected by market volatility.
Tax and Conversion Complications
Using cryptocurrency alongside or instead of fiat currency also means dealing with tax and conversion issues. In the case of the former, you will have to pay taxes if you dispose of (i.e. sell) your tokens and these laws vary based on where you live. This means navigating tax codes for crypto as well as fiat and this can be complicated.
Then you might have to convert your tokens to fiat at different points and this is also impacted by market volatility and other factors. As such, startups embracing crypto have to prepare for added responsibility.
Added Cost of Implementation
Adopting crypto, like adopting any type of system, will come with a cost to a new startup. You’ll have to open up a crypto trading account, buy hardware wallets, pay a crypto-focused tax accountant, pay trading fees, and so on. So as much as you may gain financially as a business by taking on crypto, you also need to be ready to bear the costs associated.
Conclusion
Cryptocurrency has not only won over the hearts of investors who are buying digital assets along with things like stocks but also entrepreneurs. After all, it can increase in value, opens you up to a large demographic of customers, can aid visibility, and also act as a gateway to the world of Web3. But even with all these benefits, a few pitfalls need to be considered.
An asset that can appreciate in value can also lose value and using cryptocurrency will mean higher finial costs for the business, not to mention the complexity of setting up the different mechanisms it needs.
