Cryptocurrency: A Smart Investment For Companies To Diversify

Investing in cryptocurrency is a hotly debated topic. Cryptocurrency is a digital currency that uses cryptography to secure transactions. It has no physical form and is not legal tender. Despite the controversies surrounding its volatility, illegal use, and infrastructure vulnerabilities, cryptocurrency is becoming a fast-rising trend in the financial industry, with an increasing number of forward-thinking businesses joining the crypto trend.

There are several reasons why a company should invest in cryptocurrency. Firstly, it offers safety against counterfeit due to its cryptographic security features. Secondly, cryptocurrencies are not issued or controlled by any central authority, making them immune to political interventions and manipulation. Thirdly, they provide a reliable, long-term store of value since they cannot be printed or seized, and their supply is limited by mathematical algorithms. Fourthly, cryptocurrency transactions are transparent and secure, as they are recorded and monitored in a public ledger, making them resistant to corruption and fraud. Finally, cryptocurrency transactions are fast, easily accessible, and have minimal transaction costs.

However, investing in cryptocurrency also poses risks. The market is highly speculative, and there is no guarantee of mainstream adoption. Additionally, there are complex security protocols that must be followed to protect against theft and scams. Despite these risks, the potential for high profits and the advantages in transactions make cryptocurrency an attractive investment option for companies.

Shield against currency inflation

Currency inflation is a decline in a currency's purchasing power over time. This means that the same unit of currency will buy fewer goods and services in the future. Inflation can be viewed as a measure of rising prices for goods and services in an economy.

Cryptocurrency can be an effective shield against currency inflation. Unlike traditional currencies, many cryptocurrencies have a fixed supply. For example, Bitcoin has a finite supply of 21 million bitcoins. This scarcity means that as demand for cryptocurrencies increases, their value tends to rise, making them a potent defence against inflation.

Additionally, cryptocurrencies are decentralised, meaning there is no central authority controlling them. Decentralisation safeguards your assets from manipulation and interference by external forces. Cryptocurrencies are also easily stored in digital wallets, making them a convenient and portable way to secure your wealth.

In countries like Venezuela and Zimbabwe, which have experienced hyperinflation, cryptocurrencies became a stable store of value, preserving wealth when traditional currencies collapsed.

By accepting cryptocurrency payments, businesses can avoid losses due to regional inflation. For example, if a company does international business and accepts the Indian rupee, a reduction in the value of the currency due to inflation will hurt the company's bottom line. This can be avoided by accepting cryptocurrency payments, as they have a global value, unaffected by regional inflation.

Cryptocurrency can also provide a new avenue for businesses to receive and disburse payments, attracting new customers and stakeholders who are interested in using cryptocurrency.

Long-term store of value

Investing in cryptocurrencies is risky due to the potential for high losses from security breaches. However, cryptocurrencies like Bitcoin have proven to be a spectacular way to grow wealth over time. With an annualised return of 230% over the last decade, it performed ten times better than the Nasdaq 100.

Bitcoin has also suffered from high volatility. In 2014, it lost 58% of its value, and in 2018, it dropped by 73%. From its peak in November 2021 to its bottom in November 2022, Bitcoin lost over 75% of its value.

Despite the risks, cryptocurrencies and the blockchain industry are growing stronger. Financial infrastructure is being built, and investors are increasingly able to access institutional-grade custody services. Crypto futures markets are being established, and many companies are gaining direct exposure to the cryptocurrency sector.

Shield Against Currency Inflation

Unlike traditional currencies that are susceptible to inflations within a country, Bitcoin or any other digital asset possesses a global value. For example, if you are doing international business and accept Indian rupees, and the value of the currency reduces due to inflation, then you suffer a loss as a business owner. This can be avoided if you accept cryptocurrency payments. Digital currencies have a global value, thus putting away regional inflation worries to rest.

Ability to Hold Value in the Long Term

The biggest reason for cryptocurrency's success is its self-protected nature from government influence. Since they are not linked to any currency or don't come under regulations, digital currencies can shield themselves from bank failures, hyperinflations, and other economic disasters. Therefore, this added nature makes them a perfect fit to be accepted as payments. Even when the whole financial system collapses, the value of cryptocurrency will remain intact.

Provides Transparency in Transactions

The nature of cryptocurrency is often hailed by many enthusiasts. Digital currency payments are recorded and monitored in a public ledger, making them see-through and unchangeable. They are verified and cannot be hacked or manipulated easily. This reassures that cryptocurrency payments are away from risk and corruption.

Less Burden on Transaction Cost

Banks are a physical financial medium that imposes transaction fees and taxes on every digital payment. It is understandable because they need to pay their employees, give rent for the buildings, and pay utility bills. But cryptocurrency and blockchain transactions are different. Since they are commenced over online platforms, they come with lower transaction fees, making businesses opt for them more.

Diversifies Your Company's Portfolio

Keeping all the eggs in one basket is never a good option. The same goes for businesses that adopt a single mode of payment and investment. It carries potential risks and might not be rewarding as well. But opting for cryptocurrency could diversify your company's portfolio and shield your payments against geopolitical, health, and economic crises.

Revolutizes the Whole Payment Concept

The concept of government institutions handling money came about centuries ago. But people were very slow in embracing the emerging trend. Fortunately, the cryptocurrency market is different. In just over a decade since Bitcoin hit the market, thousands of tech advancements, innovations, and changes have already occurred in the dynamic world of cryptocurrency trading. Therefore, it is mandatory to keep your business afloat in the evolving circumstances by adopting digital currency.

Transparency in transactions

The transparency of blockchain technology is achieved through the use of a distributed ledger. This means that all transactions are recorded on a network of computers, and anyone can view the transactions that have taken place. Each node in the network has its own copy of the chain, which gets updated as fresh blocks are confirmed and added. This level of transparency allows users to track a cryptocurrency token wherever it goes.

For example, in the case of a security breach, the crypto extracted by hackers is easily traceable because the wallet addresses are stored on the blockchain. This transparency reassures that cryptocurrency payments are away from risk and corruption.

Additionally, blockchain technology can provide more efficient day-to-day business operations for a variety of domains, including optimizing the cryptocurrency trade. It increases efficiency through transparent records with a single source, improves data integrity, enhances the customer experience with faster processing, helps reduce losses, and offers the possibility for higher capital availability and lower costs of doing business.

With the exponential surge in crypto and blockchain demand, even small and medium-sized enterprises are looking to reap the benefits of blockchain technology.

Accessibility and ease of use

The accessibility and ease of use of cryptocurrency are some of the most important factors for companies to consider when deciding whether to invest. Cryptocurrency is still relatively inaccessible, requiring a certain level of technical expertise that many people lack. However, companies can take several steps to improve the accessibility and ease of use of cryptocurrency for their customers and employees.

Firstly, companies can provide comprehensive education and resources on cryptocurrency and blockchain technology. This includes offering basic instructions and tutorials to help users navigate the trading landscape and make informed decisions. Simplifying the language used and providing clear, concise explanations that resonate with all audiences is crucial to welcoming new users.

Additionally, companies can adopt user-friendly technologies, such as creating cryptocurrency ATMs, enabling online shopping with crypto, and integrating crypto into existing platforms. For example, Yelp includes a search filter for businesses that accept crypto, and a German fintech company, Bitwala, is opening a cryptocurrency bank that issues debit cards to account holders.

By addressing the accessibility and ease of use, companies can attract a wider range of customers and ensure smooth transactions with stakeholders. It is important to remember that the more accessible and user-friendly cryptocurrency becomes, the more mainstream adoption it will gain.

Furthermore, companies should also be aware of the potential challenges and risks associated with cryptocurrency. These include regulatory, accounting, and tax issues, as well as the need to navigate important onboarding issues. By addressing these challenges and providing clear guidance, companies can make cryptocurrency a more accessible and user-friendly option for their customers and employees.

High-profit potential

Investing in cryptocurrencies is a risky endeavour, but it can also yield high profits. Here are some reasons why companies should consider investing in cryptocurrency, with a focus on its high-profit potential:

Shield Against Currency Inflation

Cryptocurrencies like Bitcoin have a global value that is not affected by regional inflation. For instance, if a business accepts payments in Indian rupees and the currency value decreases due to inflation, the business incurs losses. By accepting cryptocurrency, businesses can avoid such losses as digital currencies are not bound by the economic fluctuations of a specific country.

Enhanced Payment Options and Customer Base

Cryptocurrency provides an opportunity for businesses to enhance their online payment options and attract new customers. By accepting crypto payments, companies can tap into a new demographic of tech-savvy clients with disposable income. According to reports, allowing crypto payment methods can attract more than 40% of new customers.

Long-Term Value Retention

Cryptocurrencies are not linked to any specific currency or regulated by governments, which means they can shield themselves from bank failures, hyperinflation, and other economic crises. Even if the entire financial system collapses, the value of cryptocurrencies will likely remain intact. This makes them an attractive investment option for those seeking to preserve their wealth over the long term.

High Returns on Investment

Cryptocurrencies have the potential to generate extremely high returns. For example, Bitcoin's price has skyrocketed since its inception, growing by 11,280% from May 2016 to September 2024. Ethereum has also experienced tremendous growth, with a price increase of 21,196% between April 2016 and September 2024.

Diversification of Portfolio

Investing in cryptocurrencies can help companies diversify their investment portfolios. By allocating a portion of their funds to crypto assets, businesses can reduce their exposure to traditional assets like stocks and bonds. This diversification can protect them from losses in the event of a market crash or economic downturn, as the value of cryptocurrencies may move independently of traditional markets.

In conclusion, while investing in cryptocurrencies carries risks, the potential for high profits is significant. Companies can benefit from enhanced payment options, access to new customers, and the ability to preserve value over the long term. Additionally, the high returns and portfolio diversification that cryptocurrencies offer make them an attractive investment option for businesses seeking to maximize their financial gains.

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