The emergence of cryptocurrencies as an innovative and disruptive technology has changed how businesses function. Entrepreneurs who use this technology early on can grow their enterprises and explore other revenue sources. With cryptocurrencies’ increased acceptance and popularity, it’s time to consider how these digital coins can help improve businesses. As such, this article explores cryptocurrency and how entrepreneurs can diversify using cryptocurrencies.
What is cryptocurrency?
Crypto is a virtual currency used as a means of exchange and store of value. It uses blockchain technology to maintain a decentralized global ledger of all transactions. This innovative technology enables buyers and sellers to transact directly, cutting out intermediaries like banks and financial institutions. Instead, buyers and sellers can transact directly with encrypted digital wallets of various exchanges.
Today, entrepreneurs have compelling reasons to consider owning, accepting and paying with crypto. For instance, it can aid in attracting new business investors and customers while safeguarding the business against fraud. Crypto could be a profitable investment and provide innovative options for securing business loans. Here’s how entrepreneurs can diversify using cryptocurrencies.
Related: What is the difference between an entrepreneur and a business person?
Five ways entrepreneurs can diversify their businesses using cryptocurrencies
Entrepreneurs constantly search for new prospects to diversify their business and edge out the competition. One way to stay competitive is by incorporating cryptocurrencies into your business strategy. Here are five creative ways that entrepreneurs can diversify their businesses using cryptocurrencies:
Accepting crypto from customers
Integrating crypto payment into your payment method options offers several benefits, including low transaction fees. Compared to conventional payment methods like the credit card option, which charges a transaction fee ranging between 2% to 4% per transaction, crypto payment is cheaper. Typically, crypto payment charges less than a 1% transaction fee per transaction. In addition, crypto payment is final. Since no third party is involved, payments are irreversible, unlike credit card payments. It means entrepreneurs are safe from fraudulent payment reversals.
Considering crypto acceptance as a payment method has grown significantly over the years, adding it to your payment option gives entrepreneurs access to the global market. Incorporating crypto payment into your business allows for a safe and more convenient payment process which is a ticket for growing your business reach and boosting revenue. To integrate crypto into your business, you can receive digital coins manually via a crypto wallet or use payment gateways like Coinbase and PayPal. Even though these payment gateways charge additional fees, they help to simplify the entire process, allowing for easy crypto exchange for dollars.
Accessing crypto loans
Data and analysis from the World Bank suggest that lack of access to funding is one of the significant barriers many small and medium enterprise encounter to launching or initially setting up their business. Obtaining a crypto loan is a decent funding opportunity for many entrepreneurs looking for alternatives to conventional lending institutions. Fortunately, getting a crypto loan is relatively straightforward. To do this, you are to buy some units of a digital coin and hold a specific loan-to-value (LTV) ratio. Rather than selling your crypto asset, you can use it as collateral to collect stable coins or fiat currency.
The loan amount you qualify for depends on your crypto collateral and LTV. For example, with $20,000 worth of crypto assets and a 60% LTV, entrepreneurs can get a loan of $12,000. But, like every other financial service, applying for crypto loans has potential risks. For example, if your collateral value dips due to market volatility, the financial service may ask you to make more down payment. If not, a percentage of your crypto collateral may get liquidated. These requirements vary among crypto lenders. So, before taking out any loan, please do your homework on the best crypto lenders.
Creating crypto-based innovative products and services
Blockchain technology enables entrepreneurs to develop cutting-edge goods and provide top-notch services. This can include developing cryptocurrency wallets or payment processing solutions or starting a cryptocurrency-focused consulting or advisory firm. The blockchain, a decentralized database, enables safe and secure transactions without using intermediaries. As a result, it allows for the rapid, fast and viable creation of business models.
For example, entrepreneurs can develop decentralized applications (dApps) that operate on the blockchain, offering target audiences special deal offers. dApps can be social networks, decentralized marketplaces and many more. With crypto and blockchain, innovative possibilities for entrepreneurs are not limited, guaranteeing a new and continuous revenue stream.
Investing in cryptocurrency
Cryptocurrency investment is a lucrative and exciting opportunity for entrepreneurs who want to diversify their revenue stream. Entrepreneurs are to know the risks of the crypto investment and calmly invest using a proven long-term strategy. An alluring factor to crypto investment is its potential for high returns.
Digital coins like Ethereum and Bitcoin have witnessed a considerable increase in price over the years, enriching early investors. Although, these price increases are subject to market volatility causing the price of digital assets to fluctuate. Factors influencing market volatility include regulatory change, investor sentiment and technological growth. Aside from direct investment in crypto, entrepreneurs can also invest in cryptocurrency via:
A retirement account
An entrepreneur can invest in cryptocurrency without triggering capital gains through a tax-advantaged retirement account like a SEP-IRA Simplified Employee Pension) or IRA (Individual Retirement Account). Entrepreneurs enjoy tax-deductible contributions using a conventional crypto IRA while paying ordinary income tax on withdrawals.
A health savings account (HSA)
Entrepreneurs can also use Health Savings Accounts to save for future and current healthcare expenses while enjoying the following benefits:
- Tax-free withdrawals
- Tax-deductible contributions
- Tax-free investment growth
Even though entrepreneurs can’t invest their HSA balance in cryptocurrency, they can via self-directed accounts like Directed IRA. Please note that eligibility for an HSA requires one to enrol in an HSA-eligible health plan, but there’s no annual income restriction.
Using a no-risk crypto rewards credit card
Investing in crypto or adding digital coins to your business as a payment method option is a big step. If you are still unsure about the whole process, you can start small by using crypto rewards credit cards to earn digital coins. This simple step allows you to use your business and personal spending to accrue virtual currencies or points you can later convert to crypto.
As you may expect, there are different crypto rewards credit cards. Do your research and choose a card with zero annual fees that allow you to earn an unlimited 1% or more cash back in crypto on every purchase. Getting a crypto rewards credit card is one of the simplest and safest ways entrepreneurs can diversify using crypto.
