THE IMPORTANCE OF CRYPTOCURRENCY LOUIS TODD

THE IMPORTANCE OF CRYPTOCURRENCY

With cryptocurrencies becoming more popular, understandable and available, the amount of users and consumers increase massively every year. If businesses want to carry on growing they must adapt to changes in the market and with this Crypto. With interest rates at a 13 year high the cost of borrowing money is very costly, using crypto currencies enables businesses to gain new capital from liquidity pools and using crypto to invest and hold capital. On the other hand Crypto is very liable to external shocks as it is a fairly new and unstable asset, but if businesses wish to gain capital fast and in new ways with less costs it will allow them to gain a competitive advantage over other new businesses.

Using Crypto Currencies may also attract new demographics to buy products allowing the business to have more options for payment making it likely to buy from the company, it may attract younger consumers who know more about tech so some companies may feel more inclined to use Crypto currencies in order to appeal to their target markets or to open up into newer markets. Studies also show that customers that pay with Crypto are likely to spend twice as much as consumers that pay with credit cards so if businesses allow for payments in Crypto then they may be able to sell more products and make more profit in the long run.

Taking into account the cost of transaction for credit cards vs Bitcoin is also a very important factor in whether businesses should use card or crypto payments. The average credit card transaction costs 2-3% of the total sale which businesses have to pay if they want to use card payments, on the other hand crypto currencies are far cheaper and faster depending on the amount of transactions taking place at one time. One downfall of Crypto transactions is that the price of a transaction scales with how many people are trying to complete a transaction at one time due to the nature of the blockchain, nonetheless these costs will almost always be lower than the 2-3% that businesses would have to pay if they took payments from credit cards.

Large companies such as Paypal and Microsoft are already accepting Crypto payments, this will increase consumers confidence in Crypto and make more people want to pay using Crypto Currencies. Paypal experienced a jump in revenue of $3.9 Billion between 2020 and 2021 from $21.4 Billion to $25.3 Billion. This large increase in revenue was slightly larger than predicted, this could be due to the fact that Paypal only started dealing with Crypto Currencies in 2021. This shows us that as more companies start to adopt crypto into their business and allow products to be sold in crypto it will help them to increase revenue and profit.

In conclusion, I believe that businesses should start to invest small amounts of capital into Crypto in order to gain new sources of capital and save money whilst costs are low.