You have probably heard of cryptocurrency by now, a form of decentralised, digital currency backed by an unchangeable record of every transaction, known as a ledger, stored on the blockchain. This is a potentially revolutionary proposition, as it is not reliant on an authority like a government or a bank, but rather maintained by the ledger and the consensus this provides.
Recent scandals in the space, such as the downfall of the major cryptocurrency exchange FTX, have hit the sector hard and dipped the value of coins large and small. However, this means that regulation and therefore a much safer and stable market will likely rise from the ashes, making crypto a much more attractive proposition for businesses.
Here’s some of the pros and cons of cryptocurrency in business.
Be at the forefront of a new frontier
Despite recent issues, the philosophy behind cryptocurrency remains an interesting and disruptive one. A currency that can be used anywhere in the world and isn’t mediated by an institution, bypassing traditional financial institutions. The potential of this proposition means that there are new and potentially very lucrative opportunities in the market all the time.
High return potential
People have made a lot of money off crypto. While the market is in a historic slump, previous slumps have been temporary and have prefigured even larger peaks. Of course, those larger peaks have now resulted in this even larger slump that has affected some of the more infrastructural players in the industry, so understanding the market and ensuring access to the best information is essential to finding these high returns.
As we’ve seen recently, the market is famously very volatile. Bitcoin alone has seen highs of almost £50,000 to one bitcoin at the top of a sharp peak in late 2021, and now it sits at around £14,000. This volatility would be enough to put off even the most risk-keen investors, but the core idea and philosophy around crypto has been enough for it to maintain its die-hard community.
With the recent collapse of FTX, the crypto industry is at a crossroads. It is highly likely that governments around the world will begin to regulate the industry. The shape and contours of this regulation are yet to become clear, and so the way in which a business should make use of cryptocurrency as an investment vehicle or as a utility is currently up in the air. There will be trade-offs between the volatility of the market and the potential returns, but regulation may also open up new utilities for crypto yet unseen. Furthermore, more people may be willing to get involved once the market has become safer.
J Sweeney Accountants offer cryptocurrency accounting services and can advise on how to your business can invest in cryptocurrency safely, as well as ensuring your cryptocurrency accounts are compliant. Get in touch on 01604 950034 or contact us here.