As a business owner, you are probably wondering if you should jump on the Bitcoin bandwagon, joining your competitors and taking advantage of this new way to pay.
If you are thinking about taking Bitcoin in your small business, you are not alone. Although the popular cryptocurrency got off to a slow start, the blockchain-backed payment method lately has been making up for lost time.
While Bitcoin payment was once relatively rare, these days, cryptocurrency fans can pay for everything from take-out pizza to tractors — right from their virtual wallets.
So should you join the Bitcoin revolution or wait until the dust settles and things are a bit clearer.
As with every business decision, there are many things to consider, and it is important to weigh the pros and cons carefully. Here are some key considerations for business owners considering Bitcoin as a payment method.
Wild Swings in Valuation
The fluctuating value of a single Bitcoin is nothing short of legendary, and it can be hard to predict how much the currency will be worth on any given day. In the early days of Bitcoin, people could buy the cryptocurrency for a few pennies, but recently, the price spiked to over $4,000.
The price shifts have not all been upward, however, and there have been some sharp declines along the way. In the past, Bitcoin plummeted more than 50% in a few days, leaving merchants wondering just how much their payments are worth.
If you are considering adding Bitcoin to your list of payment methods, think about how you would feel if you sold a $3,000 piece of equipment, only to have the Bitcoin price cut in half the next week?
Or how you would feel if you cashed in your Bitcoins, only to watch the price skyrocket later on?
Finding a fair price for your merchandise is not always easy, but accepting currency that swings wildly makes the job even more challenging.
Dealing with the IRS is a fact of small business life, and most business owners would rather avoid entanglements with the IRS. Taking Bitcoins as payment could complicate your tax situation – or even invite an audit.
The IRS did not write rules with cryptocurrency in mind, so the tax situation remains somewhat unclear. Until the IRS writes and establishes new standards, the agency will continue to treat Bitcoin as property, not as currency, which is an important distinction and a potentially costly one.
Businesses that decide to take Bitcoin as payment need to keep meticulous records, noting each transaction and reporting the value of the payment accurately–though, since Bitcoin is by nature a digital currency, and not to mention transparent (all transactions are stored in the blockchain), reporting will be easier in the years ahead.
Increase Market Share
As you can see, there are some complicating factors in the decision to take Bitcoins as payment, From IRS regulations to wild fluctuations in value, there are plenty of things to consider.
That does not mean, however, that accepting Bitcoin would be a mistake — far from it. Businesses that take Bitcoin can enjoy some compelling advantages, including a significant increase in market share among millennials.
Members of the millennial generation have grown up with technology, and they expect convenience and frictionless transactions. The businesses that provide the greatest level of convenience stand to benefit the most in the new economy, and taking Bitcoin can be a valuable part of that strategy.
The Next Big Thing
Only time will tell if Bitcoin wins out as the dominant cryptocurrency or the new normal in the 21st-century marketplace. In the meantime, business owners who take Bitcoin can hedge their bets and take a gamble on the future.
Everyone wants to be part of the next big thing, and many financial experts believe that cryptocurrencies like Bitcoin will have a very bright future. Even if Bitcoin payments are only a small part of your business, every piece of virtual currency you collect could be a smart investment.
There are no absolutes in the business world, and there is no one right move when it comes to Bitcoin. Some business owners will eagerly embrace the virtual currency revolution, while others will be more cautious. No matter which side of the Bitcoin you fall on, these alternative methods of payment bear watching.