Bitcoin is too new and radical to not be risky.
Accepting Bitcoin can position your business as different from others, giving you that little edge we’re all seeking. But how risky is the cryptocurrency? It’s one of the oldest and one of the best known. But should you accept Bitcoin as payment for your business?
Bitcoin is not legal tender and isn’t backed by any bank. It has a certain outlaw and outlier appeal to a lot of users, but it does seem to appeal most to people with a high tolerance for risk. The value of the currency changes up and down. A dollar is a dollar, but at different times it takes different amounts of money to get one bitcoin. If you sell a widget for five dollars only to have the value go down, you’ve effectively sold it for three dollars and eighty cents, for example.
Paul Traub, an economist at the Federal Reserve Bank of Chicago, told Crainsdetroit.com, “I understand fluctuating values between different economies and countries, but a fluctuating value of a currency inside the boundaries…it sounds too risky.”
Obviously, if you accept Bitcoins, you have to be able to spend them. This means finding businesses online that accept them, or finding some ways of making them valuable to you. Now, if you’re interested in turning Bitcoins into cash, one avenue is MoneyPak, a card with value on it, essentially a debit card, which you can purchase with Bitcoins. There are fees, of course, with reports of scams and lost money. Because of the fluctuating value and the possibly fleeting nature of Bitcoin, a business that wants to accept the currency as a convenient option might wish to stop doing so if it begins getting too many Bitcoins.
One of the threats to the value of a Bitcoin is its security of lack thereof. You may be familiar with the November hack of millions of bitcoins that splashed on the home pages of all the internet news websites. The incident raised questions about security, and as usually happens, resulted in stronger security. It isn’t the case that Bitcoin is particularly vulnerable or that one should panic or be paranoid. But hackers wouldn’t be hackers if they weren’t always playing cat and mouse with security measures, so threats are always there. The perception of threat doesn’t help either—those you’re dealing with aren’t likely to be particularly confident in the currency if it is bogged in perceptions of lack of security.
How Risky is Risky?
I’d like to note, though, that there are plenty of voices discussing the flip side. For one, one can insure Bitcoins, and also, there are services that will cash them out in your type of currency, which helps with exchange rate risks. These aren’t free, but worth considering. There’s also the general idea that risk is not guaranteed calamity, and the benefits of this fast-and-loose currency could possibly be worth it, particularly for people who have a tolerance for risk.
Note that the risks will be changing all the time, some of them perhaps being quenched altogether. And new threats will appear, rinse and repeat.