Cryptocurrencies or altcoins have grown in popularity since the first Bitcoin was created in 2008, but the world of digital assets is still relatively new to many kiwi business owners. While you may have dabbled in crypto personally, or know someone who has, the relevance of crypto to your business may not have been immediately obvious or easy to facilitate.
At SBA, we are backing the creation of CoinHQ – a purpose-built platform for secure and simple cryptocurrency investment for kiwi businesses. The team behind the CoinHQ platform has been brought together by Adam Parore and includes some of New Zealand’s most successful entrepreneurs. The goal is to give SBA franchise owners and their clients access to best-in-class technology to facilitate digital asset investment for business.
In the first of this series of three articles we will dig deeper into how that can help you!
First, what is cryptocurrency and blockchain technology?
Cryptocurrencies such as Bitcoin and Ethereum, are digital currencies in which transactions are verified and records maintained on the blockchain, a decentralised ledger, not governed by a centralised authority such as a bank. You can read a lot more about the blockchain and how these currencies work on the CoinHQ Knowledgebase.
Bitcoin is the longest established and best-known cryptocurrency, but currently there are over 10,000 different cryptocurrencies worldwide.
Cryptocurrency as a long term buy and hold investment
The most important use of crypto for business is as a form of buy and hold investment. As you will know, traditional term deposits and PIEs deliver low returns, and when inflation or devaluation of the currency is considered, even go backwards. Shares, bonds, gold, commercial and residential property, there are many other investment options you can consider all with pros and cons for business investors.
Crypto has become popular as a passive investment that provides a hedge against inflation and an asset that will increase in value over time. This is particularly true of Bitcoin, which has a cap on the total available supply, and Ethereum which is widely used in Decentralised Finance Applications (DeFi).
While very early adopters benefited from the rapid increase in Bitcoin’s value, it is still far from a mature currency, and as a result is subject to a high degree of well-publicised volatility. The generally accepted rule of thumb is that a regular monthly investment is the best way to smooth out the effect of this volatility, rather than trying to pick the perfect time to buy. This is known as dollar-cost-averaging.
Globally, there are some very large-scale business cryptocurrency investors, such as Microstrategy CEO Michael Saylor, who explain the case for buy and hold Bitcoin investment in a lot more detail than we can in this article. We highly recommend researching for yourself.
Stablecoins – An Efficient Method of Foreign Currency Transactions
Stablecoins are a class of cryptocurrency that are the least volatile, as they are pegged to the value of a traditional asset such as the US Dollar. As their value does not alter much over time, their use is primarily transactional as a bridge between two crypto or traditional currencies.
The decentralised digital nature of cryptocurrency transactions means that global payments can take place in minutes or hours rather than days and with minimal transaction fees. So, if you are buying or selling goods overseas and have experienced the frustration of wire transfers that take 5 days or more to arrive then this will be welcome news, truly enabling New Zealand businesses to be part of the global marketplace.