One of the issues that has prevented cryptocurrency from being accepted as a payment method by a range of businesses is its perceived volatility.
This is understandable. Many of the crypto currencies people are familiar with have experienced both significant increases in value and significant falls. Bitcoin is a good example of why many people are wary of cryptocurrencies.
While Bitcoin’s value rose relatively steadily in its early years, it spiked rapidly in mid-2017, only to fall dramatically again less than a year later. Since that time, its value has fluctuated quite considerably.
In fact, the volatility of Bitcoin prices was found to be almost ten times greater than the volatility experienced across major currency pairs in foreign exchange markets.
The rise and fall of Bitcoin’s value has also been quite widely reported, which means many view it with caution. Plus, crypto currency values can change rapidly, which makes it harder to keep up with both upward and downward price movements.
With this background, it’s easy to see why many business owners don’t want to take a risk by accepting crypto currency for payment only to then see the value of that currency fall before they’ve had a chance to exchange it.
However, crypto currencies have the potential to revolutionise how we complete transactions, especially across international borders.
How can you minimise volatility in crypto transactions?
Before we look at how to reduce the volatility in crypto currency transactions, it’s important to understand why crypto is currently a volatile asset.
The main reasons are:
- The crypto market never sleeps. It can be traded 24/7.
- It’s still an immature market compared to other asset classes.
- Demand can shift rapidly and can be triggered by a social media post or news article.
- There’s uncertainty caused by a lack of regulation.
One of the main solutions that has emerged to bring more stability to crypto currencies in general is stablecoins. These are a type of crypto currency that ties its value to a real-world asset, like gold or a fiat currency like the US dollar.
Tether is one example of a stablecoin, with its value underpinned by the value of the US dollar to help reduce the level of price fluctuations.
However, while this addresses the issue of volatility of the crypto currency itself, it does little to remove the risks for businesses that accept crypto currencies as a form of payment.
This is where XRPayNet comes in. Our platform helps to solve this issue by immediately converting a payment in a crypto currency into the equivalent amount in the business’ chosen fiat currency.
Because our payment system enables this conversion to happen as part of the transaction itself, you can rest assured that what you receive for your goods or services will be a fair price. What’s more, you won’t have to wait and see what rate you’ll get for the conversion.
All of this will be transparent at the time of the transaction and the conversion will happen close to instantly, which removes any uncertainty for you as the business owner because you know you will be paid the correct amount.
This doesn’t change the volatility in the crypto markets itself, but it does remove the risk that volatility in that space will have a negative impact on your earnings.
Why should businesses start taking crypto payments?
Many early adopters of crypto currency have built considerable wealth through these digital currencies, but in the current landscape it can be difficult for them to access that money without selling off their crypto holdings.
It’s estimated that 300 million people worldwide hold crypto currencies, but many of them are unable to spend their digital currencies easily.
When a business accepts crypto payments, it provides a way for those individuals to spend some of the wealth they’ve accumulated in these currencies.
Accepting payments directly in crypto currencies makes it easier for some of that digital wealth to feed back into the economy.
In addition, accepting payments in crypto currencies could significantly lower transaction costs for businesses, especially those that accept international payments.
It also makes those payments much quicker, because they are processed in seconds rather than the days it takes in international banking systems.
Record keeping around crypto currency transactions is also robust and highly secure thanks to the blockchain technology that underpins all crypto currencies.
In the case of XRPayNet, there is a dedicated XRP Ledger that contains a complete record of all the data stored on the blockchain since the service’s inception. This means you can access your entire transaction history with ease, both as a customer and a business.