The COVID-19 pandemic brought with it unprecedented business challenges that hit small businesses the hardest. Facing shutdowns if not deemed “essential” and dealing with mandated social distancing and protective health equipment requirements, small businesses have had to jump through hoops to stay open or pivot to a more digital business model.
Amid these changes, cryptocurrency has flourished. This decentralized, peer-to-peer currency offers security and convenience to international trade, making it especially attractive in light of the pandemic. But can cryptocurrency help small businesses survive the financial hardships they continue to experience?
The relationship between crypto and small businesses can be beneficial in some ways, while in others, it may not be quite the saving grace you’re looking for. Understand how cryptocurrencies can help — their strengths, weaknesses, opportunities, and threats — to decide what’s right for your own business ventures.
Small Businesses Struggle While Cryptocurrencies Succeed
Examining the early effects of the COVID-19 pandemic on business shows a harsh reality. The loss of 3.3 million active business owners meant reverberating economic consequences for millions more. With unemployment rising sharply in the early months, many went without work or with reduced hours, and stimulus provisions from the CARES Act could only help so much. As a result, an estimated 200,000 more U.S. businesses have now closed their doors permanently, with the effects felt most strongly among minority-owned companies.
At the same time, cryptocurrencies have experienced unprecedented growth in the pandemic era. Of course, popular crypto like Bitcoin has always had its ups and its downs, but recent growth is staggering. In fact, Bitcoin has risen 640 per cent from the beginning of the pandemic into 2021, representing a massive interest surrounding the cryptomarket.
With techno-celebrities like Elon Musk making cryptocurrencies like Dogecoin a household name, the growth of this market seems to be on an overall upward trend. Across the world, countries are adopting crypto or making its implementation a priority of their ongoing development. From Ukraine to Pakistan, cryptocurrency is being viewed as a solution to the challenges of a global market.
But can crypto really help your own small business?
How Cryptocurrencies Can Help Small Businesses
There are myriad benefits that could lead you to adopting and accepting cryptocurrency in your trade. Whether you operate a digital or a physical business model, crypto can represent an investment opportunity worth the hassle and learning curve that comes with crypto adoption. The result can mean cost savings and potential revenue boosts.
However, cryptocurrencies are not for every business. If you are struggling against financial hardship in the wake of COVID-19, you should first conduct a strengths, weakness, opportunity, and threat (SWOT) assessment to determine if accepting these digital currencies in your practice is the best course of action for you. Such an analysis can provide a coherent organization of your thoughts to help you understand how crypto might fit in your business model.
Here, we lay down some of the defining traits of cryptocurrencies in each of these areas to explore how they might help small businesses.
Strengths
The potential of cryptocurrency in your small business depends on how well the strengths of these digital tools play into your needs. Crypto brings a lot to the table by nature of its highly encrypted and secure platform for storing virtual money and allowing users to tap into it at will to conduct global transactions without a fee.
These are some of the biggest benefits cryptocurrency can offer a small business:
- Transactions typically eliminate the fee that comes with most transaction facilitators.
- Value growth means accepting it can serve as an investment opportunity.
- Cryptocurrencies are mostly de-regulated, making them perfect for financially hamstrung industries like cannabis.
If you see these strengths improving your ability to operate in a global economy, then crypto adoption could be right for you. However, also consider the weaknesses.
Weaknesses
Cryptocurrencies, like any innovation, come with their own set of drawbacks. While these are sometimes the flip-side of the positives, others are limiting factors inherent to the system. For example, the infrastructure limitations of crypto make massive scalability a problem until new solutions can be implemented.
For small businesses, however, consider the following:
- Cryptocurrency values can be volatile, meaning accepting them can potentially lead to lost revenue.
- Lack of regulation means rule changes and greater oversight are likely on the way.
- Nothing is backing up the value of crypto the way governmentally supported currencies are guaranteed — but this could be a positive if the value of your local currency is declining.
With positives and negatives considered, turn to the opportunities and threats presented by the use of cryptocurrencies. These options can allow your business to grow and adapt, but they could also be a problematic distraction if you’re already on shaky ground.
Opportunities and Threats
The opportunities that cryptocurrencies present are many. From engaging a new audience in a secure global marketplace to building in business potential with blockchain systems, adopting crypto can open all kinds of doors for your small business. Rising values and innovative new tech platforms can allow you to attract an entirely new audience while boosting your revenues. But you won’t eliminate the threats through crypto adoption alone.
If your business is already facing unexpected financial hardship, the volatility of crypto platforms might be a threat you cannot deal with. Instead, exploring low-interest loans and COVID relief products may be a better method of surviving pandemic difficulties.
In short, the ability of cryptocurrencies to relieve you of your financial troubles comes down to what you offer. If you operate a digital marketplace and want to expand globally, crypto can help make that possible. If you run a local market, accepting crypto likely won’t help you out too much.
Explore the potential of cryptocurrency in your analysis before determining whether or not cryptocurrencies can help. While crypto is very possibly the future of trade, surviving COVID-19 hardships may take much more than blockchain adoption.
