Bitcoins are the most popular cryptocurrencies in the world. The market capitalization of Bitcoin among all other cryptocurrencies is the highest in the world. It is now used as a popular method of hedging against risks because it can insulate itself from the harmful effects of inflation. However, it is worth noting that Bitcoin can be of immense help for new business ventures which are colloquially called ‘startups’. Therefore, the role of Bitcoins is worth describing in this respect.
Benefits of Bitcoins for Startups
Bitcoins have an enormous potential to encourage budding entrepreneurs to launch their startups. It is therefore necessary to highlight some of those benefits.
Risk Management
Startups are prone to many kinds of risks. Some of those risks if left unmanaged can lead to the swift downfall of a firm. Bitcoin can hedge against inflation and save the value of the savings. Cryptocurrency can also lead to a strong treasury.
Reserve strategy
The Silicon Valley Bank (SVB) has collapsed. This prompted crypto strategist Tim Draper to frame new rules by taking Bitcoin as a part of the investment portfolio. The strategy is to split capital into three branches where 1/3rd money will be in a big bank, another 1/3rd money will be in a small bank and the remaining 1/3rd money will be in Bitcoin. This strategy can be helpful for startups because many governments are strong enough to bail out a small bank, while Bitcoins can be a good risk aversion tactic.
Diversification
Startups can face many kinds of investment problems while dealing with fiat currencies. However, diversification of investment portfolios can avert many financial disasters. It can significantly promise better returns than a bank account. Diversification helps in reducing the impact of risks, but it does not necessarily mean that it will guarantee the highest returns all the time.
Bitcoin as a Collateral Loan and Equity Financing
The startups often need funds to meet their initial operating expenses. Bitcoin can act as a major source of collateral loans even while choosing a traditional lender. The main advantage is that people will also have access to traditional financial services. Bitcoin will be a good alternative for startups to raise equity capital financing. The foremost advantage of Bitcoin is that it will help in raising capital without giving up any equity.
Initial Coin Offering
Startup funding can become incredibly easier by using an initial coin offering (ICO). Initial Public Offering (IPO) and Initial Coin Offering (ICO) are similar, but in ICO, users can sell digital tokens. These tokens can also be used to buy services and commodities on the platform that a company is building. The biggest advantage is that it can allow users to raise capital without giving up equity in a company.
General Benefits
New startups may need a high degree of anonymity to keep their strategies a secret. They can achieve that by using Bitcoin. Bitcoin transactions do not necessarily mean the sharing of personal information. By staying anonymous, a start-up can reduce many of the risks associated with traditional methods of borrowing money. Time is a major factor for startups and by choosing Bitcoin, most transactions are incredibly fast and efficient. Compared to traditional methods of funding, if startups choose exchange platforms, then they can carry out transactions much faster.
Also Read- The Major Factors Affecting Cryptocurrencies
Conclusion
Startups can significantly benefit from Bitcoins. The advantages of Bitcoins cannot be overlooked anymore. This is why startups can genuinely try out Bitcoin and protect their finances. With time, as Bitcoin continues to grow and expand, a time may come when many startups may invest in the currency. However, startups must also conduct thorough research before investing and launching a business in a particular territory to minimize risks and maximize profits.
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