What is Bitcoin?
Bitcoin is a digital currency that allows for peer-to-peer transactions on the internet. Unlike websites like Paypal, there is no need for any traditional online monetary transaction. There will only ever be 21 million bitcoin in the world. You can purchase one whole bitcoin or just a fraction of one. Naturally, the smaller the bitcoin you purchase, the cheaper it is to buy into the process. The cost of a bitcoin or a segment of one fluctuates, bringing about the notion that there are sometimes better than others to buy or sell your bitcoin, almost like trading stocks. All transactions are recorded on a digital ledger, or in bitcoin’s case, a blockchain. The Bitcoin blockchain is distributed across an entire network, meaning no country, individual, or business owns it. It is simply owned by all participants conducting transactions. What sets the Bitcoin blockchain apart from a bank’s ledger is that everything is visible, and all transactions can be seen by other users worldwide. Every user operates under a unique pin or number, and each user’s holdings are visible to everyone who holds a unique trading pin or number. The question of who founded initially or invented bitcoin remains unknown, even after its years in existence.
What is a Fractional CFO?
We frequently discuss the meaning of a Fractional CFO or a traditional CFO. A Fractional CFO manages all the same duties as a traditional or full-time CFO but does so for transitional periods or is hired as an outside contractor for companies that are too small to require a traditional full-time CFO or who cannot afford one. They take the lead on financial issues and ensure that the company has the right plans to thrive financially.
Cryptocurrencies and CFOs
Studies suggest that by 2024 over 20% of companies will be operating in cryptocurrencies. The cryptocurrency market is now said to be worth over $3 trillion. With more and more businesses trading in cryptocurrencies, it brings about a new factor that CFO must factor into the balance sheet. Due to the volatility and constant fluctuation of value in Bitcoin and cryptocurrencies alike, it poses both positives and risks for businesses.
The Risks
1. Volatility
As we mentioned above, the most prominent risk when trading as a business or even an individual with cryptocurrencies is its volatility. It’s commonly known that the value of crypto can drop substantially, and it’s essential to know when is the best time to sell or purchase at the right price.
2. Lack of Government Support
In many countries, crypto lacks government support. This is due to the nature of people using digital currencies for money laundering and to perform illegal transactions. The rise in these sorts of illegal transactions poses suspicion about whether crypto is a safe business transaction. In particular, some countries have tried to ban cryptocurrencies altogether or significantly increased the tax rate of these transactions. Due to this depending on the country your business is registered in, it is worth re-evaluating whether it is financially suitable to get involved in the Blockchain.
3. Transactions are irreversible
Transactions on the digital ledger are final and irreversible. Meaning one should be sure of the transaction and well-informed before carrying out the transaction. Transactions cannot be reversed or charged back once processed.
The Positives
1. New demographics
When trading in crypto, businesses are often met with a new, larger demographic of customers that are likely to spend a lot more on a transaction on the blockchain than on a debit or credit card. Due to the transparency of transactions on the blockchain, they are also met with a demographic that values high spending and transparency.
2. Reduced transaction costs
When trading on a blockchain, no third party is involved. Therefore there is no transaction fee involved. Depending on the number of blockchain transactions your business completes, it can significantly reduce this overhead.
3. Ease of international transactions
International transactions are made much easier with crypto. It removes the need for currency exchange which is often a reduced cost. Also, removing a third party makes the whole process smoother and more cost-effective.
As a business, should you hire a CFO to manage your crypto?
The short answer to this question is yes. Excellent financial management goes beyond bookkeeping and filing tax returns. There is much more involved in a business beginning to trade in crypto than just purchasing a bit or a fraction of a bitcoin. Crypto CFOs, understand the tax and accounting concerns of growing businesses and focus on the bigger picture and a more forward-looking strategy. Crypto CFOs are also often tasked with the correct crypto software to trade on and ensure that all aspects of the trading process are financially secure, well informed and profitable. This also allows the CFO to identify KPIs and ensure financial growth in the direction you want your business to grow.
Working with Panterra Finance
The part-time CFO executives at Panterra Finance have access to worldwide teams that are proficient in and have initiated innovative strategies in projects centred on Defi, Blockchain, Bitcoin, Ethereum, Crypto, Tokenization, ICO, IDO, and STO services. Getting started with us, it’s very straightforward. Book a call with head CFO Sam McQuade through the link here. https://panterrafinance.com/get-started/.
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