The hype around Crypto is not slowing down. Elon Musk, who announced first a considerable stake in buying Bitcoin, then announced Tesla would accept Bitcoin as payment and a few weeks after that, he announced they stop accepting Bitcoin as payment due to environmental concerns.
Meanwhile, Bitcoin grew up to 60.000 dollars, to fall back under 50.000 dollars.
The questions came up, should other businesses accept Bitcoin or other “to the moon” coins?
My direct answer is NO, but let me explain.
What are the claims to accept Bitcoin as a business and let see if I debunk them
#1 SOME SAY BY ACCEPTING BITCOIN, YOU LOWER THE TRANSACTION FEES.
Transaction fees by credit cards are between 2% to 4%.
I checked the average bitcoin transaction fee and checked out CoinDesk. CoinDesk is the #1 news website specialized in Bitcoin and other cryptos.
On February 26, 2021, a CoinDesk article wrote that the average transaction fee was $23(1)
On April 21, 2021, Coindesk published another article (2) with the worrying title “Bitcoin transactions are more expensive than ever”, and the average transaction fee is $59"
Let’s do some calculation: Let’s take the highest credit card transactions fee of 4%, and the lowest Bitcoin transaction fee of $23, you need to sell at least $575 in 1 transaction to have a benefit to accept Bitcoin.
With the $59 transaction fee, you need to sell at least $1.475 before profiting from lower transaction fees.
Credit card transaction costs are fixed, but Bitcoin transaction costs are very dynamic
Also, other costs were not included in the calculation; Binance, know for its lowest fees, says on their website, “Binance must pay these fees to miners to ensure that transactions are processed. Since transaction fees are dynamic, users will be charged according to the current network conditions. The value is based on an estimate of the network transaction fees and can change without notice.”
The following line states, “Along with the flat withdrawal fee, there is a minimum amount required for each withdrawal request. If the amount is too low, you won’t be able to request a withdrawal.”
In the case of Bitcoin, you have a “miners fee” and a withdrawal fee and a withdrawal minimum.
#2 SOME SAY IT GIVES YOU MERCHANT PROTECTION AGAINST FRAUDULENT CHARGEBACK.
The idea is that once the transaction is registered, the transaction is final. No third party can reverse it. While technically this is true, it doesn’t mean it protects you against chargebacks, fraudulent or not.
When a person purchases online with their credit cards goods or services from your business, receives the goods and requests a chargeback from the issuing bank, that’s called a fraudulent chargeback.
Now, I do a lot of transactions online, and we use Stripe. First, we don’t have many chargebacks; the last year, we had 0. But even when we did get a request in 2019, we had a chance to prove that we send out the products, that the products did arrive, etc. We won all the cases.
Yes, you can’t reverse the transaction, you still can get scammed by paying back the Bitcoins, and that transaction is again irreversible. Good luck by getting your money back after you proved it was a scam.
With Bitcoin, you have fewer issues with stolen credit card numbers, I agree. But Bitcoin is not 100% safe neither. Criminals can still get access to digital wallets, pay with those wallets and get the goods. That’s the same.
In both worlds, companies try to get this solved. Credit cards companies do a lot of work to prevent/block stolen credit cards numbers, and Coinbase is holding less than 2% of their customer’s digital currencies online.
Bitcoin is not the bulletproof solution against scams
#3 SOME SAY IT WILL INCREASED SALES
By adding Crypto, you can sell more products and services; you can expand to international buyers.
Again, maybe, but doesn’t Credit Cards offer the same? More people abroad have credit cards than Crypto. If you want to expand internationally, you must add credit cards first.
Credit card companies and payment processing companies like Stripe and Checkout do many anti-fraud checks. With bitcoin, you sell anonymously.
Except for the transaction added to the blockchain, there is no factual verification of who is behind it.
I am just thinking, most of the crypto people believe the cryptocurrency will reach 1 million; The famous “To The Moon” Theme.
Why would they use Bitcoin to buy your product or service for $100 if they make millions? It doesn’t make sense.
Do you want to reach more people buying from you online? Work with companies like Stripe and add Credit Cards; you will sell more. Not Bitcoin
#4 SOME SAY YOU DON’T HAVE FLUCTUATING EXCHANGE RATES RISK
While again, partly is true. If you sell goods in bitcoin and get paid bitcoin, you have no Exchange Risk.
But, that is not the full story!: Your staff and suppliers need to be paid. Your taxes need to be paid, your internet connection, etc…
How many of your suppliers accept Bitcoin? Not that many, so you need to change your Crypto to your local currency. And there you have exchange rates implied. (plus withdrawal fees)
With credit cards, when I sell my services in Swiss Francs to visitors from the USA. I receive Swiss Francs on my account, the amount I asked for (minus the transaction fee)
Exchange rates can have an influence on the buyer.
Exchange rates are always happening, Bitcoin or Credit Cards or Cash, depends who pays them
#5 SOME SAY BITCOIN IS MORE EFFICIENT
Some say that current transactions can take hours or days and bitcoin transactions are instant.(3). Let me tell you when you accept Cash or Credit cards; the transaction is instant.
I did some extra research on how long a Bitcoin transaction takes
“In general, sending Bitcoin can take anywhere from seconds to over 60 minutes. Typically, however, it will take 10 to 20 minutes.” by Cryptovantage (4)
Yes, you can speed up the transaction; the most common method is to pay a higher transaction fee so that miners will prioritize your transaction.
Please go back to #1 and review the calculations
Bitcoin transactions are not instant. You are better off with Credit Cards
#6 IT’S THE TREND
Some say if you don’t propose BitCoin, your business will lag, and you will lose customers. We work with 5.000 enterprises from small to huge, from local spa centre to the Nike’s of the world.
Noone we know is openly promoting BitCoin as a payment system.
Of course, we all read the news that Tesla was accepting Bitcoin to buy a car….. only two weeks later to cancel it.
There are several reasons. Environmental issues, mining is concentrated in countries where we are not always 100% sure what they are doing: the high risk, the volatility of Crypto.
I recommend watching the video by Patrick Boyle on Bitcoin
Let me give you a last example of the risk.
Let’s say your offer massages; one massage is $100 When you ask your customers to pay in BitCoin, they will pay you the equivalent of $100 in Crypto. The clients paid $100 at that moment.
Crypto falls with 12% in a week, but you have to pay your staff and suppliers. You transfer your Bitcoins to your bank account and get $88. (even less due to withdrawal fees and exchange rates) A loss Lovely isn’t it?
Bitcoin lovers will comment it can rise 12%, and you get $112, but as a true entrepreneur, we must look at the worst-case scenario to analyze the risk.
Trends are not enough to make it a success. Trends for who anyway?
I would not recommend Bitcoin or any other crypto as a currency, as a payment system.
Crypto is a highly speculative investment vehicle and we must see it as an investment tool, not a payment tool.
For once, we should follow Elon Musk advice and leave Crypto (temporarily) aside as a payment feature … Until….
Until a severe StableCoin, linked to the existing payment processors, like Stripe, CheckOut, PayPal, is available, I will not consider Bitcoin or other Crypto as a payment feature.
What do you think of businesses accepting crypto as a payment tool?