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Cryptocurrencies such as Bitcoin, Ethereum and Ripple have seen a surge in popularity over the last few years with experts claiming that e-commerce will also see significant changes. These changes are set to affect not only businesses but also customers and consumers.Ā
Some predictions for the future of cryptocurrencies include a dramatic rise in demand for crypto currency from new demographics The spread of cryptocurrency adoption across all social classes, the way cryptocurrency will become more widespread with the rise in digital payments overall and e-commerce becoming more reliant on cross border transactions facilitated by crypto currencies when compared to fiat currencies.
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Cryptocurrencies have seen a growth in popularity and adoption due to the volatility of fiat currencies. Fiat currencies are issued by central banks and backed by respective governments. Because crypto currencies are not issued by any government or central bank, there is a limited supply of them which drives their price up. This rise in price has led to a surge in demand for cryptocurrency from those who wish to profit from the volatility, as well as those who need it for online transactions and e-commerce transactions.Ā
The high demand for crypto currency is due to the following factors:
Volatility: One of the biggest problems of fiat currencies such as the US dollar is their relative stability. Many economists predict that the US dollar could lose most of its value in the coming years because of quantitative easing. This has made investors look for other alternative assets and hence have invested in cryptocurrency.
Rising cross border transactions: The number of cross border transactions is increasing every year as more and more businesses are looking to expand to countries outside their home base. With fiat currencies, these transactions can be quite convoluted and highly expensive. Therefore, many businesses are now opting for crypto currency so that they can facilitate international business with ease.
Banks increasing transaction fees: As online transactions become more popular, banks are increasing their fees for online transactions. This makes it difficult for smaller companies as well as individual users to keep up with the cost of these transactions. Cryptocurrencies reduce the costs involved in transacting because there are no third party or intermediaries involved during a transaction.
Governments restricting currency exchange: Some governments can restrict access to the foreign exchanges if they suspect foul play. This is another issue which businesses dealing overseas have had to deal with in the past. With crypto currencies, however, business can continue unabated even if access to foreign currency is restricted.
Greater security and anonymity: Due to the lack of government or central bank support for cryptocurrencies, there is no way for businesses to track user data and make profits from this. It also ensures greater anonymity of transactions which can be very useful in countries with a high threat level from terrorist organizations.
Crypto & E-commerce
Cryptocurrency is going to play a huge role in the world of e-commerce as more people become aware of its benefits over fiat currency. Below are some predictions regarding the impact of cryptocurrency on e-commerce:
More businesses will accept crypto currency as a payment option because it is far cheaper than other traditional payment methods. The success of this will be seen in future deals with vendors who are used to dealing in fiat currency only.
Cryptocurrencies will become increasingly popular and accepted as payment by consumers. A lot of investors have watched the rise in value of Bitcoin and Ethereum since they first came out and have found them quite beneficial. This is already happening as more and more stores accept crypto currencies as payment. A growing demand for crypto currency will also lead to a growth in price and hence, profit margins for businesses dealing with it.
E-commerce companies will begin to accept crypto currency as a payment option because it makes their operations cheaper due to reduced transaction costs associated with this type of transaction.
The rise in the use of crypto currency will lead to a rise in prices of goods such as newer tech and services. This is because when more vendors began to accept crypto currency for payment, these vendors formed larger companies which have to cover additional expenses such as payroll costs and marketing. Currently, much of these costs can be covered through cheaper forms of payment such as debit and credit card payments but over time as more stores begin accepting crypto currency, these costs will increase thanks to blockchain technology.
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E-commerce companies will begin to accept cryptocurrency as it is currently more secure and cheaper than alternatives such as bank transfers or credit cards. The introduction of this new payment option will lead to a rise in demand which can be described as a virtuous spiral in the e-commerce industry.
If the rate of adoption for cryptocurrency continues to increase, then it would also affect consumer confidence and consumer spending. This will lead to growth in e-commerce spending and hence, a rise in prices for goods and services as well.
Disadvantage of crypto in e-commerce
In countries with a high tax on foreign currency exchange, crypto currencies will usually have no impact on sales or taxes collected by governments but they can have an effect on the inflation rates in their respective countries. Inflation rates are affected due to the fact that businesses who have been using fiat currency as their main form of payment will switch to crypto currency. The increase in price of goods and services can be seen as an inflation rate in these countries. However, if the crypto currencies start to spread outside these countries then they are bound to cause an increase in transaction costs which will lead to a rise in prices across all industries.
Due to the high volatility associated with crypto currencies, it is possible that merchants may choose not to accept them because they may not have adequate funds if a significant amount of value of their assets drops suddenly due to a change in market conditions. This could hurt their sales and profit margins significantly.
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Companies dealing in crypto currencies will be able to reduce the costs of transacting with other companies because money transfers are conducted instantly without any third party interference unlike fiat currency which needs approval from central banks and regulators before transactions can take place. This means that transactions can be made at any time of the day unlike traditional forms of payments which usually have a small window of transfer such as during banking hours.
It can be said that crypto currencies are a very exciting new market which is breaking away from the system of financial transactions of the past. This is because they are cheaper and more secure than traditional fiat currencies. However, the acceptance of this form of payment by retailers has been slow. This may have been due to lack of knowledge regarding value and risks associated with crypto currency as well as security concerns which could have made merchants hesitant to accept this form of payment. The future will show and tell what will happen in the e-commerce world as more and more companies begin to recognize its benefits over traditional forms of payment.Ā
About the author
My name is Daglar Cizmeci, and Iām a serial investor, founder and CEO with over 20 years of industry experience in emerging tech, aviation, logistics and finance. Iāve graduated from the Wharton School and Massachusetts Institute of Technology (MIT). Chairman at ACT Airlines, my technic and Mesmerise VR. CEO at Red Carpet Capital and Eastern Harmony. Co-Founder of Marshfield's, ARQ and Repeat App.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.