Stick to your plan. Don’t bite at bitcoin.
4 min read
Opinions expressed by Entrepreneur contributors are their own.
I launched my first business more than three decades ago. I launched my most recent business six months ago. I’ve invested in dozens since then, and I’m considering a few more right now.
None of them have anything to do with the hot topic of the season: cryptocurrency. None of them will, either. Not for a long time, if ever.
There are reasons why I won’t invest in cryptocurrency, and they’re the same reasons why you shouldn’t distract yourself by even considering it…
I’ve heard entrepreneurs musing about either accepting cyber currency as payment for services or investing in it as a hedge against inflation. Both are bad ideas right now, for the same reason: There’s none of the stability that comes with traditional currency.
For example, if you decide to accept payment in Bitcoin — by far the most popular cryptocurrency — you need to acquire a “Bitcoin wallet” that allows you to buy, hold, and sell it. There are many, all with their own pros and cons. The hours you spend learning these nuances for just this one facet of the transaction is time away from your core business. There’s simply not enough track record for both the currencies and their supporting technology, so you could easily get burned if providers fail or get hacked.
Bitcoin sales can’t be undone. Unlike traditional transactions, there’s no getting it back. You must make a separate transaction. So disputing a charge or negating a sale is impossible.
This makes cryptocurrency a dangerous way to build customer loyalty. The appeal of accepting Bitcoin, for example, can easily backfire when a transaction inevitably goes wrong. Finally, Bitcoin is unforgiving about forgetting a password. There’s no reset, as The New York Times documented earlier this year under the headline, “Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes.”
If you invest in cryptocurrency, you might as well make it your full-time job, since its value fluctuates wildly over weeks or even days. It’s not unheard of for merchants to accept payment for services on one day, only to find the value of their transaction has dropped because they didn’t withdraw and convert the cryptocurrency into hard dollars.
Back in April, Bitcoin plummeted 15 percent over the course of a single Saturday, “just days after hitting record highs.” Launching a business is unstable enough. The last thing you need is the currency that funds your startup being even more unstable.
Anyone who knows me isn’t confused about where I stand on government regulation: There’s too much of it, and most of those arcane rules don’t deliver on their intentions or actually work against the good it hopes to accomplish. However, ensuring the stability of our monetary system and keeping faith in our markets is one crucial government function.
Cryptocurrency is so new, governments don’t recognize it as currency at all. The IRS considers it property and warns, “holding virtual currencies as an investment generally has tax consequences that could result in tax liability.” Good luck finding a tax expert who understands this new field, especially if you bought some of your cryptocurrency from vendors overseas. As CNBC reported, “Anyone with more than $10,000 abroad usually needs to fill out the Report of Foreign Bank and Financial Accounts (FBAR)…with the Treasury Department each year.”
Being on the cutting edge is both cool-looking and even noble since those innovations often lead to commonplace improvements in our lives. While it’s true that we laud entrepreneurs who are disrupters, it’s also true that the most successful ones are just a little bit ahead of their time.
Steve Jobs didn’t invent the personal computer or the smartphone, he vastly improved them at just the right moment. Elon Musk didn’t invent electric vehicles or private space travel, but he has a knack for knowing when to jump into a market — although even he’s admitted he might have leaped a little too soon.
If you’re a serial entrepreneur, stick with what you know. If cryptocurrency isn’t one of those topics, wait. Pick your spot. For me, that isn’t right now.