Is Crypto Over? Hardly.

After an epic 2022 collapse, due to fraud and other losses, the crypto market is on the rebound. In November 2021, the total value of cryptocurrencies soared to an all-time high of more than $3 trillion, surpassing the GDP of several developed nations. In September 2024, the crypto global market weighed in at $1.99 trillion.1

Sure, the cryptocurrency market can be volatile. However, it’s still worth consideration for those who can stomach the fluctuations. Turnarounds aren’t surprising. It seems a certain amount of frenzied turbulence could just be part of the market’s nature — and, perhaps, its appeal. For example, the news of April’s 2024 “Bitcoin halving” drove speculation that the event could increase the cryptocurrency’s scarcity and, subsequently, its value.

Bitcoin halving is inherent coding that changes the crypto’s blockchain to reduce new releases roughly every four years. Its goal is to cap bitcoin circulation to 21 million tokens. The rules of supply and demand suggested this reduced availability would increase Bitcoin’s price, which rapidly rose to around $70,000 in early March 2024 before dropping to just over $64,000 in April. After the April 19 halving, the currency held steady and had dropped to just over $56,000 in early September.2

Speculators will watch the halving’s impact on demand and pricing over time, as is common with more traditional long-term investments. Meantime, Bitcoin continues its run as the leading cryptocurrency. The U.S. Security and Exchange Commission’s January 2024 Bitcoin exchange-traded fund (ETF) approval could further strengthen its acceptance and investment access.

Interest rates play a major role in cryptocurrency’s future.

Higher interest rates typically raise the dollar’s value and lower investment returns. Lower interest rates spur investing as consumers and businesses look to increase returns. The Federal Reserve’s decision and timing on lowering interest rates this year could have a significant impact on crypto investing.

Consumers think crypto is a viable investment.

In its initial stages, few understood what cryptocurrency was, let alone what economic role it might play. Despite its unpredictable nature, some consumers bought the digital currency early on – many out of curiosity but most sought to diversify their portfolios. Still others saw the digital currency’s potential as an alternative payment method.

A recent survey states that 40% of American adults now own crypto and 63% plan to purchase more over the next year.3 Bitcoin’s ETF release also buoyed consumer confidence.

What does this mean for corporations?

There are two sides of the crypto coin. Buying into crypto might not be a prudent short-term strategy for most businesses, but the underlying blockchain technology on which digital currencies are built could transform several industries. Businesses should consider both the short-term and long-term prospects of digital asset investments, as well as the risks involved.

As a business payment tool, cryptocurrencies and other digital assets are still in the growth stage, largely due to regulatory challenges and lack of widespread adoption. Its volatility and value fluctuations also pose significant risks for businesses that accept crypto as payment. However, the Dallas Mavericks, Whole Foods, Starbucks, Home Depot and AT&T — among many corporations — already accept crypto payments. Others are still exploring blockchain-based payment systems to improve efficiency and reduce costs of cross-border payments. 

Blockchain technology offers increased opportunity to reduce friction in business banking processes, making them faster, easier, and more secure.

Is crypto right for your company?

If your business is considering crypto or other digital assets, carefully consider the benefits and risks.

• Understand the regulatory environment.

  Crypto currently has far less regulatory oversight and fewer government protections versus traditional fiat currency. So, it’s important to stay informed as global governments and regulatory bodies develop policies related to the digital currency. Be aware that regulatory decisions can have significant impact on market conditions and crypto valuations.

• Consider institutional-grade custody and security solutions.

  High crypto valuations increase the likelihood of theft and hacking. Businesses and investors should consider institutional-grade custody and security solutions to minimize exposure. These may include cold storage solutions, multi-signature wallets, and other advanced measures.

• Look beyond Bitcoin.

  While Bitcoin is the most familiar and popular cryptocurrency, there are many other digital currencies, assets and blockchain projects that may present attractive business opportunities. For example, competitor Ethereum posts lower returns, but is the go-to for such uses as decentralized finance, NFTs, and yield farming.4 In addition, this year’s EIP-4844 upgrade is expected to increase transaction capabilities, while reducing costs.
  
  Research emerging projects and technologies. Always conduct thorough due diligence on companies, founders, and management staff.

• Be aware of possible disruption.

  Positive or adverse developments in blockchain technology can disrupt a wide range of industries. Assess both short- and long-term implications of investing in or adopting blockchain-based solutions. Understand the advantages and disadvantages of partnering with startups or financing projects that are working to bring blockchain technology to mainstream markets.

Digital currencies still offer high potential, whether businesses want to make or accept payments for goods and services or include them as part of a portfolio. But there are also liabilities. Before deciding, realistically assess your knowledge of digital currency. Consider your company’s goals and objectives. Ask what you hope to accomplish. Will you be prepared to manage upswings and lows in the crypto market? These are just a few considerations.

If you'd like to learn more about cryptocurrency, simply complete a short form and a Synovus Treasury & Payment Solutions Consultant will contact you with more details. You can also stop by one of our local branches.