Understanding Bitcoin and Our Marketplace
Updated on June 10, 2020
When Bitcoin first appeared in 2009, it took a small stand against a failing financial system.
It promised a different way of transacting: one without the control or manipulation of governments or financial institutions.
Since its inception, Bitcoin has transformed from a fringe currency into a form of investment worth considering. Its value has climbed over the years, and Bitcoin hopefuls project a significant jump in its value in the near future, so it seemed time to revisit Bitcoin and its relationship with our marketplace.
This article will walk you through Bitcoin basics, examine the current state of the cryptocurrency and Bitcoin markets, and refer to expert interviews for real-world insight on building wealth with Bitcoin. Research will be interwoven with interview excerpts to create a clear picture of Bitcoin’s impact on buying and selling online businesses.
An Expert’s Introduction to Bitcoin
“It has a Genesis story that I’ll likely never see again in my lifetime.”
One for compelling introductions, crypto-OG Jon Myers set the stage in his interview with us on Bitcoin and cryptocurrencies.
It didn’t feel right to base this article on hearsay about Bitcoin gathered from the internet. The available information and opinions were too polarized to be reliable, so I sought out insight from someone who had worked with Bitcoin and other cryptocurrencies for years to better understand this often misunderstood world.
Jon first got into cryptocurrencies (crypto, for short) in 2012, considered to be the early days of digital currencies. He designed and helped launch the Bitcoin payments platform CoinSimple in 2013, and he served the last two years as the Chief Design Officer of Liquid.
Currently, he leads a quiet life in Ho Chi Minh City, Vietnam as a bonsai gardener and occasional crypto trader. He took some time out of his Saturday to walk me through his experience and explain where the market is today and where it may be headed.
The Genesis to which Jon alluded was Bitcoin’s creation in 2009 by an unknown founder using the pseudonym Satoshi Nakamoto. To this day, no one knows who created the technology. The digital currency promised a payment method outside of government control, offering unparalleled transparency and security. Bitcoin aimed to blaze a trail no other currency had before.
“That Genesis story is pretty incredible,” Jon said. “And that contributes to some of its intrinsic value as well.”
Bitcoin has more than ideological value, of course. An experimental pizza purchase of 10,000 Bitcoins in 2010 (a milestone now observed yearly on May 22), would now be worth $45,000,000, 10 years later.
Plenty of people have written off Bitcoin, and many still do. But its incredible rise has made it tough to ignore. People who believed in it from the beginning, like Jon, and who turned Bitcoin into an investment are ahead of the curve.
“I was always turned on to it as an asset class and kind of interested in it,” Jon remembered of his early days into crypto. “Presently Bitcoin, in particular, is a very legitimate asset class . . . I’m bullish on Bitcoin right now; there’s a massive amount of institutional money that’s going into Bitcoin, and a lot of the traditional sort of architecture of finance and is going to bitcoin.”
Bitcoin is the elephant in the investment room. It must be addressed because it’s changing the world and affecting our marketplace. Let’s set the stage with some definitions before we explore those changes.
The Basic Definitions of Bitcoin and Cryptocurrency
It’s easy to dive deep into talking about cryptocurrencies without addressing the nuts and bolts of the topic. I’ll rely on trusted resources like Investopedia for accurate definitions, and I’ll link to these sources for your further reading.
Fiat Money
Fiat money is the money we all know and are familiar with.
The most straightforward definition of this term comes straight from Investopedia: “Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it as is the case for commodity money. Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies.”
Cryptocurrency
Cryptocurrency is an alternative to Fiat money. These digital currencies were developed to operate on decentralized networks. They were not issued by any centralized authority, so the currencies could be free from government interference or manipulation.
Because it is secured by cryptography, this type of currency is “nearly impossible to counterfeit or double-spend,” according to Investopedia.
Bitcoin
Bitcoin is the leading cryptocurrency, the one most people know of. It has the largest value and market share of all cryptocurrencies.
According to Investopedia, Bitcoin has “no physical bitcoins, only balances kept on a public ledger than everyone has transparent access to, that – along with all Bitcoin transactions – is verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite it not being legal tender, Bitcoin charts high on popularity, and has triggered the launch of hundreds of other virtual currencies collectively referred to as Altcoins.”
Blockchain
Blockchain technology is the foundation of Bitcoin and cryptocurrencies.
According to Blockgeeks, blockchain is, “in the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) is secured and bound to each other using cryptographic principles (i.e. chain).”
Blockgeeks called blockchain an example of a “democratized system” because “it is a shared and immutable ledger, the information in it is open for anyone and everyone to see. Hence, anything that is built on the blockchain is by its very nature transparent and everyone involved is accountable for their actions.”
This definition of blockchain sets us up to discuss why this moment is so powerful for Bitcoin (but feel free to click on any of the links to learn more about Bitcoin basics).
The Current State of Bitcoin
The state of Bitcoin is always fluctuating, so I can give a picture of it only at the time of writing.
After a sharp dip that mirrored the overall decline in markets during the COVID-19 pandemic, Bitcoin has bounced back and increased in value.
One reason Bitcoin regained its value was the block-halving event on May 11, 2020.
Block-halving refers to cutting the Bitcoin miners’ reward in half every four years. The process of mining bitcoin works like the following, according to Investopedia:
“Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add the transactions to the end of a block and create chains of these blocks of transactions, forming the blockchain. When a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with Bitcoin.”
Halving lowers supply and creates scarcity, which drives up the value of Bitcoin.
Following the 2020 halving event, Bitcoin is rising in value, and people are taking notice.
Forbes predicts Bitcoin could be one of the best performing assets of 2020, and this survey of major cryptocurrency investors reveals a shared belief that Bitcoin could rise in value to over $20,000 per Bitcoin by the end of the year, mirroring its epic spike in value in 2017.
The steady climb of Bitcoin is leading large investors, such as Paul Tudor Jones, to stake their claim in the Bitcoin market. Jones has predicted vast and impending money inflation due to the economic crisis and has compared having Bitcoin to “owning the fastest horse.”
In my interview with Jon, he said that the entry of influential people into the market is a sign of Bitcoin’s wider acceptance; therefore, a system to manage Bitcoin the way other investments are managed would come into play.
“There’s all the trappings of institutional money management,” Jon explained. “Managing family office money, very wealthy individuals in need of institutional custody, where you take ownership or management of financial assets for wealthy individuals – there’s a whole set of tracks, controls and compliance for all that. So, that infrastructure is coming to or has come to specifically managing Bitcoin.”
Nothing is certain, but by all accounts, cryptocurrencies in general and Bitcoin in particular are on the rise, becoming more mainstream.
In case Bitcoin is catching your attention for the first time, let’s review the pros and cons of the world’s most popular cryptocurrency.
The Benefits of Bitcoin
“The beauty of Bitcoin is that it’s highly liquid if you want it to be. You have custody over that asset, if you want. It’s self sovereign, because nobody can censor your transaction,” Jon said.
You may recall that Bitcoin exists outside of government regulations.
This can be of massive benefit for transactions involving a significant amount of money. Using Bitcoin can avoid country-specific limitations on certain types of transactions or taxes.
Bitcoin’s trustworthiness as a currency is not to be overlooked. Because it’s secured by cryptography and is theoretically impossible to counterfeit or double-spend, it is not subject to the same weaknesses as Fiat money when large sums of digital currency are on the line.
Overall, it’s much less restrictive than Fiat currency is meant to promote safe transactions. Bitcoin’s freedom from regulation is why it exists in the first place and why so many believe it is a financial revolution.
Arguably, one of the most beneficial aspects of Bitcoin is that its value can skyrocket, unlike most other investments. Your Bitcoin net worth, if timed right, can reap an incredible amount of money more quickly than other investments. Bitcoin’s growth keeps interest in this digital currency high and will likely continue to drive up its value in the long run.
All that said, I am not a financial advisor, so I can’t guide you in gaining more value for your Bitcoin, and this article does not promote putting all your money into Bitcoin. Ultimately, Bitcoin is an asset, and all the rules of safe investing apply. If worked with appropriately, Bitcoin can gain value over time, as any other asset might.
The Downsides of Bitcoin
Bitcoin is known to be high risk and unpredictable.
Yes, it has experienced incredible highs, but it has also gone through intense drops in value.
It’s a mode of investment still young in development, and if you don’t know what you are doing, it’s not wise to go all in on Bitcoin.
Jon cautioned, “I don’t think it’s for everybody. I think it’s for somebody that might be overall bullish on the asset, or they have a special case where they might have some type of banking difficulty where Bitcoin makes things more feasible. But I don’t think people should rush into something they don’t understand well. People need to do their own research and really understand it. I’ve seen it takes a lot of emotional training and understanding to navigate this stuff. So I would caution everyone to be extremely careful.”
Panic-buying and -selling are always a bad idea, but in the world of cryptocurrency, they are compounded by a lack of understanding the investment, which can get you into trouble. In panic mode, it’s much too tempting to sell at a loss, which has happened to Bitcoin investors again and again because its value has been volatile.
Another downside to Bitcoin is having to understand proper storage. Bitcoin must be kept in a place with the right safety and security measures. Jon suggested a cold storage wallet in his interview. A quick Google of the phrase “people losing Bitcoin wallet” will pull up results of people losing hundreds of thousands or even millions of dollars, illustrating why storage is an important aspect of dealing with Bitcoin.
Now that we’ve discussed the good and bad sides of Bitcoin, let’s talk about its importance to our marketplace.
Bitcoin, Crypto, and Our Marketplace
We are the first online business brokerage to accept Bitcoin.
In this 2015 interview, our founders Justin and Joe were transparent about their hang ups on Bitcoin. But we changed our tune. We recognized Bitcoin was a viable payment method going nowhere, and that it made a lot of sense for buying and selling online businesses.
Bitcoin makes up the majority of our cryptocurrency transactions, but we have also worked successfully with Ethereum, USDT (Tether), and Monero.
Here are a few tips for working with crypto on our marketplace:
- If someone pays us in Bitcoin, we immediately convert it into USD. If the seller wanted to be paid in Bitcoin, we’d then convert it back into Bitcoin. This ensures that 100% of the USD amount of the business’s sale price comes through.
- Remember the importance of crypto storage? We do too: if an incorrect wallet ID were given to us by a buyer or seller, they could never get their money, and it would be gone forever.
- Depending on how much Bitcoin is sent, we may not receive it for two to five hours. Because we never know how long the transaction will take, we highly encourage customers to coordinate their payment with our accountants’ availability. Due to Bitcoin’s constant value fluctuations, it’s important to plan ahead.
- Crypto can be and has been used for credit on file, full or partial payments, and earnout payments.
Cryptocurrencies are a growing presence on our marketplace. After beginning to accept Bitcoin, we’ve seen its spikes in value transform sellers’ earnings. In one deal, a seller turned the low six-figure price for their business into a high six-figure sum nearing the million-dollar mark.
This success story reflects what many hope to get out of Bitcoin: wild and unexpected riches by turning $1 into $100. If you can make a Bitcoin transaction at a good time, close to a halving event or riding a spike in Bitcoin value, you could potentially multiply the very multiple you got for your business. While we cannot promise such an outcome or claim it’s the norm, it has happened, and it’s something to consider if you’re looking to use Bitcoin on our marketplace.
There are two sides to every story on our marketplace. Let’s discuss why Bitcoin is worth sellers’ and buyers’s consideration.
Why Sellers Should Consider a Bitcoin Payout
The Bitcoin benefits we’ve explained hold true for deals on our marketplace.
Bitcoin isn’t regulated by banks or governments, so you avoid dealing with those entities while selling your business.
Banks may step in and flag a transaction they deem untrustworthy, causing headaches over getting paid for your business. Bitcoin sidesteps this problem. International transactions can go through with ease and may also avoid taxes specific to the country where you are based (however, you should always consult a tax professional on the legalities of your deals concerning taxes).
If receiving payment quickly is important to you, a Bitcoin transaction can go through in a matter of hours and can be coordinated in advance. Any transaction for a large sum in a normal currency could take a few days or more to process, making Bitcoin the speediest payment method.
How Buyers Benefit from Paying with Bitcoin
Just as a seller may want to receive their money quickly, a buyer may want to pay quickly.
This makes sense. The deal doesn’t close, and the business isn’t yours until we receive your money. If you are in a down-to-the-wire race to buy a business, paying in Bitcoin could help you close the deal in record time. You wouldn’t have to worry about losing out on your dream business.
Avoiding bureaucracy and red-tape for buying your business is the cherry on top.
If you’re a buyer with Bitcoin unsure how best to use your digital coin, using your Bitcoin to purchase a digital asset with us is a good way to diversify your digital portfolio.
The Future of Bitcoin and Cryptocurrencies
No one can predict what Bitcoin, or any other investment, will be worth in the coming years.
Bitcoin enthusiasts’ investments may reach massive highs or swing backward in value. Most Bitcoin investors seem to be in it for the long haul, prepared to ride out the ups and downs while awaiting a future in which Bitcoin will steadily rise. That major players are entering the world of Bitcoin and classic investment systems are backing it indicates this currency is not going anywhere fast.
Jon summed it up well when asked why people should consider Bitcoin. He said it is always wise to diversify your investment strategy and, “at the very least, what’s it hurt to have a little skin in the game?”
It’s a good question to consider when thinking about diversifying your investment strategy to earn in a competitive market. There are always options available and in terms of our marketplace, you have the freedom to transact in Bitcoin or Fiat, whichever is your thing.
Curious about your options when buying from us in Bitcoin? Set up a call with one of our business analysts, who will walk you through the process. If you love the idea of selling your business and earning in any currency you choose, you can set up a call to plan your exit strategy.
