Cryptocurrency as a means of payment has many advantages, but its use can be associated with risks. One of the main disadvantages of digital money is high volatility, which can lead to significant losses. Fortunately, there are ways to prevent this from happening.
Our article explains the causes of volatility in the cryptocurrency market, how to protect yourself from exchange rate fluctuations, and how auto conversion can help you avoid financial losses.
Key Risks of Accepting Cryptocurrency Payments
There are two main ways to accept cryptocurrency as a means of payment:
- Direct transfers to the wallet. This helps to exclude the use of intermediaries like third-party services. However, it can be inconvenient for customers, and also does not allow you to track transactions and use other features that are offered by specialized services.
- Crypto processing. This kind of system provides the client with a convenient interface and the business owner with several useful features. These include AML transaction checks, volatility protection and other security measures that will reduce the risks of accepting payments in cryptocurrency.
Some of the main risks include volatility, dirty cryptocurrency and problems related to withdrawal to fiat.
Volatility
Digital currencies volatility is one of the main struggles of this market that all crypto owners face. Fluctuations in the exchange rate can be both an opportunity to make extra profits and the cause of significant losses in the event of a currency collapse.
High volatility is one of the reasons why many entrepreneurs are suspicious of cryptocurrency payments. It makes income from the sale of goods and services less predictable. To avoid losses, you need to monitor market conditions closely or use stablecoins.
Dirty cryptocurrency
Dirty cryptocurrency refers to digital coins that have been involved in illegal transactions, such as fraud, money laundering, and hacking.
Even if such coins have gone through a series of legitimate transactions after one illegal transaction, they can still be identified. Their use can lead to cryptocurrency exchange account blocking, fines and even criminal liability.
To avoid such problems, AML verification of cryptocurrency transactions will help. Many processors offer this service, which allows suspicious transactions to be blocked in advance.
Withdrawal to fiat
Withdrawing cryptocurrency into fiat money can be difficult for several reasons:
- there is a risk of fraud if you do not use a trusted exchanger with a good reputation;
- banks often consider large transfers related to cryptocurrency suspicious — it will be necessary to prove the legality of income.
Cryptocurrency Rate Fluctuations Reasons
The frequent changes in the cryptocurrency exchange rate have a few main reasons:
- Lack of collateral. Unlike fiat currencies and stablecoins, cryptocurrency is not backed by tangible assets. Because of this, its rate largely depends on the demand for a particular coin, which can change under the influence of external factors.
- Lack of regulation. Most countries still need clear legislation regulating the crypto sphere. The rate is not centrally controlled, and investors regard this asset with mistrust.
- Current state of the market. The crypto market is a relatively young and small sphere that is still in the formation stage. It is easily destabilized, and participants' moods can change radically in a minimal time.
- Media influence. News, publications, and articles on social networks are among the factors that significantly influence the crypto market. Unconfirmed theories and forecasts can lead to a rise or fall in the exchange rate.
Volatility Protection Methods
Crypto owners protect themselves from volatility in many ways: they monitor market conditions, set stop losses, and build long-term strategies. However, for businesses that accept payment via cryptocurrency when selling goods and services, the most reliable way of protection is to use stablecoins.
Unlike «regular» cryptocurrencies, stablecoins have tangible collateral. The most well-known of these, USDT, is backed by dollars at a 1:1 ratio. It is one of the most popular currencies with minimal volatility.
There are two ways to use stablecoins to protect against volatility:
- Accept crypto payments in stablecoins. Almost all services for processing transactions in digital currencies support USDT — it is the third most popular currency after Bitcoin and Ethereum.
- Use auto conversion of incoming payments. When this function is enabled, all funds passing in transactions through the cryptocurrency payment service are automatically converted at the most favorable exchange rate available.
As a result, the client can use any convenient currency, and the entrepreneur receives USDT or another stablecoin that is not subject to exchange rate fluctuations.
Auto Conversion of Incoming Payments with CryptoCloud
CryptoCloud is a crypto processing service which features include automatic conversion of payments to USDT. It is activated manually in the personal account settings and used for BTC and LTC transactions. The system analyzes the available offers of 10+ different operators to find the most favorable exchange rate.
In addition to auto conversion, the cryptocurrency processing capabilities include AML checks that will protect the merchant from dirty cryptocurrency, selecting the payment side of the commission, setting the accuracy of transactions, analytics, fast withdrawals, and more. You can accept payments in major cryptocurrencies both through the website and other platforms thanks to customized and permanent payment links.
The service can be integrated for free via API, HTML or ready-made e-commerce plugins. Checkout is available in several languages and can be customized. Commission for payment processing is from 0.4%.
Reducing Risks When Working with Cryptocurrency
Despite the convenience of crypto payments and the possibility of using them to bypass restrictions, working with digital money is associated with certain risks. These include the possibility of encountering dirty coins and high volatility that can lead to losses.
CryptoCloud offers protection against both risks. The system allows you to connect AML checks to detect dirty cryptocurrency, as well as auto-conversion to USDT to protect assets from exchange rate fluctuations. Learn more about these and other features of the service on our website.
