As trade wars and diplomatic tensions with Iran increase, the USD is poised to become a volatile currency for the upcoming months, especially compared against more stable currencies such as the Euro and Swiss Franc. The uncertain future of the price of a dollar against foreign trading markets signals a problem for small businesses that rely on international exchange, such as shipping companies, online retailers, and firms that outsource labor to contractors abroad. To offset the volatility of the dollar, many companies are dividing their savings between a range of currencies, including cryptocurrencies on the global market, to secure their investments in the event that the USD crashes due to global uncertainty.
Currency Exchange
FOREX, also known as currency exchange, is a decentralized global market where all the currencies trade. In fact, ConnectFX (https://www.connectfx.org/forex-brokers-lowest-minimum-deposit/) estimates that FOREX markets accrue an average turnover of over 5 trillion US dollars per day, making it the largest market in the world. Entrepreneurs and small business owners in the finance sector often buy and sell currency on the FOREX market to increase their earnings.
Trading on FOREX is like buying stocks: if you expect a price of a certain currency to go up compared with another currency, you buy the stronger currency and if you expect the price to go down, you sell the weaker currency before the price sinks.
Cryptocurrencies for Small Businesses
Like FOREX, cryptocurrencies are decentralized form of “peer-to-peer” exchange that internet users can buy and sell on the global market. The main difference between cryptocurrency and traditional currencies is that the former is totally digitized with no paper form of money, and is not affiliated with any country on the global market.
For online retailers, the advantages of using a cryptocurrency to conduct business including lower transaction fees and increased protection from fraudulent credit card charges. The decision also helps enable your business to be more international: with a cryptocurrency, potential customers can see how you’re pricing goods or services in a universal currency, simplifying the decision to purchase.
Getting Started
Emerging business owners and entrepreneurs should enter the FOREX and cryptocurrency markets gradually to avoid making mistakes when placing your investments. A common question that beginners (and others) have is when is the best time to trade Forex. The answer is now. But you should start gradually.
Even total beginners can open a demo account to begin trading without risking their savings. Eventually, many entrepreneurs and international firms choose to allocate savings between a small range of currencies, including digital ones, to spread out your savings over a diverse portfolio of currencies on the global market. Unlike FOREX, the IRS classifies all cryptocurrencies as property. This means that if you “sell” some Bitcoin at a profit, you will have to report short term capital gains on your tax return and pay ordinary income tax rates.
Expanding into the global market through FOREX and cryptocurrency trading enables small and medium-sized businesses to increase their international outreach and buffer themselves against the volatility of the dollar compared to other forms of currency. It is also a good way to learn about the motivators behind the global finance industry, which can help protect your company in the event of a market crash.
