Canada announced the registration of its first bitcoin investment fund in September 2017. Now, Canadian investors can grow their wealth through fund-managed investments in cryptocurrency and cryptocurrency products and services. Some investors have an insatiable appetite for bitcoin because of its historical upward trajectory. For this reason, the ability to invest in this type of currency has possibilities for small-business owners and entrepreneurs, but there are many things to consider before you go all in.
What Exactly Is Bitcoin?
In layman’s terms, bitcoin is a digital currency managed by computers. Techies called miners spend countless hours processing data, which results in the creation of bitcoin. While the original bitcoin enthusiasts transacted in cyberspace among themselves, these days anybody can buy and use bitcoin. The currency isn’t tied to any country, so it works well when you’re transacting in the international market. For example, say you want to shop in Japan. If a Japanese retailer takes bitcoin, you don’t have to worry about getting more or less for your Canadian dollars based on an exchange rate.
Widespread use of bitcoin has increased its value. As of December 21, 2017, 1 bitcoin is worth $21,305 Canadian, and the value keeps going up with each passing day. So for some small-business owners and entrepreneurs, it makes sense to start thinking about bitcoin as a way to increase wealth quickly.
Bitcoin Fund Investment
Canada legalizing its first bitcoin investment fund means that small-business owners and entrepreneurs can begin thinking about increasing the value of their cash by buying into such funds. Investing in a fund doesn’t mean you’re buying bitcoin. What you do is put your cash in the fund and watch it grow based on how bitcoin does. You then liquidate or sell when the value of your investment increases to your satisfaction.
The main issue with investing in cryptocurrency at this time is that it’s still relatively new, and many analysts think bitcoin may be subject to a cryptocurrency bubble. Though the price continues to rise dramatically, it could fall just as dramatically and quickly. It’s a good idea to carefully weigh the risks of investing in bitcoin in case the bubble pops unexpectedly.
Bitcoin as Startup Capital
As an entrepreneur, you might have a lot of bitcoin on hand, which you can offer to venture capitalists as a way to raise capital instead of offering equity shares in your company. If you don’t have a lot of bitcoin, or none at all, you can create your own cryptocurrency and offer it to venture capitalists with the expectation that the value will rise if your business is successful. This practice is called an initial coin offering, and if you’re in Canada, you’re in the perfect place to take advantage of this new way to raise money to launch a business. The provinces have their own regulatory bodies that also regulate ICOs — for example Autorite des marches financiers regulates ICOs in Quebec, and the Ontario Securities Commission regulates them in Ontario. Overall, Canadian regulatory bodies have shown enthusiasm for ICOs as a way to drive technology innovation.
Faster Wealth Generation
One of the easiest ways to amass bitcoin and grow your company’s wealth is to accept bitcoin as payment. Whether you have a physical location, an online location, or both, consider adding bitcoin as a payment option. Anyone who pays using the currency transfers it to you, and you benefit as the market price goes up. The caution here is that you may run into technical difficulties processing bitcoin transactions, so plan for some challenging setup.
Bitcoin is the new fintech craze, but think carefully before you invest. Because of the bubble and possible technical issues, you may find it beneficial to adopt a wait-and-see attitude before going all-in.