Are you looking forward to opening your own crypto company? If so, this article is for you. We will explain the advantages and disadvantages of crypto companies in 2021, especially during this hot and thriving climate for blockchain technology. If you’re looking to buy bitcoin and learn how to diversify your portfolio, then stick around, because this one is also for you.
What is a crypto company?
As the name suggests, it’s a company focused on developing blockchain technology applications or projects related to cryptocurrencies and similar technologies. For example, we have IOTA, which is not a blockchain but tangle-powered. These companies are the ones that bring cryptocurrencies to the market. By using the rising value of their coins, they can fund their activities and research to launch the solutions they promise to the market, to solve critical problems in the real world. Let’s check the pros and cons of crypto companies.
What are the advantages of crypto companies?
Launching a crypto company is an excellent way to efficiently fund a project, to develop better solutions in a timely manner.
1. Better funding
Instead of raising money the traditional way, by using cryptocurrencies, the process becomes more efficient since the developing team will have access to more liquidity and higher-priced coins, especially during a bullish market.
2. More coverage
The growing cryptocurrency prices bring more funds to the projects, and due to the media hype, companies can get more coverage for the solutions they offer. All in all, it’s one of the most powerful ways to advance and boost a project nowadays. With the right marketing team, you can piggyback off the blockchain and cryptocurrency hype to make the project more popular. It doesn’t mean investing a lot of money. Something as simple as airdropping free tokens to holders could be enough to boost interest.
3. Disrupting solutions for a competitive edge
Furthermore, using blockchain technology to develop solutions for the most critical problems nowadays is sure to bring the company a competitive edge. Blockchain solutions are more efficient and tackle problems like never before, which will allow companies to bring unique products and services to the market.
What are the disadvantages of crypto companies?
Even though launching a crypto company offers plenty of benefits, it also has some downsides. Below, find them listed.
1. Careful with piggyback
Even though your company will piggyback off the blockchain hype, you need to be careful. You shouldn’t use it as a vehicle to drive investors because it could mean trouble with the SEC. This is what is happening with RIPPLE at the moment, with their token $XRP. All in all, you need to consult with a lawyer to ensure that your project is meeting all the requirements to operate legally.
2. Bear markets are the enemy
Everything looks bright and promising when we are in the middle of a bullish market cycle, but when the bears come, they tackle down on everything, and that includes far more than just tanking the crypto prices. After a crash, the crypto space gets a bad rap, and that’s not good for companies deeply immersed in it. On top of that, since the prices decreased significantly, many times more than 90%, the team will have access to fewer funds. This can be mitigated by selling at higher prices, but you need to be careful with not ruining the tokenomics or being subject to investigations by the SEC.
Why is it important for you as an investor?
Because it lets you see that some companies might be in only for the money. A recent example is the DeFi100 case, where they blatantly robbed funds worth 32 million dollars. Therefore, this insight will invite you to analyze a company before you invest, so you can avoid these growing rug pulls that are damaging the crypto space as a whole. It will make you more thoughtful before you invest, especially if you want to hold crypto bags for the long term.
Furthermore, this perspective will allow you to identify solid projects that could give you enormous profits. Some examples include AAVE (formerly known as LEND), MATIC, ENJIN, etc. You could have found these projects with enough fundamental analysis, but now you can use this methodology to find these winners.
Now you know all about the pros and cons of crypto companies. If you’re planning to launch a crypto company, let us know in the comments.