I remember when my team at my telecom company decided to introduce smart applications in early 2019 to keep pace with a rapidly changing world, also because our products are targeted at different markets, we decided to be at the forefront of this transformation to attract a new segment of customers and adopt digital currencies as a means of payment for our services and products. The idea was exciting and in line with the evolution of the market, but it was not without challenges. When we announced accepting digital currencies, we faced a fundamental problem: the high volatility of digital currencies’ prices. We feared that this volatility would lead to financial losses, especially if the value of the currencies received decreased significantly before converting them into cash.
Challenge: Price Volatility
At first, we were excited to experiment, and started accepting popular currencies like Bitcoin and Ethereum at the time, and others later. However, we soon realized that daily market fluctuations could make our income less stable. If we received a payment of $1,000 in Ethereum, the next day we could find ourselves with a value that was 10% or more lower. This volatility was a threat to the sustainability of our business.
Find a solution
Instead of abandoning the idea, we decided to look for a smart strategy that would allow us to continue accepting cryptocurrencies while protecting ourselves from these risks. We found the solution in leverageless futures contracts. The idea was simple: once we receive a payment in cryptocurrency, we open a futures contract with a size equal to the value of the payment.
Execution: Hedging with Futures
When we received a payment in Ethereum, for example, we would open a futures contract of the same size without using any leverage. This contract would fix the price of Ethereum at a certain value, so that if the value of the coin fell after receipt, we would make a profit on the futures contract to offset any losses. If the value rose, the profit from the rising coin would offset any losses on the futures contract.
This way, we ensure that the total value of the payment we receive remains stable, regardless of the market movement.
Results and lessons learned
Experience has taught us a lot. First, we have learned that adopting innovation does not mean blind risk-taking, but rather it must be thoughtful and based on clear plans. Second, we have realized the importance of financial instruments such as futures contracts, which can transform from speculative tools into effective means of protection if used wisely.
Negatives and challenges
But as with any strategy, the idea was not without its drawbacks:
1. Additional costs: Opening futures contracts requires fees, which can sometimes be large, which reduces the profit margin.
2. Complexity of the process: Managing futures contracts on a daily basis requires a specialized team to understand the market and track the movements accurately.
3. Freezing liquidity: Using futures contracts without leverage means freezing part of our money as collateral, which may limit our ability to invest it in other areas.
4. Possibility of Errors: Human errors or market misjudgments may result in contracts being opened that do not exactly match the value of the currencies received, exposing us to additional risks.
5. Restriction in accepted currencies: Due to complexity, we focused on a limited number of cryptocurrencies, which may lose a segment of customers who use other currencies.
Inspiring others
I share this experience because I realize that many SMEs may face similar challenges when adopting cryptocurrencies. Solutions exist, but we must have the courage to explore and implement them carefully. If I have one piece of advice, it is this: don’t be afraid to innovate, but always be prepared to protect yourself with the right tools.
Today, we are proud to have been able to provide a modern payment experience to our customers while maintaining the stability of our business. While we have faced challenges and downsides, this experience has been a valuable lesson that has helped us balance progress with caution.