While Sotheby’s recent decision to accept cryptocurrency as payment for a rare diamond may seem like an inevitable progression to some, it also comes with risk, an executive from European cryptocurrency platform Nebeus said.
COO and head of product Michael Stroev said the move has the classic risk/reward profile.
“Accepting crypto as payment for high-worth items is logical but puts a lot of risk on Sotheby’s,” Stroev suggested. “Bitcoin and Ethereum are still highly volatile, as seen in this week’s drop in their value. By accepting crypto as payment, Sotheby’s would be exposed to a massive downside if the prices of Bitcoin and Ethereum fall. However, they would also be exposed to a potentially similar upside if cryptocurrency prices rally.
If the price of the accepted cryptocurrency tanks, Sotheby’s will be exposed to a significant loss. That is a much bigger risk than, say accepting it as payment. Teslas, which are cheaper and are not unique. In the latter situation a company is better able to manage its risk exposure, he added.
There’s a better solution, Stroev offered.
“The alternative to accepting crypto payments is leveraging crypto towards cryptocurrency-backed loans. In this situation, Sotheby’s would avoid any volatility risks, and the high-worth items would still be purchased using crypto. Crypto investors would maintain ownership of their assets while still being able to purchase new high-worth item investments. A win-win situation for both sides.”
