The crypto markets are notoriously volatile, with exchange rates fluctuating wildly from one moment to the next. For businesses that accept crypto payments, this unpredictability can be a major concern. To address this, NOWPayments has introduced the Fixed Rate option, a feature that allows merchants to freeze the exchange rate when creating a payment. This article delves into the essence, benefits, and usage of the Fixed Rate option, providing a comprehensive guide for businesses navigating the world of crypto payments.
Crypto Payments in the Age of Volatility
At the heart of the cryptocurrency market is volatility. Prices can swing dramatically, and these fluctuations can impact the value of transactions. This can be particularly challenging for businesses that accept crypto payments. If the value of a cryptocurrency drops significantly between the time a customer makes a payment and the time the business receives it, the business could end up with less than they expected.
In the traditional finance world, businesses can hedge against currency volatility using various financial tools. However, in the crypto space, these tools are not widely available or may not be practical for smaller businesses. This is where NOWPayments’ Fixed Rate option comes into play.
Understanding the Fixed Rate Option
The Fixed Rate option is a feature that enables businesses to freeze the exchange rate when creating a payment. This means that regardless of how much the market fluctuates, the exchange rate at the time of payment creation is the rate that will be used.
This feature is an extension of NOWPayments’ autoconversion capability. Autoconversion is an automatic exchange of cryptocurrency during payment, allowing the customer to pay in one coin and the merchant to receive another. This conversion typically takes place when the money reaches the processing stage. However, due to market volatility, the exchange rate can change between the time the payment is created and the exchange.
The Fixed Rate option mitigates this risk. When using Fixed Rate, the transaction takes place at the rate at the moment of payment creation. This offers protection for businesses against market volatility and ensures they receive exactly what they expected.
The Benefits of Fixed Rate
The Fixed Rate option offers several benefits for businesses that accept crypto payments.
1. Protection from Market Volatility: The most significant advantage of the Fixed Rate option is that it shields businesses from the volatility of the crypto market. By freezing the exchange rate, businesses can ensure they receive the expected amount, regardless of market movements.
2. Increased Confidence: The Fixed Rate option boosts confidence in the use of crypto payments. Knowing that they will receive the exact amount they expect, businesses can accept crypto payments with peace of mind.
How to Use the Fixed Rate Option
The Fixed Rate option is available through NOWPayments’ APIs and payment links (invoices). To use this feature, businesses need to select the “Fixed rate” option when creating a payment link in their NOWPayments Dashboard.
It’s important to note that the rate freezing period is 20 minutes. If the payment is not sent within this timeframe, the payment will proceed at the standard rate. The fee for using the Fixed Rate is 1%.
In essence, NOWPayments takes on the risk of the volatile market. The platform shows the rate to the user and, if the user agrees to it, provides a guarantee to exchange at that rate and nothing else. The user receives the exact amount they saw when creating the exchange.
There are some limitations to consider. The user has two minutes to create an exchange, and the deposit must be sent within 20 minutes. If the time limit is met, the user is guaranteed to receive the rate stated at the beginning of the exchange, regardless of market fluctuations.
If the user sends the deposit later, two options are available – refund or continue the exchange at the current rate (through the standard float).
For API partners, the Fixed Rate option can be used by specifying the flag useRateId=true in the estimate request. This will return a rateid to which the rate is bound. Exchanges can then be created with the rateid to which the rate is bound.
Looking Ahead: Crypto Payments and Fixed Rate
As the use of cryptocurrency continues to grow, businesses need tools to manage the risks associated with this new form of payment. The Fixed Rate option from NOWPayments is a powerful feature that offers businesses greater control over their crypto payments.
By mitigating the impact of market volatility, the Fixed Rate option makes it easier for businesses to accept crypto payments. It provides certainty and confidence, making the process of accepting digital currency smoother and more predictable.
In a market characterized by rapid changes and uncertainty, the Fixed Rate option is a beacon of stability. For businesses navigating the world of crypto payments, it offers a path to greater control and predictability. It’s a definitive step towards making crypto a more viable and reliable form of payment for businesses worldwide.