In November, when bitcoin and Ethereum rose to all-time highs on the promise of wider adoption, politicians and athletes raced to join in on the excitement by announcing that they would convert a portion of their salaries into cryptocurrency.
Among them was Mayor of New York City Eric Adams, who promised after his election that he’d spend his first three payroll checks in bitcoin, and wide receiver Odell Beckham Jr., after signing a new contract with the Los Angeles Rams, he elected to take his entire NFL salary in Bitcoin.
However, the cryptocurrency sell-off that has driven digital asset prices to historical lows demonstrates that challenges in crypto payrolls remain, and those hoping to get their pay and other benefits in cryptocurrencies may want to exercise caution.
“Taking part of your salary in bitcoin is a way to publicly signal your support for the space and your belief that it will succeed. It’s a way to vote with your wallet.” Christian Catalani, founder of the MIT Cryptoeconomics Lab told Yahoo Finance. “Of course, because of the volatility, this involves risk — and that’s why most people only take a part they can afford to lose.”
There are several advantages to paying employees and businesses in bitcoin: transfers are quick and cost-effective, it eliminates the middleman financial institution, and it’s a venture with growth potential. However, just as digital currencies have the potential to move upward, declines may occur quickly and unexpectedly, leaving staff earnings severely reduced.
“It is important to note that in many of the cases we’ve heard about, the individual is converting their salary, or a portion of it, into crypto after getting paid rather than their employer transferring crypto to them,” “I think we’ll see something different,” said Cathy Barrera, the founding economist of Prysm Group and program director of the Wharton Economics of Blockchain and Digital Assets program, told Yahoo Finance “But even for those whose employer is converting their dollars earned into crypto, we should think about these activities as being similar to investing some portion of one’s income.”
Bitcoin, the most popular digital cryptocurrency, has lost close to half of its value since reaching a high of $69,000 in November. Ethereum — the second-largest digital currency — has tumbled to around $2,700 from a peak of about $4,600 as potential rate hikes by the Federal Reserve cause investors to sell high-risk
Adams, who earns an annual income of $258,750 for biweekly paychecks of approximately $5,900 after typical tax withholdings, was predicted to have lost more than $1,000 on his first mayoral wage after changing his cheque to bitcoin and Ethereum (which fell sharply in value).
In response to a request for information, the mayor’s office provided the following statement:
“The Mayor is clear: New York City is the center of the world, and it should be the center of innovation. By converting his paycheck to cryptocurrency, as he previously said he would, he hopes to encourage the growth of this burgeoning sector and aid the City’s economic recovery.”
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