Is It Better To Invest In Crypto Or Stocks?
The global market is a complicated system that is hard to predict. The stock market goes up and down, stocks are bought and sold, people make money off of it.
But it’s really not a difficult concept when you compare it to the bitcoin market.
Cryptocurrencies work in an almost identical fashion. Cryptocurrency has no intrinsic value while investors invest in stocks to obtain a profit.
This leaves the possibility of using cryptocurrency as a medium of exchange that can be used outside of trade and finance.
Cryptocurrency also offers more anonymity than stock markets, which opens up new opportunities for criminal activities, such as money laundering or drug trafficking.
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We’ll look at a few differences and similarities between stocks and cryptocurrency.
Cryptocurrencies can be used as a medium of exchange
Aside from the speculative aspect of investing in stocks, there’s also a purchase of an item for use in the future.
Cryptocurrency is a medium of exchange that can be used to buy and sell goods and services. A person could buy some cryptocurrency, convert it to fiat currency, and then buy goods with their Bitcoin balance.
One of the biggest differences between stocks and cryptocurrency is how they are governed.
Securities markets are governed by regulations and laws. Cryptocurrency has no governing body or organization to enforce the rules of the market or protocol itself.
That makes it much easier for hackers or criminals to use cryptocurrencies in illegal ways.
The NYSE is controlled by the U.S. Securities and Exchange Commission (SEC) while cryptocurrency is not.
Cryptocurrency can be used in illegal activities with much less risk of being caught or punished because cryptocurrency has no governing body or organization.
Both are speculative
Both the stock market and cryptocurrency are extremely speculative.
The price of a stock has no real meaning other than what investors on the market give it.
For example, a share of Facebook may be worth $100 USD in the future but there’s nothing inherent in a share of Facebook that justifies that price.
Cryptocurrency is no different as there’s nothing backing cryptocurrency prices other than speculation from investors on the exchange.
Both are traded on exchanges
Like stocks, cryptocurrency is bought and sold through exchanges.
Cryptocurrency has many different exchanges to trade through that offer hundreds of different cryptocurrencies.
The most popular exchange for trading cryptocurrencies is called Coinbase which allows people to buy and sell via their bank account or credit card.
Crypto is easier to own
You can mine a number of cryptocurrencies, including Bitcoin and Ethereum, on your own computer.
This makes cryptocurrency easier to get your hands on if you’re a tech-savvy person with a PC.
You can open an online brokerage account and buy stocks through licensed financial agents.
Cryptocurrency is not as easy to quickly obtain and it requires certain knowledge of technology and programming.
You could potentially rent a mining rig for cryptocurrency or buy the hardware for mining in the home which could be an extremely expensive investment or current trend.
However, if you understand how cryptocurrency works safely and securely, then you should be able to make money from it on a long-term basis by selling that hardware after earning back the costs from hashing power generated from mining.
Stocks on the other hand, are much easier to buy and sell. You don’t need any technical knowledge to invest in the stock market, but it’s a good idea to know a little about investing because both have their risks.
Stocks cannot be mined and are stored completely on a centralized exchange.
The value of stocks is determined by their market capitalization, stock price, and the amount of shares that exist.
Therefore, the more investors buy and sell a stock, the higher its price will rise or fall.
Stocks can only be traded on business days
Stocks are only traded on business days, which makes them more difficult to invest in.
This can also be a good thing because it means that there will be fewer disruptions on the stock market if something happens during the trading day.
Cryptocurrency is traded 24/7 allowing investors to buy and sell whenever they please.
Cryptocurrencies are riskier
There’s no telling what the price of a cryptocurrency will be in the future.
Cryptocurrency is not covered by any governing body or agency, so there is greater risk when it comes to investing in cryptocurrency than stocks.
However, if an investor holds for long enough then cryptocurrency can appreciate significantly as happened with Bitcoin in December 2017.
Stocks can be easier to predict. When a company releases quarterly earnings, the prices of stocks are usually more certain.
However, cryptocurrency can be very volatile and it’s hard to tell what will happen to a cryptos price in the future.
Government regulations may also change the price of a stock or cryptocurrency.
Regulations could cause an ETF to drop in value because it would not fit with the new regulations and would not be able to be traded on brokerage accounts.
Stocks are subject to the ups and downs of an economy
When the U.S. economy is up, stocks will usually be up if you invest in them but this is not always the case for cryptocurrencies like Bitcoin.
If a country’s economy goes down, then its stock market will likely follow suit as well as other economic markets.
But when there’s economic growth in a country, then its stock market will also follow suit.
Cryptos depend on hype and mass adoption which makes it more difficult to predict whether they will increase in value or decrease in value.
Which one should you go for?
It all boils down to risk tolerance and goals for investing. If you like to invest for the long-term then the stock market or cryptocurrency may be good investments for you.
The cryptocurrency trail may be more difficult to navigate, but if you’re willing to risk it then you could earn a large return on your investment as has happened in previous years with Bitcoin.
If you’re saving up money for a goal, then the stock market might be more suitable.
You can put your money into index funds which are funds that track the performance of an index, such as the S&P 500 Index.
These funds will allow you to make money on average in any economy and if the economy grows because of that then your invested capital will likely appreciate as well.
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