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Cryptocurrency vs. Stocks: Where Should You Put Your Money?

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There is no denying that cryptocurrency has taken the world by storm in recent times. According to Bloomberg, these digital currencies are estimated to be worth around $2 trillion.

Of course, Bitcoin is still the most popular. However, there are new and exciting coins coming to the fore all of the time.

As an investor, you may be pondering whether or not you should invest in cryptocurrency or whether you should go down the more traditional investment route of stocks. This is something we will explore in more detail below.


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Before we get into the particulars, we must stress that there are no guarantees when it comes to investing in stocks or cryptocurrencies. People have made a lot of money investing in cryptocurrency and people have also made a lot of money investing in stocks. There are also individuals that have lost a lot of money investing in both.

Therefore, it is critical to remember that it is a personal decision, which needs to be made based on your own thoughts, financial situation, and risk profile.

Should you invest in stocks or cryptocurrency?

Any savvy investor needs to have a thorough understanding of what they are investing in. It is critical to weigh up the rewards vs the risks when investing in anything, and what is going to drive the success of the investment.

If this sort of information is not available to you, you will not be able to make the calculation. In this situation, you are not really going to be investing. Instead, you are going to be making more of a gamble!

With that being said, below, let’s take a look at both options to help you get a better understanding:

Cryptocurrency

Cryptocurrency is typically not backed by any hard assets. There are a few exceptions, such as stablecoins, yet this is generally the case. Bitcoin, Ethereum, and the other most popular crypto coins are not backed by any hard assets.


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A cryptocurrency may enable you to carry out certain functions, for example, sending money to another individual or utilizing smart contracts that execute automatically once specific conditions have been met.

It is also becoming a lot easier to buy cryptocurrency than ever before. You can check out this guide on how to buy Ethereum with credit card payments to see exactly what we are talking about. All it takes is a few simple steps.

Because cryptocurrency is not backed by cash flow or assets, the price rises and falls, making this a volatile market. Speculation driven by sentiment is the only thing moving the price of crypto. As the sentiment changes, the prices shift, and this can sometimes happen in a dramatic manner.

Therefore, the price of cryptocurrency is only driven by the hope that another person is going to buy it for a greater price in the future. For your crypto coins to represent a successful investment, you need to get someone else to purchase them from you at a higher price than what you paid for them. This means that the market essentially needs to be more optimistic than it was before.

Stocks

Stocks are fractional ownerships in a company. A lot of people lose sight of this. When you have a legal ownership stake in a business, it means that you are a shareholder, and therefore, you have a claim on the cash flow and assets of the organization. This will back your investment and give you the basis for your valuation.

So, now you need to understand why stocks increase and dip in price. A stock price will move as investors evaluate the company’s future success. While investors end up becoming overly optimistic about the stock in the short term, the stock price is ultimately going to depend on the business’s ability to boost profits over the long term.

In other terms, you are pinning your investment on the company being a success in the long term.

What are the benefits of investing in cryptocurrency?

There are a number of different benefits to consider when it comes to investing in cryptocurrency. This includes the following:

  • There is a wide interest in digital currencies – There seems to be an increasing interest in cryptocurrencies from governments, companies, and investors. In fact, El Salvador adopted Bitcoin as a legal tender last year. We have also seen that Bitcoin is held on Tesla’s balance sheet. The growing acceptance of digital currencies is only going to be a good thing for investors.
  • The number of coins is increasing – When cryptocurrency first started, there were only a few options in terms of the coins that investors could put their money into. However, this has changed due to speculative interest. New coins are introduced on a regular basis, meaning you now have thousands to select from.
  • Potential for outsized gains – Purchasing cryptocurrencies means that there is potential for significant gains on your investment. A number of cryptocurrencies have seen their prices go through the roof since they were first introduced. These returns are the chief reason why people are allured by the idea of putting their money into this type of investment, to begin with. However, it is important to note that the possibility of price appreciation does come with considerable risk.
  • Potential hedge against fiat currency – For some investors, one of the greatest appeals that cryptocurrency has is the decentralized nature of the platform. The governments or central banks do not control cryptocurrencies, which often like printing money to create inflation in fiat currencies, such as GBP, EUR, or USD. cryptocurrencies have often been referred to as ‘digital gold’ by some investors who carry it in their digital wallets because they believe that it is going to protect them from inflation.

What are the benefits of investing in stocks?


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Now that we have evaluated the different benefits that are associated with investing in cryptocurrency, let’s take a look at some of the benefits you can expect by investing in stocks:

  • Stronger regulation – Stock exchanges, companies, and brokers are all heavily regulated via different government agencies. Businesses are required to supply specific information to investors via the Exchange and Securities Commission. While no regulatory body can claim to be perfect, stocks have been around for quite some time now and so it is safe to say that there are protections in place that do give investors confidence.
  • Accessibility – It is easier than it ever has been to invest in stocks these days, with a lot of different online brokers reducing trading fees to zero. You can invest in stocks individually or you can decide to buy a diversified collection of stocks through an index fund. Index funds aid in keeping costs low and you can create a diversified portfolio even if you do not have a lot of money, to begin with.
  • Stocks have intrinsic value – A stock is an ownership interest in a business and so the value of the stock over time depends on how successful the company is. Businesses have assets that produce cash flow and earnings for investors, generating what we call intrinsic value.
  • A long history of solid returns – While cryptocurrency may be one of the newer investments on the market today, stocks have a proven and long track record of generating solid investment returns, with the S&P 500 returning roughly 10 percent over the long term. In the short term, it is true that stocks can be volatile. However, if you are investing and playing the long game, stocks could be the perfect thing to add to your portfolio.

Cons of investing in crypto and stocks

According to Phi Dang, “There are also some risks and drawbacks associated with investing in both cryptocurrency and stocks, so it is important to be aware of these so you have all of the information you need to make the best decision for you.”

In terms of stocks, they can be volatile, especially during the short term. Moreover, there is a lower possibility of extreme gains. In the long term, they have returned around 10 percent on average.

While stocks are volatile, cryptocurrency is extremely volatile. There are also some risks from a regulatory standpoint, and it is important to note that cryptocurrency does not have any intrinsic value. These coins are not backed by underlying earnings or assets, as is the case for stocks.

Where should you put your money?

So there you have it: everything you need to know about cryptocurrency and stocks. We hope that this has given you some perspective on both types of investments.

Of course, investments are always a personal decision. You need to consider the money you have available, your risk profile, and the diversity of your investment portfolio at present.

If you are not feeling confident, you may want to consider working with an investment advisor who can help you to devise the perfect investment plan for your needs.

Source: Plato Data Intelligence: Platodata.ai

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