Crypto vs. Stocks: What’s the Better Choice?
Ever since its emergence a decade ago, cryptocurrency has taken the world by storm. It has quickly grown to be an uber-lucrative investment option for traders all over the world, putting a question mark on the age-old investment go-to, stocks.
Many traders are now tempted to completely ditch stocks and fill their portfolios with cryptos entirely. While others refuse to buy into the zeitgeist of the crypto revolution and stick to the tried and tested stock market.
The answer to which is better is a little more nuanced than that. Let’s take a look at both investment options and determine which will suit you the best.
Crypto vs. Stocks: What’s the Better Choice?
Cryptocurrency has emerged into a multi-billion dollar market in such a short time since its emergence. The value of Bitcoin, the first-ever cryptocurrency, currently sits at over 20,000 USD. It has naturally attracted a lot of investors looking to earn big money.
Stocks, on the other hand, are reliable, age-old investment options. They are familiar with extensive historical data to back up their returns and strategies. While crypto seems like a zeitgeist that might fade away, the biggest strength of stocks is that they are here to stay.
As an investor, both crypto and stocks are great options to invest in. All you need to do is understand what they are, their pros and cons, and how they operate to put them to work in the most productive ways.
Let’s take a deeper look at crypto vs stocks to help you pick the most suitable course of action for you.
1. Understanding Crypto Investment
Cryptocurrency is a relatively new medium of exchange that can be best described as a digital currency that runs on blockchain technology. It aims to decentralize the structure of money and give power back to the hands of consumers.
Some of the most popular cryptos include Bitcoin, Ethereum, Cardano, Dogecoin, Solano, etc. Cryptos are traded on exchanges dedicated to them, making it hassle-free to buy them. You’ll be able to buy Bitcoin or buy Shiba Inu coin with just a few clicks and expand your portfolio.
You can store the crypto in your wallet or spend them as you would regular money. You might send them to other parties as well as swap them for other cryptos. Cryptos offer a variety of uses and are fast gaining acceptance around the world, with El Salvador leading on that front.
Cryptos are not backed by any hard assets. They are completely online when it comes to their existence. Miners mine them to earn profits and mining itself is a complicated process you need to have a good grasp of before dabbling in it.
Let’s dabble in their pros and cons to look at both sides of the coin.
a) Pros of investing in crypto
Here are some of the lucrative pros that make crypto so inviting to investors:
i) Potential for big gains — The biggest draw of cryptocurrency is the potential to go big. Many cryptos have skyrocketed in value in a very short time to earn their investors huge gains. That said, this potential comes with a big risk as well.
ii) Decentralized nature — For many investors, the draw to cryptos is their decentralized nature i.e., their regulation is not controlled by any authorities. It gives them more freedom to operate and protects them from inflation. For this reason, it’s also called ‘digital gold’.
iii) Growing acceptance — Crypto has overcome its biggest challenge that it would be too niche and has gained widespread acceptance. More companies are accepting crypto as a payment method.
This has encouraged more traders to invest in digital currency as they are seeing uses they can put it to.
iv) Offers variety — Crypto has changed the trading landscape by offering a viable option for traders. Traders now have a lucrative option that has the potential of earning them big gains other than stocks.
b) Cons of investing in crypto
While cryptos offer big pros, you shall also be wary of the cons associated with a crypto investment. Some of them are:
i) Extremely volatile — Cryptocurrencies are very volatile, making them an extremely risky investment option. They may soar high in value for some time only to crash down later. Bitcoin, the most popular crypto, is the biggest example of this.
Crypto tracking website com reported that the profitability of Bitcoin sank to the lowest in months in July 2022. Even though it soared to its highest value in November 2021 with 69,000 USD. It dropped significantly in months.
ii) Regulatory problems — While many companies and some governments are embracing crypto, it still remains a controversial topic for many countries. Countries like China have even banned it.
iii) Cybersecurity risk — The very nature of a cryptocurrency being unregulated and decentralized gives cybercriminals opportunities to pounce on innocent traders. No authorities are overseeing such actions to safeguard traders.
iv) No intrinsic value — Stocks have a value of their own through the earning potential they provide. Cryptos have no intrinsic value as they are not backed by any hard assets. This also contributes to their volatile nature.
2. Understanding Stock Investment
In simple words, stocks are a fraction of the ownership in a business. Also called shares, stocks entitle the owner to earn a share of the profit a business receives. This profit is called a dividend, distributed regularly.
Stocks are bought and sold in the stock exchange markets. If you buy a stock, you become entitled to the profit, assets, and cash flow of the business corresponding to your share in the company.
You technically become the owner of the company in part. It means that stocks bring you wealth and ownership backed by real assets. This is sorely lacking in cryptocurrency that is not backed by anything.
Similarly, stocks also see rise and fall in value and they can be volatile at times, corresponding to the market conditions. But they are still not as volatile as cryptocurrencies as they still have underlying assets grounding them.
Let’s take a look at their pros and cons.
a) Pros of investing in stocks
Here’s what you gain by investing in stocks:
i) Reliable earnings — Stock markets have been around far longer than cryptos and have a solid track record of producing reliable returns for investments. Investors can study previous trends to devise strategies and earn big here.
ii) Accessible — It is extremely easy to invest in stocks through physical and online platforms. Moreover, you have the option to formulate better strategies based on historic research as well as track trends.
iii) Regulated — Stock exchanges are heavily regulated by the government to ensure no fraud or misdeeds occur. They offer a safer platform for traders to operate in.
b) Cons of investing in stocks
Some cons accompany investment in stocks:
i) No extreme gains — While crypto offers the potential to earn exponentially due to its extreme ups and downs, there is no such way to earn that big with stocks. Stocks return around 10% in the long run.
ii) High fees — The fees associated with stock exchange processes are often too high on account of it being heavily regulated by various higher authorities. This reduces the profit you aim to earn in the market.
3. The big question — Which is better?
Both cryptos and stocks offer their unique advantages and disadvantages. The answer to the question about which is better lies entirely in what you want to achieve as a trader and your trading strategy.
While there are no set strategies for traders, there are broadly three ways you might go with your investments. And cryptos and stocks fit differently in all three. They are:
a) Safe bet
If you want relatively safer earnings with a reliable income that builds your wealth, stocks might be a better option than crypto as they are not as volatile and do ensure a steady return in the long run.
b) Take risks
If you wish to take risks with your investing, then cryptos would be a more suitable option. The potential to earn is sky-high and you can get as creative as you like with your investments. But remember that the risk is also that high.
c) Building portfolio or wealth
The middle road to both the above approaches would be one where you invest in both cryptos and stocks depending on your needs and expected returns. It allows you to soar high on risks while having stability backing you up.
You can build wealth while diversifying your portfolio at the same time by investing in cryptos and stocks in measured capacities.
Investing Smartly with Cryptos and Stocks
Both cryptocurrency and stocks have a lot to offer to a trader when it comes to returns and ownership in the market. However, deciding where to invest can often be tricky.
While cryptocurrency offers the potential to earn big, stocks offer relatively stable earnings with ownership of assets.
The better choice out of the two would depend on what you want to get out of trading. Having said that, the current market environment favors crypto investment as you have the potential to go big with them.
Let us know in the comments what you think is the better choice between stocks and crypto.