Crypto Vs Stocks: Which Is Better
Stocks and cryptocurrencies are dramatically different investment assets. While both are generally liquid assets that belong in the speculative side of your portfolio, the similarities end there. These are very different types of securities and belong in very different parts of your portfolio. Heres a summary of these two types of securities. A financial advisor can help you decide whether either or both of these are a good fit for your portfolio.
What Are Stocks?
Stocks represent ownership in a publicly traded company. Each share of stock you buy confers a percentage of ownership in the company itself. You receive this ownership in proportion to the number of shares that a company has issued.
For example, say that XYZ Corp. releases 50% of its ownership in the form of 50 shares of stock. If you buy one of these shares of stock you will literally own 1% of XYZ Corp.
An investor can make money by selling their stock shares to other investors. This is known as capital gains, the difference between what you paid for the asset and what you get from selling it. Beyond that, the benefits that you get from owning stock depend entirely on the individual company involved. Stocks can also gain value to their investors, through voting power held by shareholders and by other rights of ownership. Every individual company is different in terms of how it handles issues like dividends and shareholder voting rights.
What Are Cryptocurrencies?
How Bitcoin Interest Is Growing
A push to liquidity, such as the one seen in March, is rare, and it usually occurs at the climax of a market selloff. The fact that it also happened in Bitcoin around the same time hints that more institutional interest was in play than in previous crashes.
And growing institutional interest is one of several trends that King expects to be a major driver in Bitcoin prices over the years to come.
Coinbase, a digital currency exchange that’s expected to go public this year, said on Nov. 21 that its institutional asset base from $6 billion in April 2020 to $20 billion as of mid-November. And Canaccord Genuity recently pointed out a laundry list of recent institutional and other noteworthy cryptocurrency events. Here are just a few highlights from the last quarter of 2020:
- JPMorgan Chase sends its “JPM Coin” digital currency live and forms an Onyx division to focus on the blockchain.
- Billionaire investor Stanley Druckenmiller says he owns Bitcoin.
- Galaxy Digital announced the acquisition of two companies as it builds out a platform for institutional access to digital assets.
- Mexican billionaire Ricardo Salinas Pliego says 10% of his liquid assets are invested in Bitcoin.
- Billionaire and hedge fund manager Ray Dalio says Bitcoin has a place in investors’ portfolios.
- Insurance firm MassMutual purchases $100 million in Bitcoin.
Then there’s inflation.
What Is Binance And Can I Still Use It In The Uk
The UK financial watchdog has blacklisted cryptocurrency exchange Binance and banned it from carrying out any regulated activity over concerns about its money laundering controls.
The regulator has also ordered the company to stop any form of advertising in the UK.
Binance isnt based in the UK, so the British regulator doesnt have the power to stop investors from buying and selling cryptocurrency using the exchange. However exchanges do have to register with the FCA to operate in the UK.
This is a clear warning that investors should be very cautious.
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How Many Cryptocurrencies Are There What Are They Worth
More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $849 billion, regaining some ground from recent price lows. Still, the market value of bitcoin is down from April high of $1.2 trillion.
Decide Which Cryptocurrencies Make The Most Sense For You
After you’ve determined how much you want to invest, it’s time to figure out which cryptocurrencies are right for you.
For example, risk-averse retirees might benefit from the high interest rates available from stablecoins. Bitcoin serves as a starting point for new investors. Ethereum adds more risk, with more potential upside. And larger altcoins like Cardano or Solana offer a high risk, high reward option for risk-tolerant investors.
No matter what you buy, understanding what you own and why you own it can help separate an investment from a reckless gamble.
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Good Reasons To Invest In Cryptocurrency
Bitcoin Vs Stocks: Which Is Right For Your Portfolio
Investors nervous about the stock market might be looking for alternative investments like Bitcoin. When considering cryptocurrencies, though, its important to assess your overall portfolio goals and risk tolerance.
Learn about investing in Bitcoin over stocks in a way that may help you decide whether adding the cryptocurrency to your portfolio is the right move for your situation.
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Determine Your Ideal Cryptocurrency Allocation
In his book, The Psychology of Money, Morgan Housel discusses the importance of knowing what game you’re playing. Although we may be buying the same stocks or cryptocurrencies, we all have different investment objectives. Some people want to grow wealth over time, others want to day-trade for a quick buck. Then there’s everyone in between.
Knowing what you want to get out of an investment can help set the tone for a reasonable amount of exposure to cryptocurrency that suits your risk appetite.
Should I Invest In Crypto
Absolutely. Theres a lot of untapped earning potential in the cryptocurrency markets. Plus, its always a great idea to diversify your investment portfolio. What you should not do is put all your eggs in one basket. Part of the reason crypto investing got a bad reputation was because of greedy and careless investors who took their entire retirement savings and invested it in Bitcoin or Ethereum. Or even worse, Bitconnect. With that said, you can build wealth over the years by investing in cryptocurrency. You just need to follow a few simple steps:
- Build a cryptocurrency portfolio alongside your stocks. You dont have to choose one or the other.
- Diversify your crypto investments. Choose some of the heavy hitters like Bitcoin, Litecoin, and Ethereum to add to your portfolio.
- Also invest in some up-and-coming projects like Stellar or BlocPal, as well as established projects with low-cost tokens like Ripple and VeChain.
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Should I Invest In Cryptocurrencies
Bitcoin and other cryptocurrencies are speculative investments. Bitcoin doesnt fit within traditional asset allocation models, as it is neither a traditional commodity, such as gold, nor a traditional currency. Bitcoins dramatic volatility is driven primarily by supply and demand, not inherent value. Bitcoin doesnt have earnings or revenues. It doesnt have a price-to-earnings ratio, price-to-sales ratio, or book value. Traditional value metrics dont apply, so there are no methods for assessing its value that we endorse or find persuasive beyond the trading value.
Nevertheless, in the 13 years since the underpinnings of Bitcoin were first described,3 the cryptocurrency market has developed beyond an initial experimental phase and continued to mature as a new, unique, and sizable asset class. Several institutional investors and corporations have begun to invest in Bitcoin, and some traditional capital-market participants have introduced crypto-market infrastructure services to make it more accessible. Some investors believe that if the lack of correlation with other asset classes continues, cryptocurrencies could add diversification to a portfolio. These showings of validation and confidence may be self-reinforcing, despite significant outstanding uncertainties around legal, regulatory, and compliance considerations.
The Stock And Crypto Disconnect
One of the most attractive aspects of crypto is that it is not tied to the stock market. What that means is if there are signs that the stock market is overheating and may burn out soon, that doesnt mean crypto will as well.
You may see some clouds on the stock market horizon and decide to hold off before buying. In the meantime, crypto might be seeing some strong gains making it an attractive place to park your money while you wait for the stock market correction.
Some of the factors that go into the strength of the currencies is the technology itself. Many coins are basically ways to raise capital for building out the blockchain infrastructure.
For instance, there are coins used to pay for an Internet of Things type of blockchain. In this case, the blockchain is designed to help trucking companies efficiently ship goods. This makes the investment attractive as technology advances as the coin associated with it gains value. That has nothing to do with any speculation that goes on with the stock market.
In other words, you may find a technology that you like and decide to invest in its own coin because you see the potential in how it works. That is opposed to speculating just because you think the coin is at its lowest point and will grow because other coins are also growing.
Crypto vs gold
Gold was long touted as an alternative to investing in a volatile stock market. A safe way to park money with a great upside. Well, gold has lost 30% of its value since 2012.
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Should I Invest In Cryptocurrencies Stocks Or Gold
The pandemic has had a serious impact not only on various markets and industries, but also on the incomes of individuals, who have been affected by rising unemployment, layoffs and pay cuts. People have increasingly started wondering not only about how to keep their savings from devaluing, but also make money in such difficult times.
Many are now talking about investing. Could investing be the answer to the previous question, and is investing worth trying for those who have always been far from the topic? Well, probably yes. Staying away from investing is missing out on the opportunity of making money, receiving passive income, saving up for retirement, paying off mortgages, and becoming the owners of that very Lambo.
If you decide to join the ranks of novice investors, you need to have start-up capital and decide what to invest in cryptocurrencies, stocks or gold these being the most popular assets among individual investors. Speaking of capital, one should not imply significant funds it is enough to start with $100. However, choosing an asset to invest in might be a little bit challenging. Let us take a closer look at each of the options.
Crypto Vs The Stock Market: Where Should You Invest
The advent of blockchain technology has disrupted so many aspects of daily life. None of them has been quite as transformative as its effect on the financial industry.
Where before people only had a few options for investment such as the stock market or property, there are now many different cryptocurrencies that all have different functions.
The biggest player is of course Bitcoin, but there are many smaller coins that are very attractive to investors.
The blockchain has still not reached its potential, so the upside is still very high. Of course, nothing is cut and dry so it may not be the best place to try to invest.
In this article, we will go over some of the things you should know so you can decide whether to invest in crypto or the stock market.
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Should You Invest In Cryptocurrency
Owning some cryptocurrency can increase your portfolio’s diversification since cryptocurrencies such as Bitcoin have historically shown almost no price correlation with the U.S. stock market. If you believe that cryptocurrency usage will become increasingly widespread over time, then it probably makes sense for you to buy some crypto directly as part of a diversified portfolio. For every cryptocurrency that you invest in, be sure to have an investment thesis as to why that currency will stand the test of time.
If buying cryptocurrency seems too risky, you can consider other ways to potentially profit from the rise of cryptocurrencies. You can buy the stocks of companies such as Coinbase, Square, and PayPal or invest in an exchange like CME Group, which facilitates crypto futures trading. While investments in these companies may be profitable, they do not have the same upside potential as investing in cryptocurrency directly.
Remember To Stay Safe
Buying the best cryptocurrencies is not enough to be a successful crypto investor.
Countless promising investors saw their crypto journey end brutally because they did not pay attention to security.
If youre serious about investing in cryptocurrencies, put some effort into reinforcing your security.
- Read the ultimate cryptocurrency investment strategy guide I wrote about the 50 mistakes cryptocurrency investors make — many of them are related to security.
- Purchase a hardware wallet . Our favorite hardware wallets are the ledger nano s and ledger nano x.
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The Crypto Community Is Entertainingly Self
As a fledgling cryptobro, I try to stay in the loop by joining various crypto group chats on Telegram, and regularly browse Reddit and other forums. And thats both good and bad.
What I genuinely love about the crypto community isnt the analysis or predictions or even sharing of new projects, but the banter of a group of individuals who in real life may have absolutely nothing in common and yet share a common bond through their journey in crypto investing. Its wholesome, even if the jokes are about losing all their money in crypto and having to flip burgers at a fast-food chain.
But just as how there are stock market gurus, there are crypto gurus who spend their day shilling about their favourite token and giving detailed analyses on why its just a matter of time for this project to take off and make them rich .
They may be right or they may be wrong, but should you trust a random stranger on the internet with your hard-earned money? You already know the answer.
Your Money Could Be Stolen
Be aware that a hacker can potentially steal the contents of your digital wallet.
Your digital wallet has a public key and a private key . However, crypto-asset systems allow users to remain relatively anonymous and there is no central data bank. If a hacker steals your crypto-asset, you have little hope of getting it back.
Using a wallet thats held offline, called a hardware wallet or cold storage, may provide additional protection.
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Bitcoin History Vs Stock History
While you cant base future performance on the past, its useful to take a look at how different investments have fared over time.
In 2015, Bitcoins price fluctuated between $200 and $500 per coin. However, during 2017, the price suddenly rose, reaching a high of $19,891 in December, before dropping below $3,500 in December 2018. In 2020 alone, Bitcoins price bounced between $3,858 on March 12 and $9,074 on July 5.
Stock growth hasnt been as dramatic, but its also been more stable since 2015. The S& P 500 index remained at right around $2,000 in early 2015. While there have been ups and downs since then, the S& P 500 was around $3,100 as of July 2020.
The Dow Jones Industrial Average hovered between $17,000 and $18,000 in early 2015. In December 2017, when Bitcoin was peaking at nearly $20,000, the DJIA was at about $24,000. As of July 2020, the DJIA was around $25,000.
Bitcoin has been volatile since it was created since there was no natural way to value it, Chisholm said. It went to $20,000 because everyone was hearing the news and people didnt want to miss out. Then it went to $3,000 and now its almost back to $10,000.
With stocks, even though there are ups and downs and some volatility in the short-term, theres more long-term and historical support.
Historically, the stock market has provided around 10% annual returns . The same cant be said for Bitcoin.
What Does Crypto Have Going For It
Maybe you have friends who put a few thousand dollars into Bitcoin or Ethereum, sold at a good time and have been crowing about their 20 to 1 profit ever since.
You no doubt noticed that when you chose to plunge into the market last December that Bitcoin fell to the floor like a Saturday-night drunkard. To be precise, it dropped from $19,760 to $6,200 .
Thats quite a precipitous fall, but before you decide to emulate it by throwing yourself off a tall building, look back at the history of Bitcoin. You will discover that its always been a Saturday night sot.
- In January 2012 it lost 49% in 16 days.
- In August of the same year, it shed 57% in a mere 3 days.
- In April 2013 it dropped 83%, again in 3 days.
- On 30th November 2013, after climbing to the sky , it sank slowly to its knees for a year or so, losing 87% of its value.
And by the way, I failed to mention the many stumbles when it cast off anywhere between 30 and 40% of its value.
Bitcoin is like that. And it may or may not stay like that it is difficult to say. But at the moment it is a speculative cryptocurrency that is not connected to any specific commercial activity. Its value is speculative, in the same way that the value of gold is speculative.
It is important that we do not confuse Bitcoin and the current speculative behavior of the crypto markets with what would happen if large corporations began to issue cryptocurrencies.
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