Cryptocurrency vs. stocks — Which is better?
Investing in stocks is the established choice and crypto is a novel form of investment.
It’s a fierce debate among investors. Stocks have been around for centuries and have achieved a certain status of reliability, while cryptocurrencies have only come into inception in recent years.
For seasoned investors, it’s not so much about which one is better but which form of investing aligns with their goals. What kind of results do they want to achieve over what period of time?
Stocks are backed by company assets or physical money, but this is not the case with crypto. The crypto market is young and growing rapidly which means there is great volatility. The question, “Which is better?” is difficult to answer objectively, as it depends on personal motives.
CNBC found in 2021 that half of the millionaires already invested at least 25% of their wealth in crypto. Should you invest in stocks or cryptocurrency? That’s all up to you.
Does cryptocurrency work like stocks?
Investing in stocks works differently than committing funds to cryptocurrencies. However, both have their advantages and disadvantages.
Both cryptocurrencies and stocks are used to build wealth but the method of investing is completely different, as stated above. When you invest in stocks, you become a certain part owner of a company called a shareholder.
You can buy shares during the opening hours of the stock exchange. If the stock you have invested in performs well, you will also receive a dividend. Dividends may be kept as cash or reinvested in order to accumulate more shares by investors who receive them.
The stock market is incredibly strict in terms of laws and regulations, with all the associated penalties for non-compliance. The crypto market does not have to deal with international laws and regulations and the market is in motion 24/7. There is no ownership when you are active in the crypto market and you do not get paid dividends. Instead, you can lend or stake your tokens to earn passive income. If you want to start investing in cryptocurrencies, you can do so quite easily. In doing so, digital coins fall outside the control of a central bank, allowing you to complete anonymous transactions at lightning speed and bypassing economic trends such as inflation.
Is cryptocurrency a good investment in 2022?
If you’re considering investing in cryptocurrencies, you must be familiar with the risks and the benefits of the crypto market.
Whether cryptocurrency is a good investment in 2022 or not is also a subjective topic. There has definitely been a breakthrough on normalizing the crypto market in recent years.
However, it is not yet permitted to use your coins for everyday things such as shopping for groceries or paying rent. Regulation will provide convenience on the one hand, but it also has limitations on the other.
For instance, governments will be able to penetrate the infrastructure, tracing crypto activities more easily. As a result, anonymity decreases and an era of taxing your crypto assets arrives. If you are open to cryptocurrency investment, you should be aware of the risks next to the potential gains.
Are stocks a good investment in 2022?
The stock market is just as unpredictable as the crypto market. Do your own research and be aware of the risks.
No one can look into the future, so you can never be sure with your investments. Equities are interesting for those who want to make long-term investments. We’re living in exciting times, as the economy is affected by many factors in 2022. For instance, the COVID-19 pandemic and the war between Russia and Ukraine resulted in inflation in the market.
Because of this, the stock market is also currently experiencing great volatility alongside the crypto market. It is, therefore, not possible to predict the price of stocks — we will only know when the future is at our doorstep. If you want to realize a stocks investment, at least immerse yourself in the market forces and economic trends and get well informed. There are no risk-free investments, not even on the stock market.
Crypto trading vs. stock trading — How are they different?
Both the crypto and the stock markets are volatile and subject to external influences. However, there are also differences between them.
When we’re talking about cryptocurrency vs. stocks, there is a big difference in how they are traded. Cryptocurrency can be bought at a cryptocurrency exchange, whereas you can buy stocks at the stock exchange. Of course, there are differences in the exchanges and opening hours, as previously described.
Normally, the crypto market is more volatile than the stock market. However, the stock market is also subject to volatility due to interest rate changes and uncertain situations like war, inflation rate and monetary policy changes. But, what about trading costs in cryptocurrency vs. stocks?
Basically, transaction fees do not apply to the crypto market, as it is decentralized. However, you do pay a gas fee to reward the miners and validators who secure transactions on the network.
On the stock market, transaction costs like brokerage fee apply, but you can often trade free of charge within certain platforms like eToro that do not charge any commission for trading stocks.
Investing in cryptocurrency for beginners
Do your own research and follow the step-by-step plan for buying cryptocurrencies.
When you want to start investing in cryptocurrency, you must understand what you’re doing and what you are investing in. You have well-known currencies like Bitcoin (BTC) and Ether (ETH), but there are also a lot of altcoins.
Not all coins have productive value and you need to monitor your portfolio carefully so you can act in time.
“Buy low and sell high” is something to aspire to, but it can turn out quite the opposite for inexperienced traders. With both stocks and crypto, it is important that you do not invest money that you still need because there are always risks involved in investing.