Cryptocurrencies vs. stocks: Which to invest in?

The choice between crypto vs stocks has always stumped even professional investors because both markets differ dramatically in their profitability and analysis. The chosen earning instruments have advantages and disadvantages, but which should you choose? Experts in financial literacy, investment, trading, and analytics discuss this in our article. We tell you what you should invest to earn as much as possible and safely.

Bitcoin will do to banks what email did to the postal industry.

Rick Falkvinge

What is the difference between cryptocurrencies and stocks?

In most cases, crypto vs stocks should be differentiated by their key parameters that affect your investment activities. The former is a form of digital currency, while the latter remain securities of companies. 

1. Risk and volatility

Risk is what differentiates crypto vs stocks the most:

• cryptocurrencies are more often than not highly volatile. This leads to significant price fluctuations over even a single day. This creates both high income opportunities and a high risk of losing money;
• stocks can be just as volatile, but only in the short term. In most cases, there are fewer price fluctuations over the long haul compared to coins.

It is important to realize that cryptocurrencies have not been around that long. At the same time, shares have been traded on exchanges since the 17th century and are already considered an established investment activity. Investments in companies operating for a long time are considered particularly safe.

2. How transactions with them take place

Crypto vs stocks differ even in how exactly you will interact with your assets:

• cryptocurrencies are often purchased directly from online exchanges and stored in digital wallets. Transactions without intermediaries can take place at any time of the day or night;
• stocks are usually purchased through licensed brokers or other investment platforms. The trades themselves take place while the exchange is open throughout the day. Each transaction requires payment of a commission.

Working with cryptocurrencies is easier and faster because you can self-dispose assets anytime. The market is not that regulated yet.

3. Fraud

It is in terms of fraud and various projects with deception, cryptocurrencies are far ahead of stocks:

• at the moment, cryptocurrencies remain an area that is poorly regulated and open to everyone. Because of this, the risk of fraud is increasing, and there are only more such projects every year;
• shares are fully regulated and traded on exchanges. The risk of fraud is not reduced to zero, but it is significantly reduced.

You should always be careful about the assets you buy or sell. Read the documentation and pay close attention to who is in charge of the project.

4. More and more common investors

The average portrait of an investor who is interested in certain trading assets also differs:

• cryptocurrencies most often attract young investors who are interested in rapid growth, capital appreciation, and the potential of new technologies;
• at the same time, stocks interest conservative investors who want to diversify their portfolio and come to a stable income.

Many investors are now developing new types of investments, where even cryptocurrency assets can be stable and diversified, while stocks are more risky and profitable. It is possible to build your portfolio by anyone.

Cryptocurrency vs stocks – the differences

Crypto vs stocks comparisons have been made since the investment community realized the potential of blockchain and coin investments. This is why users are interested in learning more about the differences between the instruments. Almost anyone can now assemble a portfolio of investments.

1. Supply

The value of an asset often depends on its supply and demand, so crypto vs stocks is reasonable to compare in this category as well:

• cryptocurrencies are usually offered in limited quantities. Their mining can become more difficult, and their price can rise. For example, Bitcoin may only have 21 million coins in the aggregate;
• companies can issue stocks in large quantities and even increase them in the future. The asset’s value will vary depending on the state of the business, performance, and prospects.

In any case, the impact of the project and its development is significant on both categories of financial assets.

2. Regulation

In this category, crypto vs stocks differ particularly strongly:

• the cryptocurrency market is only now starting to be gradually regulated by the government and various commissions. This creates both risk and freedom for investors;
• the SEC and the state government have regulated stocks for many decades. Because of this, protection is higher, and there is less manipulation.

Over time, more and more restriction and deterrence tools will also be applied to cryptocurrencies.

3. Purpose

Even the original idea of crypto vs stocks is significantly different:

• cryptocurrencies are needed as a new medium of exchange that is ideal for a decentralized market;
• stocks reflect the ownership stake in various organizations and companies. It is your right to a share of management and profits.

This is why cryptocurrency is now actively used by small investors and individuals to settle, exchange, or save their cash.

4. Technology

A significant difference between stocks and crypto can be cited even in the category of technology used:

• cryptocurrencies work through blockchain and are characterized by high security of transactions and full transparency for all market participants;
• stocks are a more traditional instrument. Classic financial systems and exchange technologies that conduct trading and accounting are used.

Innovation, technology, new developments, and promising projects are what it means to work with cryptocurrency assets.

Other considerations when investing in stocks vs. cryptocurrencies

Is crypto stocks are becoming extremely popular when an investor starts to build his portfolio based on different principles and combining both instruments at once.

Therefore, you need to consider several factors when choosing the right assets:

• long term. It is best to focus on the long term rather than instant profits when investing. Try to expand your planning horizon and choose assets that can bring you a lot of money;
• diversification. Most world-renowned investors believe you can’t keep all your eggs in one basket. A balanced portfolio will allow you to increase your chances of success;
• level of expertise. Regardless of the field and project, you must study it carefully before investing your money. In this case, you can be sure that you understand the company’s mechanisms, risks, and peculiarities.

You should also consider the regulated investment environment. For some investors, a great advantage will be the freedom of action in the cryptocurrency market and a greater number of promising projects. For others, the regulated stock market is more important when you know you will not be cheated because all documents have already been reviewed by the SEC.

Should you invest in cryptocurrency or stocks?

When choosing a cryptocurrency stock, you should be guided by your own goals and objectives for your investment. You must match your qualities with what you want to achieve with your investment.

If your goal is a quick and large profit, which will be based on the growth perspective of the project, then pay attention to cryptocurrencies. Additional advantages include high system speed, fast and safe transactions, and no need to cooperate with a broker. The projects themselves are also more expensive because the entry threshold is lower.

At the same time, the shares will be interesting to those investors who want to get a stable passive income for many years and even decades. If you guess with the chosen companies, you can get even more profit. In any case, you can start investing in the SP500, which will give you an average picture of the stock market and earn an average of 10-15% per year.

Why trade cryptocurrencies?

The difference between crypto and stocks shown by our experts is quite large, so there are several important reasons why you should pay attention to coins:

• high volatility. Due to the constant volatility of cryptocurrencies, they are highly valued by traders, who can earn large sums. For you, it is also an opportunity to sell the purchased shares in time and get a few hundred extra dollars on the balance;
• ease of use. Now, digital wallets have reached a stage of development focusing on user convenience. You can easily understand cryptocurrency exchanges and register. Even a special key for the wallet will not cause you problems with use;
• 24/7 market. Unlike stocks, you can make transactions throughout the day and night. Markets do not depend on the exchange’s schedule;
• innovative technologies. The cryptocurrency sphere is full of amazing technologies that are impressive in their scope and capabilities. It will appeal to those who are fans of DeFi and decentralization itself.

It is an excellent tool for an investor who wants to see the results of his activity and make a profit in the short term. However, you will need to spend much more time researching such a market to understand all the projects you invest in unambiguously.

Why trade stocks?

Some main reasons include:

• dividends. You will be able, under certain conditions, to receive regular income from your shares;
• long range. In the long run, stocks are considered more secure and reliable, making it a good investment for 10-20-30 years ahead;
• liquidity. Securities of large companies can be quickly sold or bought in the market without any delay.

The main advantage can be called regulation and protection of users. This protects the investor’s interests, who will not even see a fraudulent project among the general list.

Rule number one: don’t lose money. Rule number two: don’t forget rule number one.

Warren Buffett

Cryptocurrencies vs. stocks: Final thoughts

In conclusion, crypto and stocks are amazing financial instruments for passive or active earning. Thanks to them, you will be able to multiply your capital. The main thing is to correctly form your investment portfolio based on the principles of diversification and constant analytics.

When choosing between the two instruments, you should decide what exactly you will focus on with your investments. If you are interested in long-term growth and getting a stable income without unnecessary manipulations – choose stocks. At the same time, high profits, volatility, openness of projects, and easy access to assets – cryptocurrencies can also bring you a lot of money.

Make your choice right now! Perhaps it will allow you to form passive income and avoid financial difficulties.