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Crypto vs. Stocks

Jaiya Gill
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Crypto vs. Stocks

It’s important to understand the similarities and differences between cryptocurrency and traditional stocks. We're here to break it down for you.

As more people are becoming interested in investing in crypto, it’s important to understand the comparisons between crypto vs stocks. 

Fundamentally, crypto and stocks are notably different. Stocks are investments that represent a share, or partial ownership, of a publicly traded company. Cryptocurrency is decentralized digital money that’s based on blockchain technology. They also have a lot in common. They’re both volatile assets, prone to speculation, and highly liquid. 

Benefits of Crypto and Stocks

There’s a lot of evidence for the advantages of the stock market. Over the last 30 years, despite market downturns and crashes, equities have consistently delivered returns to investors. The S&P 500 index has been able to deliver an average return of about 10.7% on an annualized basis since 1926, by spreading its exposure across 500 of the largest US companies and minimizing risk.  

The stock market has also become a dependable place to set up plans for retirement, saving for a house, paying for university tuition, and other long term goals. There’s also an extensive amount of resources for individual investors to understand the stock market including getting help from licensed investment professionals. 

Crypto vs stocks, on the other hand, can run very hot and has the potential for very high profitability, with some cryptocurrencies recording skyrocketing gains in short periods of time. 

Crypto also serves a potential long term advantage and could be the component of a new financial system. Crypto is being incorporated into the business models of global payment providers like Visa, Mastercard, and Stripe. 

Disadvantages of Crypto and Stocks

Crypto vs stocks also has some drawbacks. A stock’s worth can be assessed by investors and investment decisions can be made based on business results, cash reserves, growth prospects, and other variables. There’s no certain way to assess crypto’s worth, since it’s based on blockchain technology rather than ownership of a company, so it lacks specific metrics. The market value of crypto comes down to supply and demand. 

Crypto vs stocks are also very volatile. Crypto is constantly being shifted by short-term movements and investor reactions. For example it can be driven to the moon through by FOMO or plunge through investor fears like the sudden bear market. 

Investor enthusiasm can also drive stocks to fluctuate, but sensitivity to interest rates is the stock market’s biggest drawback. Whether rates are low vs high, may determine whether investors shift their capital from the bond market to equities, or vice-versa. High interest rates can slow economic growth and lower investor enthusiasm for stocks. 

Governance

Stocks are traded on heavily regulated stock exchanges while crypto is traded on largely unregulated exchanges. The stock market has a long history of regulation and legislation, with firm rules for how to trade, own, and manage stock portfolios. The crypto market doesn’t have any regulatory framework. 

Security Differences

Stocks are usually only vulnerable to shifts in the economy, interest rates, or geopolitical crises. Crypto, on the other hand, can be affected by hacks or rug pulls. 

Cost Comparison

Crypto vs stocks, are much more expensive to trade and manage. Crypto exchanges can charge fees from 0.1 to 1% per trade. Alternatives like indexes or ETFs offer inexpensive opportunities for investors, while some brokerages offer commission trading or charge minimal fees.

Buy the entire crypto market in a single token.