If you’re new to the investment game, you’re most likely stuck choosing between stocks and cryptocurrencies. You’ve heard excellent things from both sides of the market and can’t decide what to choose yet. People are giving you advice left, right, and center, but you aren’t sure what to do.
As it is, you have little knowledge of how any of these things work, so you’re bound to be in a dilemma. At this point, choosing anything will seem overwhelmingly scary, leaving you discouraged for the most part. But don’t worry; we’re here to point you in the right direction and have you investing right away.
Both stocks and crypto come with plenty of risks and plenty of rewards. While the financial end result might be the same, there are considerable differences in how both these markets work. This article will provide a detailed look into the functioning of both crypto and stock trading to help you choose which one to invest in. Read ahead to learn more.
Difference between Stocks and Crypto
Investing in stocks means owning shares in a company which will give you access to a portion of the company’s earnings over time. Buying shares in a company will directly put some financing into that company’s operations. Later on, when the company makes a profit, you can then sell those stocks for a significantly higher amount than what you had paid. This process is called stock trading and has been going around for ages. Here is an example of a stock’s price change of one of the market leaders in the automotive industry.
In the past, individuals who have made wise decisions in stock trading have come out to reap huge benefits. But at the same time, it poses particular risks as well; for example, the company whose stocks you’re buying might go bankrupt. In that case, you’ll have no way of recovering the amount you spent.
For the most part, you’ll get your profit as long as the underlying company is out there making profits as well. High stock prices mainly indicate that the underlying company is doing well in the market. Low stock prices mean the company is either at a loss or hasn’t grown to a significant level yet.
Cryptocurrency, on the other hand, is a completely different ball game and does not rely on the success of companies. Buying cryptocurrency like Bitcoin gives you full ownership of the coin to do as you please.
The coin’s price depends on supply and demand, meaning that prices will go up when more people want to buy it. Naturally, if there are too many coins and insufficient buyers, the prices will ultimately go down. So, the entire success of the coin depends on hype and popularity, which makes crypto trading quite a flimsy and superficial affair.
Nevertheless, cryptocurrencies like Bitcoin have displayed incredible growth over the last few years. Early investors made double, even triple, what they originally spent. So, while it is volatile, it is also quite lucrative.
Why do people choose Stocks?
Stocks are a known concept and have been around for as long as we can remember. This feeling of permanency gives the impression that stocks are trusted, dependable, and familiar. They present a great opportunity for the average person to make long-term investment decisions. Moreover, they have a proven track record of success, with many individuals making money in the long haul.
Compared to this, crypto is still a new concept unfamiliar to most people in the world. What’s more, most people aren’t tech-savvy and have little information about the digital currency trade. This is why most people choose stocks over crypto as an investment option.
Stocks also have a tangible value that the average person can understand. They are a data-based representation of how successful or not a certain company is. So, it’s not a very complicated concept to grasp and is even predictable in some scenarios.
Plus, the availability of stock brokers allows the common person to invest in stocks without understanding the market. A good stock brokerage firm will guide its clients into what decisions to make to achieve their investment goals. So, you don’t really have to know anything about stocks to invest in them.
On the other hand, crypto requires a vast understanding of trends that follow in digital currency. It’s essentially a game of populism, with the shiniest and most attractive currencies being sought after by most. Investing here without doing any research would be financial suicide.
Why do people choose crypto?
Most people view crypto as a ‘get rich quick’ scheme. However, the reality of digital currency trading is far more complex than that. People buy bitcoin because of the hype and the guaranteed increased prices somewhere down the line.
But let’s face it; crypto doesn’t have any value in the real world. The value only comes from the attention it gets from millions of buyers. If we remove the buyers from the equation, the value automatically drops to zero. It is essentially a very hollow concept altogether.
Be that as it may, the public reaction to crypto has been overwhelmingly positive, with more and more buyers getting into the trend. People have been flocking into the trade since the recent bitcoin explosion. So, the notion that one can get rich quickly by investing in bitcoin is something the public still believes in. This could potentially mean a significant rise in digital currency’s importance in the real world.
Moreover, the increased demand has led to various crypto coins flooding the market. What started as a limited edition currency has spread into thousands of versions, and they’re all up for grabs. If these coins can attain popularity similar to bitcoin, we could be looking at some serious digital gold.
What should you choose?
That depends on what kind of risk you’re willing to take. If you’re looking for steady long-term investments over at least 10 years, stocks might be your thing. They are less volatile than crypto and are not subject to changing trends. As long as the company behind the stock performs well in the market, stock prices will surely increase.
On the other hand, if you want to be done with your investment in less than five years, crypto will suit you better. It is the right choice for making short-term investments with potential profits. However, you have to understand that crypto is a volatile and fast-paced world. What works today might not work next year, so choose your coin wisely.