Crypto vs Stocks: Which Is a Better Investment?

Crypto vs stocks. Traditional finance vs. the ‘future of finance.’ The old school vs the new generation. Whatever you want to call it, Bitcoin (BTC) breaking all-time and the blockchain industry being thrust into the spotlight has made people ask themselves the big question:

What’s a better investment, crypto or stocks?

As you can imagine, it’s not a question with a simple black-and-white answer. With its dizzying price multiples and flashy coins, crypto might shine brighter, but not all that glitters is gold. 

On the other hand, the stock market might appear far more tangible with its strict regulations and historical significance, but waiting ten years for a 10% price appreciation might not be what modern investors are after.

In this guide, we’ll pit digital currencies and their trademark volatility against the stock market’s tidy suits and weigh which asset class might be better suited to your taste.

What Is Cryptocurrency?

Cryptocurrencies are an emerging asset class that has taken the world by storm over the last decade. 

Built on blockchain technology, these digital assets typically offer users full control and complete custody over their portfolios and rely on decentralized platforms and financial systems. This means that no central authority, like a government or central bank, can access or control your funds.

Led by classic coins like Bitcoin, Ethereum (ETH) , and Dogecoin (DOGE) , crypto assets have provided early investors with staggeringly high returns. However, crypto market volatility goes both ways: while crypto trading has brought life-changing profits for many participants, there’s always another side of the story.

What Are Stocks?

Stocks are one of the central pillars of traditional finance. Officially, a stock represents a share in a company’s ownership, meaning that shareholders generally have a legal claim over a proportionate percentage of the company’s earnings and assets.

Owning stock in publicly traded companies like Amazon, Apple, and Netflix is one of the oldest ways of joining traditional markets. In most cases, the value of a company’s stock is directly tied to the growth and success of the company itself.

Instead of being in your own personal custody, stocks and other traditional assets are generally handled by centralized companies like stock exchanges and brokerages on your behalf. 

Unlike cryptocurrencies, traditional markets have been firmly regulated by governing bodies like the U.S. Securities and Exchange Commission for decades, adding a sense of trust and stability to these markets.

Crypto vs. Stocks Head-to-Head

To better understand the crypto vs stocks debate, it’s important to objectively analyze each investment strategy’s unique offerings. Beyond that, we’ll explore the various risks associated with these investment decisions.

Key Similarities

• Investing in Search of Profit – It sounds obvious, but the biggest similarity between crypto and stocks is that they both provide an opportunity to increase wealth through financial markets. If you buy a particular asset and its valuation increases, you profit.
• Diversification – Within the stock and crypto markets, investors can explore hundreds of independent niches. While stock investors might split their holdings between companies focused on diverse avenues like entertainment, real estate, or pharmaceuticals, crypto investors can equally separate their funds between smart contract platforms, decentralized storage providers, or blockchain gaming companies.
• Support Companies You Believe In—Both investment routes let investors put their funds behind enterprises they want to see succeed.

Key Differences

• Risk Tolerance – Perhaps the biggest difference between crypto and stocks lies in market volatility. While 2, 5, or even 10x gains are relatively commonplace in cryptocurrency, the stock market is much calmer. At the same time, crypto assets are far more likely to collapse and suffer crippling price drops in a matter of days or hours, as seen on numerous occasions like the Terra Luna collapse.
• Security Concerns – Government agencies heavily regulate every corner of the stock market. Holdings and portfolios are typically insured and protected by brokerages, and the risk of being hacked or having your stock portfolio is virtually zero. Crypto investments, on the other hand, are truly the Wild West of finance. If you lose access to your crypto wallet or a hacker gets their hands on your seed phrase or private key, it can be almost impossible to recover your funds.
• Utility – Stocks may give partial ownership of real-world companies, but there’s not much that you can actually do with them. Conversely, crypto assets are interoperable in a vast ecosystem of financial products and applications in various emerging industries. For example, DeFi smart contracts allow taking out an instant loan against your crypto holdings without paying fees to an intermediary. The same process might take weeks and finish with a hefty bill to the loan provider.
• Speculation – Part of investing in the stocks of real companies means you have a tangible understanding of where your money is going. Publicly traded companies are obliged to share earnings reports with shareholders and remain transparent about the state of the business and its movements. On the other hand, crypto companies don’t owe investors anything and often convey empty promises or abandon their projects without being required to make investors whole.

Crypto Pros and Cons

For all its flaws, investing in cryptocurrency can provide plenty of benefits. Let’s recap some of the pros and cons.

Pros

• True Asset Ownership and Decentralization – One of the founding principles of the crypto industry is the concept of self-custody. By storing your funds in a private crypto wallet, no one other than you has access to your funds. Centralized authorities like governments and central banks cannot touch your assets.
• Cutting Edge Technology – Investing in the crypto market gives you exposure to the frontier of progress and innovation in the tech industry. New use cases for blockchain and crypto assets are being discovered every day, making it an exciting time to be following the industry.
• Rapid Price Appreciation—Simply put, the crypto market offers investment returns that can’t be found anywhere else. For example, crypto investors who invested spare change in coins like Bitcoin or Ethereum in their early days made millions in a few years. More recently, meme coin traders turned a handful of U.S. Dollars into 6-7-figure profits through coins like PEPE or Shiba Inu .

Cons

• Largely Unregulated – The blockchain industry is in its infancy, and governing authorities haven’t had the time to adapt appropriately yet. There are still dozens of questions about what is considered legal. As a result, crypto history is plagued with tales of lawsuits and legal battles. Fortunately, the approval of Spot Bitcoin ETFs (exchange-traded funds) in the U.S. has indicated a step in the right direction.
• Frequent Hacks and Scams – The crypto space is rife with malicious actors and scammers who will not hesitate to hack vulnerable protocols and try to steal your wallet’s private key or seed phrase. However, learning how to stay safe in the crypto space isn’t as complex as you might think, and protecting yourself from hacks and scams requires nothing more than a little common sense.
• Wild Market Volatility – The euphoric highs and overnight millionaires have a dark side. For every success story, someone on the other side of that trade might have lost a significant amount of money. Crypto prices can be obliterated quickly during a crash, with some coins remaining over 90% down from all-time highs for years.

Stocks Pros and Cons

Trading stocks might be one of the staples of traditional finance, but there are still a few drawbacks.

Pros

• Safe & Transparent Investing – When investing in stocks, you know what you’re getting into. Companies listed on stock exchanges must communicate openly with shareholders and regularly share earnings reports and company information.
• Price Stability – You can still lose money in the stock market, but you’re less likely to wake up one day and see that your entire portfolio has been cut in half overnight for no apparent reason.
• Accessible – Jumping into the stock market is relatively easy and doesn’t demand a steep learning curve or pose the cybersecurity risks prevalent in cryptocurrency. Opening a brokerage account and depositing fiat currency to platforms like Robinhood is straightforward.

Cons

• Limited Utilities – Apart from watching the price move and collecting the occasional dividend payment, you cannot do much with stock, especially compared to the diverse range of tools and services provided through crypto assets.
• Small Returns – While some consider the stock market’s small price fluctuations a blessing, others might find the potential returns insubstantial to their investing goals.

The Final Verdict

Ultimately, knowing which is better for you in the crypto vs stocks debate depends entirely on your risk tolerance and investment objectives. If you’re a patient investor who doesn’t mind waiting several years to see your wealth grow and enjoys following the lifecycle of household business names, the stock market might be more your style.

However, if you’re looking to grow your net worth quickly and want to stay informed about the latest advancements in a nascent industry, crypto investing might be more your flavor. But bear in mind that while suffering a loss in the stock market might trim a percentage off your wealth, suffering a loss in the crypto market could cause dramatic cuts to your portfolio much faster.

On the Flipside

• Investing in either the stock market or the crypto market can incur losses. It is strongly recommended that you always conduct your own thorough research and never invest more than you can afford to lose.

Why This Matters

With the approval of Bitcoin ETFs and BTC breaking all-time highs, there’s arguably never been more eyes on the crypto space. Newcomers should consider all the risks and investment options before putting their money on the line.

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