Although cryptocurrency has actually been around for many years, it's more recently that investors have been clamouring for it. And if you're eager to grow your money into a larger sum, you may be thinking of doing the same.
Comparison between Crypto Currency & Stocks
It is not a new thing for people to invest their money in a profitable source to build wealth. Although all kinds of investment portals come with a certain degree of risk, some are less volatile and can shield themselves against massive economic blows. Therefore, in the 21st century, cryptocurrency and the stock market have emerged as the top investment choice. This has induced a great debate on cryptocurrency vs stocks.
Stocks represent a percentage of a business. They stand as a company’s value and change their price range based on the organization’s performance in the market. On the other hand, cryptocurrency is a digital asset that has made its debut in 2009 through the famous bitcoin. It can be stored and traded digitally. The value of a cryptocurrency varies based on its market demand, supply, and adoption. For many years, people were confined to the stock market investment models. But the recent emergence of cryptocurrency and bitcoin’s price has attracted or moreover, redirected many investors to try their hand on the digital currency market. Unfortunately, that doesn’t hide the fact that the cryptocurrency sphere is very volatile and carries potential risks. While bitcoin has been in the headlines in May for reaching the record US$60,000, within a month, it almost touched the death cross. The stock market is no different. During the early days of the pandemic, S&P 500 has lost over one-third of its value. Therefore, to investors who want to pick the right investment model, the confusion between cryptocurrency vs stocks remains unsolved. Analytics Insight has aimed to decrypt some of the hidden similarities and differences between cryptocurrency vs stocks to make it easier for investors.
The Difference Between Cryptocurrency and Stocks
While cryptocurrency and stocks are both types of investments, they individually carry certain functionalities that make them different from the other. When you buy a stock, you are directly investing in a particular company that you believe will bring growth. On the other hand, you just buy tokens of a certain cryptocurrency to either use them as a digital investment portal or even trade them as payment.
Cryptocurrency maker and stock distributor
One of the reasons for cryptocurrency’s undying popularity is its independent and decentralized nature. Owing to its leniency, anybody can become a miner and try getting their hands on bitcoin. Besides, other cryptocurrencies like Dogecoin were literally born out of bored programmers who wanted to mock the meme. It is completely different for the stock market. Stocks need to be created. They have to be cleared by government agencies and should also be audited.
Stocks are encrypted from hacks while cryptos are not
As mentioned above, the stock market is widely regulated by government agencies and goes through complete yearly auditing. Due to its heavy scrutiny, there is little chance that stocks could be rigged or fraudulent. On the other hand, it is completely different for cryptocurrencies. Because of their decentralized nature, digital currencies are unregulated and prone to fraud. A simple cryptocurrency scam could make you lose all your digital assets.
The void in ownership rights
Stocks are seen as an ownership right. Similar to voting and citizenship card, stock ownership doesn’t change until the owner prefers to sell the stock. When he or she invests in stocks, they are allocated with a percentage of ownership in the company. In the digital currency market, you are allocated with tokens like Ethereum, bitcoin, etc. when you invest in it. They do not represent a legal stake in the organization that issued them.
The difference in transaction fees
Whenever you buy a new stock, even for a very less amount, you are bound to pay a transaction fee. While it is convincingly okay for large investments, transaction fees on small investments will eat up your profits from the stock. But trading cryptocurrency could be remarkably rewarding as it comes with low exchange fees. However, the transaction and gas fees vary based on the crypto exchange you opt for.
But is cryptocurrency the right investment for you? Or are you better off putting your money into stocks?
What's your risk tolerance like?
Investing in stocks isn't exactly for the faint of heart. The stock market can be very volatile, and sometimes, all it takes is a modest dose of bad news for a company's stock price to plummet.
Political turbulence and general economic upheaval can also move the broader market so that larger indexes, like the S&P 500, lose value overnight. If you buy stocks, that's a risk you'll need to accept.
That said, as volatile as the stock market is, cryptocurrency can be even more volatile. But on the flip side of that, there may be more potential for reward.
The danger of cryptocurrency is that because it's relatively new, it's hard to know how much staying power it has. The future value of cryptocurrency will hinge largely on whether it becomes a widely accepted form of payment. If that doesn't happen, your digital coins could, in the long run, become worth absolutely nothing.
Granted, the same thing could technically happen when you buy stocks. But remember, some of the companies that trade today have been around for well over 100 years. If you do your research and choose a nice, diverse mix of stocks (or buy index funds that lend to instant diversification in your portfolio), then you'll minimize that risk to some degree.
What's your investment horizon?
Stocks have long been viewed as a solid long-term investment. Even though major indexes like the S&P 500 have had their share of years when they've delivered a negative return, all told, investors who have stuck with stocks for many decades have come out ahead financially. Because cryptocurrency is newer, it may not be the most viable long-term investment. If you're interested in it as a short-term investment, great. But you shouldn't buy cryptocurrency in your 30s in the hopes that it alone will fund your retirement.
You don't have to choose
There's no rule stating that you have to put your money into cryptocurrency or stocks. Rather, you can invest in both at the same time. But you may want to invest in each one for different purposes.
Stocks are a great bet for growing retirement wealth. Cryptocurrency, on the other hand, maybe the sort of thing you buy in the hopes of turning a near-term profit you can use to take a vacation or meet another shorter-term goal.
No matter which option you choose, it's important to do your research before diving in. Don't just pick stocks without digging into their financials, and don't choose one digital coin over another because it's in the news more. Rather, spend some time assessing your choices so you can go in with more confidence.
Top 10 Cryptocurrencies In October 2021
1. Bitcoin (BTC)
- Market cap: Over $821 billion
Created in 2009 by someone under the pseudonym Satoshi Nakamoto, Bitcoin (BTC) is the original cryptocurrency. As with most cryptocurrencies, BTC runs on a blockchain, or a ledger logging transactions distributed across a network of thousands of computers. Because additions to the distributed ledgers must be verified by solving a cryptographic puzzle, a process called proof of work, Bitcoin is kept secure and safe from fraudsters.
Bitcoin’s price has skyrocketed as it’s become a household name. Five years ago, you could buy a Bitcoin for about $500. As of Sept. 30, 2021, a single Bitcoin’s price was over $43,000. That’s the growth of about 8,600%.
2. Ethereum (ETH)
- Market cap: Over $353 billion
Both a cryptocurrency and a blockchain platform, Ethereum is a favourite of program developers because of its potential applications, like so-called smart contracts that automatically execute when conditions are met and non-fungible tokens (NFTs).
Ethereum has also experienced tremendous growth. In just five years, its price went from about $11 to almost $3,000, increasingly more than 27,000%.
3. Tether (USDT)
- Market cap: Over $68 billion
Unlike some other forms of cryptocurrency, Tether is a stable coin, meaning it’s backed by fiat currencies like U.S. dollars and the Euro and hypothetically keeps a value equal to one of those denominations. In theory, this means Tether’s value is supposed to be more consistent than other cryptocurrencies, and it’s favoured by investors who are wary of the extreme volatility of other coins.
4. Cardano (ADA)
- Market cap: Over $67 billion
Somewhat later to the crypto scene, Cardano is notable for its early embrace of proof-of-stake validation. This method expedites transaction time and decreases energy usage and environmental impact by removing the competitive, problem-solving aspect of transaction verification present in platforms like Bitcoin. Cardano also works like Ethereum to enable smart contracts and decentralized applications, which are powered by ADA, its native coin.
Cardano’s ADA token has had relatively modest growth compared to other major crypto coins. In 2017, ADA’s price was $0.02. As of Sept. 30 2021, its price was at $2.10. This is an increase of over 10,500%.
5. Binance Coin (BNB)
- Market cap: Over $64 billion
The Binance Coin is a form of cryptocurrency that you can use to trade and pay fees on Binance, one of the largest crypto exchanges in the world.
Since its launch in 2017, Binance Coin has expanded past merely facilitating trades on Binance’s exchange platform. Now, it can be used for trading, payment processing or even booking travel arrangements. It can also be traded or exchanged for other forms of cryptocurrency, such as Ethereum or Bitcoin.
Its price in 2017 was just $0.10; by Sept. 30 2021, it had risen to over $382, a gain of more than 382,000%.
6. XRP (XRP)
- Market cap: Over $44 billion
Created by some of the same founders as Ripple, a digital technology and payment processing company, XRP can be used on that network to facilitate exchanges of different currency types, including fiat currencies and other major cryptocurrencies.
At the beginning of 2017, the price of XRP was $0.006. As of Sept. 30, 2021, its price reached $0.94, equal to a rise of over 15,700%.
7. Solana (SOL)
- Market cap: Over $41 billion
Developed to help power decentralized finance (Defi) uses, decentralized apps (DApps) and smart contracts, Solana runs on a unique hybrid proof-of-stake and proof-of-history mechanisms that help it process transactions quickly and securely. SOL, Solana’s native token, powers the platform.
Launched in 2020, SOL’s price started at $0.77. By August 2021, its price was almost $140, a gain of about 18,000%.
8. USD Coin (USDC)
- Market cap: Over $31 billion
Like Tether, USD Coin (USDC) is a stablecoin, meaning it’s backed by U.S. dollars and aims for a 1 USD to 1 USDC ratio. USDC is powered by Ethereum, and you can use USD Coin to complete global transactions.
9. Polkadot (DOT)
- Market cap: Over $28 billion
Cryptocurrencies may use any number of blockchains; Polkadot (and its namesake crypto) aims to integrate them by creating a cryptocurrency network that connects the various blockchains so they can work together. This integration may change how cryptocurrencies are managed and have spurred impressive growth since Polkadot’s launch in 2020. Between September 2020 and Sept. 30, 2021, its price grew 872%, from $2.93 to $25.61.
10. Dogecoin (DOGE)
- Market cap: Over $26 billion
Dogecoin has been a hot topic thanks to celebrities and billionaires like Elon Musk. Famously started as a joke in 2013, Dogecoin rapidly became a prominent cryptocurrency option, thanks to a dedicated community and creative memes. Unlike many other cryptos, such as Bitcoin, there is no limit on the number of Dogecoins that can be created, which leaves the currency susceptible to devaluation as supply increases.
Dogecoin’s price in 2017 was $0.0002. By Sept. 30, 2021, its price was at $0.20—a 101,800% increase.
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