Which should I choose to invest in cryptocurrency or stock? What is the difference between the two?
How to choose cryptocurrency and stock? Cryptocurrency is a novice, but stocks are a proven investment option. Since the advent of Bitcoin (BTC) in 2008, cryptocurrency has continued to be popular. Cryptocurrency enthusiasts believe that the future of finance lies in these digital assets, not in stocks and fiat currencies. Although stocks and cryptocurrencies have many basic similarities, they differ in several key areas. It is necessary for investors to understand the difference between cryptocurrencies and stocks.
1、 What are the differences between cryptocurrencies and stocks?
1. Market maturity
Historically, stocks have a long record of success. The following is a brief timeline to illustrate the history of the stock exchange:
1611: Amsterdam Stock Exchange (ASE), the first stock exchange, was established.
1698: The London Stock Exchange was established.
1792: 24 stockbrokers signed an agreement to create the New York Stock Exchange, which is currently the largest stock exchange in the world.
1971: Now the world's second largest stock exchange, NASDAQ, was established.
In 2000, the Riyueguang Stock Exchange was renamed the Pan European Exchange, which is currently the largest stock exchange in Europe.
The stock exchange has become an important part of the financial system. The New York Stock Exchange manages about 2.4 billion transactions every day, while the London Stock Exchange can handle more than 1 million transactions. Cryptocurrency is a relatively new asset in the financial world. Only 3% of the population uses encryption technology.
When someone buys shares of a listed company, they become shareholders. The success of a company also determines the value of its specific shares. Ownership is guaranteed by local regulators. When someone buys cryptocurrency, he or she owns it because it is in his or her own cryptowallet. No government or regulatory agency guarantees such ownership. Because it is written in code.
3. Procurement process
Stocks operate through a centralized market, so orders can only be processed by individuals and entities within a fixed period of time. This means that transactions only occur when these entities are open. On the other hand, the cryptocurrency market is always active. Transactions are not licensed, and are processed through code, which means that the market is always open.
4. Price fluctuation
Cryptocurrencies are generally more volatile than equities due to the uncertainty of their future value. Many cryptocurrencies are not related to tangible asset classes such as fiat money or gold, making them unpredictable investments. However, it is important to remember that even stock prices can experience unexpected fluctuations from time to time. For example, at the beginning of 2022, the price of large technology stocks fell by 80%!
5. Fees and regulations
Unlike stocks, cryptocurrency communities are not subject to central regulation and supervision. While this sounds good, it can lead to extreme volatility and lack of stability. Governments are actively discussing how to integrate cryptocurrencies into existing financial systems. However, regulated markets also require fees. Users who want to invest in stocks may have to pay brokerage fees, bank charges, and taxes. On the contrary, cryptocurrency exchanges have low transaction costs, some of which are usually negligible.
2、 Which should be chosen between cryptocurrency and stock market?
Due to high uncertainty and volatility, risk averse investors will consider stocks rather than cryptocurrencies, which are considered to be high-risk and high return investments. This is not an either or investment. Individuals can invest in both and should diversify their investments according to their unique risk profile and outlook to create a portfolio.
A variety of investment tools can reduce risks and reduce the space vulnerable to market fluctuations. Cryptocurrency is the representative of the digital age, so it must be something worth exploring. Users who do not want to buy cryptocurrency at their own expense can even get it for free.
Cryptocurrency is a digital currency based on blockchain technology. Shares, or shares, represent a small portion of the ownership of a company. As for which type of investment to choose, you can consider investing in both according to your risk tolerance. Adding cryptocurrency to the stock portfolio may be a good way to increase some valuable diversification and open the door to potential rich returns - without making yourself completely vulnerable to any investment risk.