Online trading platforms made it easier for individual investors as well as institutional investors to invest in both cryptocurrencies and stocks. Due to the numerous technological innovations that made trading available to a global audience on their smartphones, the financial market is changing.
Today, not only can you learn anything you want about cryptocurrencies, the latest developments in blockchain technology, or stocks, but you can easily open a trading account. The downside of having so many options at your disposal is that you might find it overwhelming to choose whether it is better for you to invest in crypto or stocks.
Namely, cryptocurrencies have gained worldwide attention with the latest bull cycle of Bitcoin, which started in 2020. It remained the longest one to date, and the price rose from approximately $10,000 in May 2020 to $20,000 in December 2020. But, Bitcoin was not the only cryptocurrency that had entered a bull market phase. Actually, the entire crypto market was influenced by this bull cycle, which resulted in an increasing number of new cryptocurrencies and, of course, a newfound interest in investing in crypto. So, that being said, if you’re wondering what the differences are between cryptocurrencies and stocks, read on.
Stocks
A stock, in simple terms, is defined as ownership of a fraction of a corporation. The owner buys stocks from certain companies to gain a corresponding share of the company’s profit, also known as a dividend.
In order to evaluate the stocks you want to add to your portfolio, you need to keep up with the trends in the market, the latest news that impacts the company’s revenue, and consult the company’s financial statements.
The stock prices move due to many factors, from external factors like the political situation in the country to the profitability of the company as well as the market demand and supply. Actually, the market demand and supply for the stocks of the company and its products will impact the price of the stock and whether it will rise or fall.
It’s also worth mentioning that there are many online trading platforms where you can create your account and start trading right away from your desktop or mobile devices. In addition, it’s really important to choose the right platform that is reliable and has the best options for your financial needs. Here, you will find the best trading platform Canada. Multiple comparisons between different exchange sites will help you make the right decision and register on a reputable platform.
Cryptocurrencies
Virtual currencies are based on decentralized blockchain technology, which means that compared to stocks or fiat currencies, they are completely dependent on the market supply and demand. Each cryptocurrency has its own unique features that could be the main aspect of its success.
Some of the most famous cryptocurrencies are Bitcoin, Dogecoin, Etherium, but there is a huge influx of new cryptocurrencies on the market, so there isn’t a shortage of options. However, the main difference is that you can’t rely on companies’ spreadsheets to make your decision or past market trends, although if the cryptocurrency has been around in the crypto market for a longer period of time, it is beneficial to do some analysis on its past price movements.
Otherwise, it’s important to read the white paper of the crypto project and to understand as much as you can about its goals and applications. However, this doesn’t mean that your investment will be successful or even stable because, as we said, the crypto market is completely decentralized, which means economic as well as political factors don’t have as much influence on it as they do on the traditional financial markets. It depends entirely on the interaction between market demand and supply. One example that depicts the volatility of the crypto market is the flowing situation. Elon Musk announced that Tesla would accept Dogcoein payments, the price increased by 15%.
Another important factor is the support from the business sector, which also fuels the demand for crypto. For example, when Bitcoin was accepted as payment, notably by famous companies like PayPal, Telsa, Venmo, this improved its position on the market. The same applies to other cryptocurrencies on the market, as any factor which affects the market demand and supply, whether it’s external or internal (Bitcoin halving, for instance), will change the price of that virtual currency.
Conclusion
In conclusion, compared to the stock market, the crypto market is much more volatile. It is fully distributed, and there are many new trading sites where you can invest in crypto. Moreover, as it is a decentralized market, the changes in the interaction of supply and demand directly impact the value of cryptocurrencies.
On the other hand, the stock market even though it is also affected by the market demand and supply, economic factors like monetary and fiscal policies also will impact the price movement. In a nutshell, stocks seem to be a more stable investment compared to crypto because you can find readily available information about the company’s financial statements and data. That said, there are no guarantees; whether you want to invest in crypto or stocks, it’s up to you to learn as much as you can about the asset that you want to add to your portfolio.
Last Updated on by Himani Rawat
