Cryptocurrency vs Stocks: Which is Safe & Profitable Investment?

Analytics Insight aims to solve the unsettling debate between cryptocurrency vs 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 Parallel Line Between Cryptocurrency and Stock Investment

The cryptocurrency market has opted for a digital model of functioning since the very beginning. But the story is completely different for the stock market. Initially, financial guides or brokers used to take money from investors and add them to the stock market. Fortunately, the scenario has changed when the stock market also through a complete transformation. Today, both cryptocurrency and stocks can be accessed through the digital exchange, brokerage account, mobile application, or other online platforms. Besides, they also offer a similar kind of user experience in terms of layout, trading options, and order-book-based liquidity mechanism.

Retail trading options open the door to general trading orders like a market order, limit order, and stop (or stop-loss) order. Even though both cryptocurrencies vs stocks might look similar from the buying and selling point of view, they have underlying differences that need to be addressed.

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.