Comparing Stock Investments to Cryptocurrency Investments

We often get the question of which is better, investing in the stock market or in cryptocurrency? The answer is something along the lines of both, as they are an excellent way to balance your risk exposure.

That being said, it’s important to know the differences between investing in cryptocurrency and the stock market, so you can be prepared for what is to come. Read on to learn the comparison between stock investing and crypto investing.

The Similarities Between Crypto and Stock Investing

1. Both Involve Risk

No matter what you invest in, there is always risk associated. You are putting your money in the hands/utility of someone who is not you, and while you may be rewarded, there is always a chance you will end up with nothing.

Of course, there are more risky investments in both realms. There are some cryptocurrency investments that are safer than others, just as ETF stock options tend to be safer than speculative trading. There is no 100% safe investment in either though.

So, no matter what you plan to invest in, ensure you only invest money you are okay with losing.

2. You Could Earn Returns

Just like both crypto and stock investing involve risk, they both also offer possibility of rewards with the rewards varying based on the risk you expose yourself too.

Both stock investing and crypto trading offer options for passive income. In terms of cryptocurrency, buying something like Ethereum could lead to a passive income, while stock investing in ETFs could lead to a passive income as well.

In either case, don’t forget there is a risk, and ensure you take steps to ensure your portfolio is diversified to help absorb any market fluctuations.

3. Your Options for Investing

Investing in stocks and cryptocurrency both offer multiple avenues for investors. There are many types of investments in each category, and many platforms you can consider for making your investments.

Of course, this wasn’t always the case, as when cryptocurrency investing first began, you were forced to use DeFi or person-to-person trades to do your investing. Now, thanks to options like Coinbase, Binance, and Kraken, investing in cryptocurrency is just as easy as investing in the stock market, thanks to apps like Robinhood and M1.  

4. Varying Liquidity

There is an argument that trading stocks offers more liquidity than trading cryptocurrency, and we don’t think that this is always the case. Thanks to automatic market makers like Coinbase and Binance, trading popular currencies is just as easy as trading stocks.

In the same method, there are some stocks that are harder to trade and some that are easier. Using an automated market maker helps, but some assets, namely hedge funds, do require investors to be locked in for a certain period of time in order to gain returns.

So, whether you pick cryptocurrency or stocks, be prepared to not always be able to access your money immediately.

The Differences Between Crypto and Stock Investing

1. The Type of Risk You Are Exposed to

As mentioned above, both types of investing involve risk, however the type of risks you are exposed to varies depending on which you choose to invest in. With stocks, you are subject to market fluctuations based on the economy, more so than you are with cryptocurrency.

While cryptocurrency prices and sentiment do shift depending on the economy, it is also a bit of a counter investment, sometimes causing it to flourish even when the market crashes. Before you get too excited, though, know that cryptocurrency is much more subject to regulatory fluctuations than the stock market, meaning politics alone can change the prices, causing them to crash even when the economy is flourishing.

2. Where You Can Seek Help/Advice

Stock investing and crypto investing also change who you can go to if you have questions or need help. With stock investing, there are many platforms, and many banks that have specific advisors. There are also wealth management firms that can help guide your investments.

With cryptocurrency, while some banks may have programs, most don’t, and cryptocurrency wealth management firms are still a thing of the future. So, if you need help or have questions, you will likely be on your own or have to head to an online forum for help. This can make it difficult for new traders to get involved.

3. When You Can Trade

The trading hours differ for stock and crypto investors. With stock investing, investors are forced to operate during the trading hours of their country, which is typically Monday-Friday banking hours. International traders are often forced to stick to the US, EU, or Chinese time zone to be an effective trader.

Cryptocurrency trading, on the other hand, operates 24 hours a day, 7 days a week, and 365 days per year—meaning you can trade whenever you want. This makes it easier for those who want to get involved in cryptocurrency day trading to continue to hold another job and trade cryptocurrency on the side, while stock day traders usually have to commit to trading as their job.

4. Regulatory Framework

We hinted at it above, but cryptocurrency trading is highly impacted by the regulations of the country where the trader lives, which both increases its risk and the barrier to entry. While this isn’t necessarily something bad, it can make individuals more hesitant to start trading cryptocurrency over stocks.

Additionally, know that a lack of a regulatory framework increases the possibility of scams, hacks, and malicious actors operating within the space. This often drives potential traders away, leading them to choose to trade stocks instead.

Overall, no matter how you look at it, trading both stocks and cryptocurrency is risky and includes possible rewards. Beyond that, choosing which is a better fit for you is a personal choice, so ensure you evaluate carefully which is a better choice for your portfolio before buying. Remember, never invest any money you cannot afford to lose.