Since Bitcoin was created in 2009 by Satoshi Nakamoto, the asset has experienced rapid growth until now. Its ever-increasing value has attracted many investors to include it in their portfolios. However, compared to traditional stock assets, there are many investors who feel that crypto investment is unstable. The possibility of a significantmarket crash would be detrimental to many parties. Still, given the growth of crypto, especially Bitcoin, this statement has caused much debate, with some arguing that this asset could be an inflation hedge.
Despite the debate surrounding the topic of Bitcoin and other traditional assets, this digital currency’s impact on financial markets is very real. Crypto trading is now as popular with new and experienced investors as stock trading in general. With the high volatility in crypto trading, many see the opportunity for greater profits than ordinary stocks. Anyone can do crypto trading at any time, the fees are low, and the minimum purchase amount is small. These advantages are why many investors are now starting to venture into the crypto world.
With its benefits, Bitcoin is now one of the investment assets that can be profitable if used properly. In the short term, it can be the investment tool of choice compared to traditional stocks. In the long run, it can replace gold as a store of value in the face of inflation. Here, Tokenomy will discuss, in detail, the differences between Bitcoin and stocks to give you a better understanding of the differences between the two.
Is Buying Crypto Like Buying Stocks?
Buying Crypto assets is similar to buying stocks because the purchase is equally dependent on the quantity of the asset and the number of enthusiasts. Investors can do the transaction online, and investment in these two assets can be both profitable and harmful. Mechanically, crypto and stocks work in the same way. If you trade stocks or forex, you will be comfortable trading crypto because the application or website interface has many similarities. However, the way to conduct a fundamental analysis of these two assets is quite different. Each crypto token has factors that determine its market price. However, the trading mechanism and technical analysis are almost the same, so it will be easy to understand if you are used to trading either of these two assets.
For example, you can purchase in the stock market and crypto simultaneously. The purchase price will be according to the current market price, and the purchase limit amount includes the sell/buy price predetermined by you as a trader. The stop-loss function also works with the same mechanism in both markets, so that you can operate it more easily.
When compared, one of the differences between crypto and stocks is the opening and closing of the market in making purchases. For stocks, trading transactions are done during certain hours only. On the other hand, the crypto trading market is open for transactions for a full 24 hours.
Key Differences Between Cryptocurrencies and Stocks
It is not uncommon for 1000% gains within a week of trading in the crypto market. Tempted by the enormous profits, many investors jump into crypto trading without being adequately prepared. With high volatility, the percentage of profits and losses from crypto trading is equally high. The price of crypto assets can be likened to a roller coaster, and many people equate crypto trading with gambling. Price volatility in the traditional stock market does occur, but on a smaller scale. The points below will help you understand the key differences between crypto assets and stocks.
Liquidity is a measure of a trader’s ability to buy or sell assets in a market. The stock market has a higher trading volume than the crypto market and therefore has more liquidity. In comparison, the crypto market has fewer traders, allowing for less liquidity issues.
However, crypto assets generally cannot be said to have low liquidity. Bitcoin is one crypto asset that has high liquidity with a vast number of buyers and sellers. It is crypto assets with a low market capitalization that usually cause liquidity issues for investors with high purchasing power.
Purchasing a certain number of shares on the market gives the asset owner ownership of a company. As a shareholder, the investor has several benefits, such as profit dividends, and the right to vote when company decisions are made. However, if you buy shares through a broker, the shares are technically owned by the broker. Only a few investors buy shares under their name.
Buying crypto assets means transferring ownership of the coin to the investor. Crypto assets are traded on exchanges and stored in digital wallets. However, you can transfer your assets to a hardware device to secure your digital wallet.
Both crypto and stocks share price volatility. Both have volatile and unpredictable price movements, with no clear guarantee of when you should buy or sell. However, for stocks, companies provide access to information that can help you make trading decisions. In addition, the price movement of stocks tends to continue to increase in the long term. Stock market movements also only occur during market opening hours , while crypto assets always experience price fluctuations. Hence, they experience more ups and downs compared to stocks. More volatility means less stability in crypto asset prices.
No Strict Regulation in the Crypto Market
The stock market is regulated, and itsmargin requirements are strictly controlled and monitored. With the crypto market, access is much freer and regulation is currently not as strict as in the stock market. Profit margins in crypto markets are not monitored by a third party, and price movements can be very high.
Crypto vs Stocks: Which is the Better Short-Term Investment?
Crypto assets with high volatility promise great short-term investment returns, although the risks are also higher. With stocks averaging about 10% return per year, Bitcoin outperforms with an average annual return of 230%. But be aware that these digital assets can experience drastic drops in value in a matter of minutes.
Crypto vs Stocks: Which is the Better Long-Term Investment?
The stock market’s stability is a factor that attracts many long-term investors. Looking at the example of the S&P 500 since 1975, it declined ten times in the last 46 years, but it has increased when viewed in the long term. Likewise Crypto, especially Bitcoin. Since its creation in 2008, has experienced several market cycles. Still, when viewed in the long term, it tends to increase.
It is impossible to predict what will happen tomorrow or next year. However, observing changes in technological development, financial trends, market investment preferences, and world politics enables us to anticipate and deal with the future of crypto assets for the next few decades. Many signals indicate significant structural changes in finance and government systems. Knowing the occurring trends can provide predictions for you in dealing with uncertain price movements in the future. Now is the right time for you to consider crypto as one of the investment instruments in your portfolio for long-term value protection.