While crypto and stocks are still dramatically different worlds, they seem to be rapidly converging to create a new digital economy, where buying and selling your favorite stocks on decentralized marketplaces around the world could soon be a real option.
Let's say you are a newbie, and you want to invest in the financial markets and grow your money. How would you go about it? Would you choose stocks, which are the most popular financial asset in the world, or crypto, which has taken off the world, especially during the last 10 years?
While it may sound like the strangest combination ever, both crypto and stocks are endeavors that are relevant to a wide range of individuals looking to build wealth through the financial markets. However, knowing the main differences and similarities between crypto vs stocks might be crucial if you're a serious about investing in them. In this article we will compare crypto vs stock market and try to determine which might be a better investment for different people and circumstances.
How to Get Started with Crypto and Stocks – Quick Guide
- Open an account — If you want to trade CFDs on Crypto and Stocks, you will need a Trading Account, while if you want to invest in Real Shares, you will need an Invest Account.
- Choose your strategy — Trading is about speculating on financial market underlying's without owning them, whereas investing involves taking the ownership of financial assets.
- Open and monitor your position — Use our extensive range of advanced tools and resources to open and manage your positions.
Understanding Crypto vs Stocks
In today's financial market, stocks and cryptocurrencies are two of the most traded assets. People around the world engage in daily stock and crypto trades with the primary goal of making a profit should their value increase. Like the stock market, the cryptocurrency ecosystem is dominated by individuals or institutions that use digital assets as a means of capital growth or as a store of value. Stocks and cryptocurrencies do have some similarities, but they are very different in many ways.
Crypto
Stocks
Cryptocurrencies are digital assets that serve as an alternative method of payment. Unlike fiat currencies, or real money, people mainly use crypto for online transactions, you can make some physical purchases. All cryptocurrency transactions are publicly logged on a blockchain-based digital ledger system. Smart contracts are nodes of data that are connected to build transaction blocks that are validated by anonymous computer networks.
There are more than 26,000 different cryptocurrency tokens and coins available, with Bitcoin being the most well-known. Thanks to the wide range regarding the offer and the price, as well as their accessibility (24/7), they quickly gained the attention of both novice and experienced investors.Stocks are securities that represent an ownership share in a company. Investors who own a portion of a company's shares are entitled to a proportionate share of its profits. Investors can buy, sell, and trade stocks in the stock market. Although the stock market is accessible online, it is typically available on weekdays during regular business hours. Like with cryptocurrencies, an investor can buy a stock, hold it until its value increases, and then sell it to generate a profit. This is referred to as capital gain, which is the difference between what you paid for the stock when you bought it and what you received when you sold it. On top of that, investors may profit from owning stock from regular dividend payouts, depending on the company in question, if it is a dividend paying entity or not.
Key Differences & Similarities between Stocks vs Crypto
In the past, when someone was mentioning investing, most people immediately thought of the stock market and Wall Street. Nowadays, the world of investment has evolved and expanded to encompass far more than that. Cryptocurrencies have grown in popularity over the last few years and are now being regarded more seriously than ever in the investment community.
To fully understand how investing in crypto vs stocks can help you build and diversify your portfolio or grow your wealth, you initially need to have a clear picture about the differences between stocks and crypto. As we stated in the introduction, stocks and cryptocurrencies are very different assets.
Stocks
Crypto
Asset typeStocks represent ownership in a business. Buying shares means simply purchasing an ownership stake in the assets and earnings of a company. Cryptos are purely digital assets developed on blockchain technology, representing a type of digital value or decentralized currency. Value Associated with a company's financial performance. Mainly fueled by supply-demand dynamics and market speculation.
HistoryStocks have been around for a lot longer, and investors can use their historical data to make better-informed decisions. Crypto market has a relatively short history compared to the stock market, being around since 2009.
RegulationStock markets are highly regulated and supervised by governmental bodies to maintain transparency and safeguard the interests of investors. Around the world, there are different levels of regulation governing the cryptocurrency industry. Since it is still a relatively new, developing market, there is some regulatory uncertainty.
Market accessStock markets have predetermined trading hours and during weekends and holidays are closed. Cryptocurrency markets are open 24 hours a day, seven days a week, which facilitates uninterrupted trading due to constant prices fluctuations.
TransparencyRegulations require publicly traded companies to maintain a specific level of transparency including requirements for annual reports, quarterly financial reports, shareholder meetings, and other means. Legal scrutiny of cryptocurrency projects is not even close to that of publicly traded companies. Most authorities and governments are still learning about cryptocurrency technology and how the law should apply to it. Total market cap $55.2 trillion (as of mid-2024) $2.43 trillion (as of mid-2024)
RiskEven though stocks are more stable than crypto, they can still experience market downturns and company-specific challenges. The cryptocurrency market is recognized for being unpredictable and involving higher risks compared to the stock markets. Return
(Avg. Annualized Return S&P500 vs Bitcoin Indexes - 10 years)15.6% 63.6% Utility Investment or ownership stake Investment, transactions, or smart contracts
In the ongoing debate of crypto vs stocks, although stocks and crypto are different from many points of view, there are also some similarities that traders and investors should be aware of.
Similarities between Stock Market and Cryptocurrency
- Investment potential: Both stocks and cryptocurrencies may offer investment opportunities for traders and investors. Although the stock market has a long track record generating consistent profits, cryptocurrencies, especially the most popular like Ethereum and Bitcoin, have written their own success stories.
- Diversification & Portfolio Balancing: Investors may include both crypto and stocks in their portfolios for a better diversification which could help them mitigate some risks. In order fulfill their financial objectives depending on their risk tolerance, investors sometimes allocate a portion of their portfolios to both stocks and cryptocurrencies.
- Risk & Unpredictability: There is a risk and unpredictability associated with both asset classes. Stocks can face significant price swings due to market sentiment shifts and economic variables, while cryptocurrencies are notorious for their wild price movements. Whether you choose stocks or crypto, it is crucial to take risk management measures.
- Strategy: Stock and crypto investors can choose either long-term or short-term strategies. While some want to store assets for years, others use day trading or swing trading to capitalize on short-term price movements. In this regard, they may use fundamental analysis, technical analysis and sentiment analysis that apply to both stocks and crypto. Also, investors may get early exposure through IPO (stocks) and ICO (crypto).
- Influence factors: International financial markets can impact both stocks and cryptocurrencies. Their prices are often influenced by market sentiment, geopolitical news, and economic events
Crypto vs Stocks — Choosing Your Strategy
Whether you choose stock market or cryptocurrency, or both, the strategy should always align with your financial goals, risk tolerance and investment experience. However, your time horizon can have significant impact on how you invest in stocks and cryptocurrency and the potential returns or losses. For this reason, we will put in contrast the short-term and long-term approaches within the stock market vs cryptocurrency debate
Stocks vs Crypto Long-Term Strategies
Stocks
Crypto
Experienced stock investors prioritize well-positioned companies with strong performance history. They buy stocks to profit from the company's growth, dividends, and compound interest over several years or even decades. This approach is driven more by a conviction in the long-term success of a business and less by short-term market price swings. A buy-and-hold investing approach that does not include market timing and instead uses passive investing. Investors buying cryptocurrencies for the long run think blockchain technology has revolutionary potential. They are in it for the long haul, not the quick one, and are frequently referred to as "HODLers" (a misspelled version of "hold"). They are buying cryptocurrencies and plan to hang onto them for several years hoping to benefit from a significant rise in value. Long-term cryptocurrency investors frequently withstand market turbulences due to their faith in the underlying principles of the technology.
However, both stocks and crypto can be suitable for a short-term approach. Cryptocurrency trading is the act of speculating on cryptocurrency price movements via contracts for difference (CFDs) or buying and selling the underlying coins via an exchange. On the other hand, stock trading involves following the short-term price fluctuations of different stocks closely and then trying to buy low and sell high or vice versa to capitalize on price changes.
Stocks vs Crypto Short-Term Strategies
Stocks
Crypto
Stock traders might be seeking to capitalize on short-term ups and downs. Rather than investing in the shares, traders speculate on the share’s value. They can speculate on rising prices, by going long, as well as falling, by going short (via CFDs). While trading individual stocks can generate quick gains for those who time the market correctly, it also carries a high risk of loss. This approach requires constant attention to the market and is time-consuming as it involves a constant market analysis. Known as "day traders" or "swing traders," short-term cryptocurrency traders try to capitalize on market turbulences. To profit from market swings, they buy and sell cryptocurrencies in a matter of minutes, hours, or days. Given the cryptocurrency market's inherent lack of predictability and fast price movements, this method carries a higher risk even though it may generate quick rewards.
The choice between stocks vs crypto, as well as the long vs the short-term approach, ultimately boils down to your investing horizon and degree of comfort with the associated markets. Some investors combine both, allocating some money into short-term plans for possible rapid rewards and some into long-term investments for stability and long-term growth. Whatever approach you decide on, to make intelligent decisions along your investing journey, you need to conduct thorough research and stay up to date on market trends and news.
Crypto or Stocks — Weighing the Options
Each asset class has benefits as well as drawbacks. Your choice may depend on your risk tolerance and other preferences. In the end, your ability to balance the risks and rewards—rather than the investment vehicles you choose—might determine the success of your investment. A lot of seasoned investors diversify their holdings by holding or trading both stocks and crypto.
However, if you still want to choose one, let’s have a look at their pros and cons.
Crypto
Stocks
Pros Cons Pros Cons Accessibility
It is accessible 24/7 to everyone with an internet connection.Unpredictable
The cryptocurrency market is well known for its extreme price fluctuation.Highly regulated
Given the stock market's maturity, it is tightly supervised.Limited accessibility
Stock markets have a limited trading schedule and are closed during weekends.Inflation-resilient
Since the monetary policy of central banks don't directly affect cryptocurrencies, their prices are less vulnerable to inflation.Lack of regulation
Cryptocurrencies are not fully regulated all over the world. Investors should undertake legal research relevant to their location.Mature market
Stock exchanges have existed for many centuries. As a result, unexpected events are rare, and the markets are extremely mature.Lower potential returns
While stocks have typically yielded 10% annually, crypto might experience 10% or more changes in values in just one day.Flexible
Compared to stocks, there are additional alternatives for investors to build their crypto holdings besides trading or investing, such as crypto staking, yield farming or crypto mining.Security risks
If you opt to self-custody your crypto assets, you are solely responsible for their security. Cryptocurrencies require a private key to access the tokens stored in a digital crypto wallet.Diversification options
Stock investors have access to a diverse range of stocks across multiple industries and sectors, as well as multiple types of shares to suit their investing profile.Vulnerable to market sentiment
Given that the stock market is governed by centralized institutions, stocks’ value can be greatly influenced by current events and the overall state of the economy.
Getting Started with Capex.com
If you have eventually decided upon crypto vs stocks, or both and you are ready to get started, follow these steps:
- Open an account to start trading CFDs or various underling assets including stocks and crypto. You'll automatically gain access to a free demo account, allowing you to practice with virtual funds.
- Enhance your understanding about stock and crypto markets by visiting the Capex Academy, that might help you find strategies that best match your approach.
- Use our extensive risk management tools and resources, such as placing and executing stop-loss and take profit orders, to protect your positions.
Final words
As we are getting close to the end of our comparison of crypto vs stocks, it is obvious that each option presents its own set of opportunities and challenges.
Both stocks and cryptocurrencies are viable assets that investors may put their financial resources in. Which one to pick is essentially a personal choice based on your risk tolerance and personal objectives.
Furthermore, it doesn't have to be an either-or choice. Stocks and cryptocurrencies, along with other asset classes, all could have a place in a well-diversified investing portfolio. And focusing on diversification is a golden rule of investing, so you may keep that in mind while you build your portfolio
Free resources
Before you decide between crypto vs stocks, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.
Sources
https://www.imf.org/
https://ceur-ws.org/
https://bigdeal.org.uk