Cryptocurrency, primarily Bitcoin, has been landing headlines in financial pages across the globe thanks to a dizzying climb in value over the last decade. With stories of Bitcoin millionaires tempting investors everywhere, it’s a great time to take a deep breath and consider your options before totally redoing your stock options in the heat of the moment. So, what are the benefits of crypto vs. the stock market? And what appeal do stocks still hold, even if their rate of return is nowhere near that of crypto?
How Crypto Gains Value
Unlike assets that are accrued through business profits, which generally correspond to an increase in goods or services sold, cryptocurrency is a form of asset that increases in value only if you can eventually sell it for more than you paid for it. Just as precious metals derive their value from supply/demand, so too does this form of digital currency. When more people are interested in purchasing this currency, the value goes up. Just as with the stock market, it’s best to purchase crypto when the value is low and sell when it’s high. And, like the stock market, it can be maddeningly difficult to determine just when to buy and when to sell!
While this new form of investment is often cited for its volatility–the most popular form, Bitcoin, dropped below $8,000 in February 2018, and then again below $11,000 in March after a brief rally–its proponents point to growing global interest in this innovative and secure way to exchange assets.
Crypto Vs. The Stock Market
A few key points for beginners can help you figure out the differences between cryptocurrency investments and the stock market. For starters, many beginner investors find that cryptocurrency is easier to start investing in since you only need to understand the basics of how exchange platforms work in order to make a purchase. The stock market, by contrast, offers a complex and diverse system of company portfolios to track and navigate, and figuring out where to start can create paralysis in the new investor.
By contrast, cryptocurrency does carry a high amount of volatility, which could mean an emotional ride for the first time investor. Unlike the stock market, which tends to offer modest returns over time, provided that you diversify your investments and commit to staying the course, the staggering rises in value of the top cryptocurrencies of the last decade have left even seasoned investors stunned.
So, how do you decide which option to choose? As with any good investment strategy, diversity is key. Try working with a financial professional or find accessible investing advice online and choose some steadily performing stocks where you can rest assured that you will get a moderate return without riding the rollercoaster day in, day out. Then, decide how much you can afford to “risk” on crypto. Some experts advise that, for beginner investors, it’s wise to only invest what you can stand to lose. If you approach your investment with that mindset, you won’t be crushed if the crypto market takes a sudden drop right after you push “buy.”
For more information on how cryptocurrency works, including how to purchase your first portion of the digital pie, read our complete series on crypto basics, then start making financial moves for your future today!