Many investors find choosing between stocks and cryptocurrencies increasingly tricky. Here’s how to determine the best investment.
Cryptocurrencies have impacted an investment revolution, currently taking the world by storm. And Bitcoin is undoubtedly the most popular and valuable crypto, leading that revolution. Over the recent years, its successful bull run has increasingly attracted global investors, making it the most sought-after virtual asset today. Major crypto exchanges such as the bitcointrader provide consistent market analysis to help traders predict price movements.
While Bitcoin has outperformed traditional assets in the past, investors still find it quite hard to abandon stocks. Some institutional investors remain hesitant to invest in crypto, citing high volatility and regulatory pressures. That begs the question, which is the best investment between Bitcoin and stocks?
This article highlights the advantages and disadvantages of investing in Bitcoin and stocks to help you determine the most suitable investment to pursue.
Pros and Cons of Investing in Stocks
Investing in stocks means you are buying shares of publicly traded companies. That gives you fractional ownership of the company since they have tangible assets to back the investments. The value of stocks mainly depends on a companies’ performance, outlook, cash flow, and valuation.
Less Volatility
Stock exchanges or forex markets have existed since 1611, giving financial experts lots of data to work within, determining trends, and projecting future market performance. Although it is still challenging to predict the success of a publicly-traded company, stocks offer other alternatives like mutual funds and ETFs that enable investors to mitigate risks by spreading their investments across multiple companies.
Strict Regulations
Government authorities such as the SEC closely monitor all forex exchanges and stock trading. Although that creates a sense of security for investors, it also limits them from multiple opportunities.
Diverse Investment Options
The stock market has robust investments from which investors can choose. For instance, you can invest in different companies or narrow it down to something you are familiar with, such as a particular product or service. Investing in stocks initially required going through a stockbroker and vast sums of money, but several platforms exist today that allow people to invest small amounts of money at their convenience.
Lower Rewards
The relatively lower risks attached to stocks mean meager returns on investments. Company stocks usually deliver about 10% returns over the long term, while crypto could move up by a similar percentage in a single day.
Pros and Cons of Investing in Bitcoin
Bitcoin doesn’t have the backing of a tangible asset like stocks, but it is a decentralized means of payment and store of value accepted worldwide. Its value fluctuates based on investor sentiments. Positive sentiments drive prices higher, while negative perceptions weaken prices.
Better Hedge Against Fiat Currencies
The absence of central banks’ or government’s control makes Bitcoin less susceptible to politically motivated inflationary risks. Institutional investors are increasingly adopting Bitcoin to hedge against potential inflation.
Potential for Higher Returns
Bitcoin’s value has steadily skyrocketed since inception, with experts predicting a similar trend in the future. Nevertheless, Bitcoin has a more significant potential for huge returns on investments than stocks.
Increasing Mass Adoption
Several governments, multi-national corporations, merchants, and individuals have increasingly shown interest in Bitcoin. The growing Bitcoin adoption signals its global acceptance as payment and an investment tool, gaining immense value over time.
High Volatility
Bitcoin experiences massive and swift price swings, mainly because of the whims of traders. You can amerce great fortunes with Bitcoin quickly, but telling how the prices will move next is usually challenging.
Overall, both stocks and Bitcoin have unique investment opportunities and risks. While investment choice mainly depends on your goals and risk tolerance, Bitcoin offers a better hedge against inflation with a potential for higher returns.
