Stocks have been around for a long time and can give both long-term and short-term returns. Crypto is a newer form of money that has a higher risk and price volatility. Even though traders and investors are interested in both, cryptocurrency is often seen as an alternative to more traditional assets.
Having said that, there are ways to make money in both markets. This blog post explains the main differences between Crypto and stocks so you can decide which is a better investment in 2023.
Let’s start with a basic definition.
What is the Stock market?
A stock market is a public place where stocks can be bought, sold, and issued. This can happen on a stock exchange or over the counter. Stocks, which are also called equities, are a share of ownership in a company. The stock market is where investors can buy and sell shares of ownership in companies.
When investors use their money to buy shares on the stock market, they make money. When businesses use that money to grow and expand, investors benefit because the value of their shares of a stock goes up over time. This is called capital gain. Also, when a company makes more money, it gives its shareholders dividends (depending on the company).
A stock market that works well is important for economic growth because it lets companies quickly get money from the public to grow.
Now, What is Cryptocurrency?
A cryptocurrency is a type of digital or virtual currency that is used to buy and sell things. It’s a lot like real-world money, except that it doesn’t exist in the real world and works through cryptography. It is a digital payment system that doesn’t use banks to verify transactions.
Because cryptocurrencies work without a bank or a central authority and are independent, new units can only be added when certain conditions are met.
Payments made with cryptocurrency only exist as digital entries in an online database. When money is moved using cryptocurrency, the transactions are written down in a public ledger. Cryptocurrencies can be used as both a currency and a way to keep track of money because they use encryption technology.
What are some differences between Crypto and Stocks?
Stocks and cryptocurrencies are two very different types of assets. Here are some of the things that set them apart from each other.
The equity in a company is shown by the shares that are traded on stock markets. When you buy shares of a company on the stock exchange, you become a part-owner of the company itself. The value of your shares is also based on how well the company is doing.
When you buy cryptocurrency, whether it’s coins or tokens, you don’t necessarily get a piece of the company that made it.
If you want to buy or sell stocks, you need to have a brokerage account. When you buy cryptocurrency, you can store it on a platform for crypto investments like Carret. You can stay more anonymous if you use cryptocurrencies, which is great.
Your security number, address, signature, and other “Know Your Customer” (KYC) details can be used to verify your brokerage account and crypto investment platform. The information here is meant to protect you in case of fraud or identity theft.
Cryptocurrency exchanges are fairly new. Carret is the best crypto investment platform in India, and it lets you trade with more than 100 different cryptos. The stock market, on the other hand, has been around for more than 200 years.
Some of the top stock exchanges in the world are:
- New York Stock Exchange (NYSE)
- National Association of Securities Dealers Automated Quotations (NASDAQ)
- Bombay Stock Exchange (BSE)
- Shanghai Stock Exchange (SSE)
- European New Exchange Technology (EURONEXT)
When you buy crypto or stocks, you are taking on risk and volatility. Both assets can go up or down in value, and it’s almost impossible to time the market to know exactly when to buy or sell.
Even though the stock market has a well-deserved reputation for being volatile, the average total return over decades has been about 10% for the broader market. Since past performance isn’t a guarantee of future returns and public stocks must report their finances to the public, investors can get information from several places to help them decide whether or not to buy those securities.
On the other hand, the value of cryptocurrency is more likely to change quickly and drastically, sometimes without any warning. This makes some people wonder why cryptocurrency is so volatile. Crypto traders can make big money from these swings, but they can also lose a lot of money in a short amount of time.
To avoid this kind of risk in crypto investments, India’s top crypto investment platform Carret gives you an easy way to earn up to 17% APY by holding your cryptos in a 24Carret account.
Many investors think of stocks as being liquid, but each type of cryptocurrency has a different level of liquidity.
Bitcoin is more liquid than most other digital currencies because it is traded more often. That means more people want to buy and sell that particular cryptocurrency.
Also, investors in both crypto and stocks may have to deal with slippage, which happens when someone sells a lot of an asset when the market isn’t moving much. It means that the investor will lose money.
The Securities and Exchanges Commission (SEC) in the United States and the Securities and Exchange Board of India (SEBI) in India are two examples of national agencies that keep an eye on stocks and stock markets. Publicly traded companies are held to a certain level of openness by the rules set by these companies.
Also, cryptocurrencies are based on the idea of decentralization, which lets people trade money directly with each other over the internet without having to trust anyone. They are not regulated in India, but the Union Budget 2022 says that gains from cryptocurrencies will be taxed at 30% and a 1% tax will be taken out at the source.
In this case, there isn’t a big difference between stocks and cryptocurrencies, because trading both can come with big costs. Fees are charged by crypto exchanges. There are also “gas fees,” which are the costs that a network takes out of different blockchain transactions.
This is why many investors prefer platforms like Carret that let them invest in cryptocurrencies and charge very low fees for any transaction.
Crypto markets are usually open all the time, so you can use them no matter what day or time of the week it is. On the other hand, stock markets are only open during business hours in their home country.
What are the Pros of investing in cryptocurrency?
Possible hedge against fiat money:
For some investors, one of the most appealing things about cryptocurrencies is that they don’t have a central authority. It’s not run by governments or central banks, which like to print money and cause inflation in fiat currencies like the U.S. dollar or Indian Rupee.
Cryptocurrencies like Bitcoin have been called “digital gold” by some investors who keep them because they think they will protect them from inflation.
Most cryptocurrency systems don’t depend on a central authority, so they can’t be censored or controlled by any government.
Unlike stocks, investors can grow their crypto holdings in more ways than just trading. Yield farming, staking, and providing liquidity are all ways for crypto investors to make money. Products like 24Carret are a great example of how holding cryptocurrency can help you make more money.
Wide interest in digital currencies:
Investors, businesses, and governments all seem to be getting more and more interested in cryptocurrencies. Tesla has Bitcoin on its balance sheet, and for a short time, it accepted Bitcoin as payment before changing its mind.
In 2021, El Salvador made Bitcoin a legal form of currency, even though the International Monetary Fund has asked the country to change its mind. The more people use digital currencies, the better it could be for investors.
What are the Cons of investing in cryptocurrency?
Since cryptocurrencies are still pretty new, they have been very unstable so far. They aren’t backed by anything, so their price depends on what traders want to pay for them depending on supply and demand.
No intrinsic value:
Cryptocurrencies don’t have any value themselves, which means they aren’t backed by assets or earnings like stocks are.
El Salvador has accepted Bitcoin, but many other governments are not as sure about cryptocurrencies. China with the other 9 countries has made it illegal to trade and mine cryptocurrencies.
What are the Pros of investing in stocks?
Returns for a long time:
Stocks have a long history of giving good returns on investments. Over the long term, the Sensex has returned about 12 percent. Even though stocks can be volatile in the short term, they have usually been safe to hold for long periods.
Have intrinsic value:
A stock is a share of ownership in a company, and its value depends on how well that company does over time. Companies have assets that bring in money and make money for investors. This is called “intrinsic value.”
Different government agencies keep a close eye on stock exchanges, brokers, and companies. Through their monthly, quarterly, and yearly reports, companies have to show investors their performance.
What are the Cons of investing in stocks?
Even in the short term, prices can change quickly on the stock market. If a company is doing well, the price of its stock is likely to go up. In the same way, if a company loses money or gets bad press, the value of its stock will probably go down.
Less chance of making huge gains:
Broad stock indexes like the Sensex probably don’t have as much potential for huge gains as cryptocurrencies do. Over the long term, stocks have returned about 12%, but it’s not uncommon for cryptocurrencies to move by 12% in a single day.
How can crypto markets impact stock markets?
Even though cryptocurrency is not tied to the stock market, some experts think there is a strong link between the price of cryptocurrencies like bitcoin and the price of stocks.
Some crypto fans may be upset by this because one of the things they like about the crypto market is that it can take care of itself. But there is some evidence that cryptocurrency does affect the stock market in more general ways.
For example, after Tesla said they would invest in bitcoin, the price of their shares went up by 2%.
When the Fed raised interest rates, both stock prices and the value of cryptocurrencies went down.
The price of important crypto tokens dropped by 40% to 50% in May 2021, after reaching new highs for most of 2021. The stock market dropped a lot after investors sold off a lot of cryptocurrencies.
Does cryptocurrency work like stocks?
No. Cryptocurrencies can be bought and sold on crypto investment platforms like Carret. The fees aren’t always the same because they depend on the crypto. Some cryptos are so new that they don’t have a track record, so it’s hard to figure out how much they’re worth.
Stocks are well-known and heavily regulated investments that can be bought and sold through a traditional brokerage or an app.
Conclusion: Should you invest in cryptocurrency or stocks?
If you want to take part in the growing digital economies around the world, like Web 3.0, you will need to invest in crypto. However, investors need to know what they’re investing in instead of just jumping in because everyone else is.
Whether you should invest in cryptocurrency or not depends on how much risk you are willing to take. But at Carret, everyone agrees that cryptocurrency is here to stay and is an important new asset class. Due to how volatile cryptocurrency assets are, it’s best not to make them a big part of your portfolio without getting advice from an expert.
Even though crypto and stocks are different in many ways, they are also similar in some ways. Cryptocurrency and stocks are both good ways to invest, but they can be used for different things in your portfolio. No matter which one you choose, you should always know the risks that come with it.
To reduce risks, you can use a crypto investment platform like Carret, which gives you up to 17% annual percentage yield (APY) on your crypto holdings.