Investment has always been one of the longstanding ways to make money, or better put, to create wealth. So, while investment vehicles like stocks and bonds have existed for many years, the emergence of Bitcoin as a digital asset with the potential for a moonshot has broadened the investment outlook. Hence, you may need to understand if stock or Bitcoin is the better investment option.
Note: The statements in this article do not intend investment advice or any advice on financial products or digital assets. They are to provide general information and nothing more.
What Are Stocks?
A stock, also know as a share, is the ownership of a fraction of a company. As such, the holder of the stock is always entitled to a corresponding share of the company’s profits in the form of a dividend. So stocks are mainly traded (buy and sell) on stock exchanges like the New York Stock Exchange, Nigerian Stock Exchange, London Stock Exchange, etc.
Notably, stocks have been an attractive investment vehicle for investors because when a given company performs well in profitability, so do those who have invested in it.
When the value of their investment increases, they have the option of selling it at a profit. But investors can also risk losing if the company doesn’t do well.
An Overview Of Bitcoin
Bitcoin has continued to gain traction since its launch in 2009, with phases of bullish and bearish runs to show its resilience and dominance as an investment option. Today, Bitcoin remains the oldest yet the most expensive crypto asset, trading at about $55,000 with a market cap of over $1 trillion when writing this article.
Therefore, the staggering value of Bitcoin has been of interest to individuals and institutional investors who want to leverage the potential of the crypto asset for maximum gains. This is with the understanding that crypto trading is one of the best ways to make money online in this digital age.
Key Differences between Stock And Bitcoin
1. Price Volatility
Volatility is the extent to which the price of an asset fluctuates over time. So, highly volatile assets can experience significant price swings (upward and downward), while less volatile assets are likely to show some price stability.
In essence, the uncertainty about the future value of cryptocurrencies, although they have been touted as the future of money and physical assets, does not usually back them, making them more volatile than stocks.
Additionally, the influence of Bitcoin Whales, individuals, or companies who hold a large amount of BTC can impact Bitcoin price. Thus making the asset vulnerable to volatility. But we should also not rule out the fact that stocks can experience unprecedented periods of volatility.
2. Regulation
Most stock markets across the world are subject to government oversight. Regulatory bodies like the Securities and Exchange Commission (SEC) have the authority to investigate and punish any wrongdoing that contravenes the existing securities and financial laws in the country. This protects investors and reinforces market confidence to invest in stocks.
Meanwhile, Bitcoin is a product of a decentralized system where the meddlesome of third parties like governments and banks has been eliminated. This has made the crypto market largely unregulated. But, various governments and authorities of different countries or regions are already developing regulatory frameworks to bring crypto activities under the ambit of relevant authorities’ oversight.
3. Scams And Security Risks
The crypto market has become a hotbed for scams of all sorts. This is owed to the largely unregulated nature of the market, which has encouraged malicious entities to steal from unsuspecting users through devious means.
From phishing attacks to pig butchering (romance scams) and even crypto Ponzi schemes – these have resulted in huge losses for victims who fell them.
For instance, the OneCoin scam perpetrated by Ruja Ignatova was one of the biggest Bitcoin Ponzi schemes and is even considered one of the biggest crypto scams ever. This fraud ripped people off about $5.8 billion by marketing OneCoin as an altcoin to become “Bitcoin Killer.”
On the other hand, stocks are also not immune from scams and security risks. Pump and dump is one of the popular stock scams whereby highly exaggerated statements make a stock’s price increase artificially in a bid to convince investors to buy. After this, the perpetrators of the scheme will sell their holdings at a much higher price.
This is not an isolated case, as there are other stock scams you should know. Perhaps you can recall Bernie Madoff, whose Ponzi scheme stole about $50 billion in the early 2000s.
4. Diversification
You can diversify your investment into different companies across the world to own a stock. You can be a shareholder in a tech company while holding stock in a real estate firm. This prevents you from putting all your eggs in one basket while maximizing your returns on investment (ROI).
Meanwhile, there is no such opportunity in Bitcoin investment, as this asset class influences the crypto market. So, diversifying your crypto portfolio may be less effective than with stocks.
Frequently Asked Questions (FAQs) About Stock Or Bitcoin
Should I Invest In Stock Or Bitcoin?
It can not be established that one is better than the other between stock and Bitcoin. This depends on your risk tolerance, as every investment has its risk. You might consider investing in the two, as diversifying into stock and Bitcoin can open the door for lucrative returns.
How Much Should I Invest into Crypto Or Stocks?
There is no rule of thumb for how much you can invest in Bitcoin. But, it is encouraged to invest 1% or 2% if you are a beginner investor. It is also crucial to not invest more than 10% of your portfolio in individual stocks.
Which Is Safer Between Stocks And Bitcoin?
Let’s reiterate that all investments have their risk(s). But, the knowledge to mitigate the risks can help you to make good returns over time. So you may need to consult with professionals in the various markets to guide better.
Conclusion
We can not overemphasize how important investments can be to drive wealth and maintain financial health. Asset classes like stocks, bonds, cryptocurrencies, commodities, etc., are available for investors to explore for possible maximum gains.
However, it is important to research and consult with experts to better understand the benefits and pitfalls of such an investment journey.
