Should You Trade Crypto or Stocks?

Equities or stocks are an old-fashioned financial market, owing to their multi-century existence. Meanwhile, most people consider investing in crypto an incredible leap of faith.

Both markets come with their benefits and risks; it’s up to the individual to decide which of these they can handle.

Differences between trading cryptocurrencies and equities at a glance

Let's dive into the main differences in more detail.

Ownership

Trading stocks is about fractional ownership of a particular company (and, in some cases, receiving a portion of their profits through dividends).

Furthermore, being a shareholder in certain companies also affords certain voting rights. While not all stocks provide such benefits, the general idea is that one owns shares of an enterprise.

Experts perceive this as a safer investment because businesses always issue shares for growth expansion. Thus, unlike cryptocurrencies, you can find real-world intrinsic value for a stock with tangible assets.

Owning a digital currency doesn’t provide much material usage other than paying someone or executing some computer function. As a crypto holder, you do not own the blockchain companies that have created a particular token.

For these reasons, we view crypto as more speculative. Yet, just because you cannot attach an office building to a coin doesn’t mean they are useless. So, there can be actual fundamentals driving their price.

The only difference is that we can only understand their value digitally rather than physically.

Market cap

According to Wikipedia, the market value of the entire stock market is roughly $93.6 trillion. Crypto's market cap presently sits at about $1.18 trillion (according to CoinMarketCap).

Yet, despite the immense variety of shares from around the globe, it is harder to diversify here. Even if we consider the US market alone, we have close to 6000 listed companies.

While the rate of new cryptocurrencies is fast expanding, it is much easier to specialize from a numbers perspective than with shares.

Regulation

To paraphrase the Securities and Exchange Commission (SEC), “People who seek your investment dollars must tell you the truth about their businesses; they must treat you fairly and honestly by putting your interests first.”

The vast majority of stock markets globally are subject to intense regulatory oversight to prevent any wrongdoing. Publicly listing a company is reserved only for a few who meet highly selective criteria.

This contrast to cryptocurrencies, which are decentralized, meaning no regulation exists. It’s why trading digital currencies is banned in some countries while others have called for stronger laws.

Trading hours

One advantage of decentralization is market access. Crypto is the only market tradeable 24/7.

Conversely, stock exchanges only open according to standard business hours. Therefore, trading coins is much more flexible, where you can keep tabs on the markets at any time and enter/exit positions at will.

Volatility

Socks have recently become quite volatile in their own respect. However, cryptocurrencies generally have higher volatility for a few reasons. Firstly, currencies change hands often, bringing about rapid fluctuation.

However, the fundamental reason is that cryptocurrencies are a relatively new asset class. With this, they bring a high level of uncertainty and speculation. Yet, the large price swings we see are some of the attractive qualities because you can realize greater profits in a shorter period.

Summary

So, most people ask the ultimate question: should you invest in crypto or stocks? Equities are theoretically safer and more reliable investments, given they’ve been around for eons.

Meanwhile, crypto has only been prominent in the better part of the last decade. Yet, despite its newness, the long-term returns can outpace all other more established markets.

Overall, no financial security is significantly better than the other as it depends on the investor’s risk tolerance, experience, and goals. Fortunately, you can try your hand simultaneously to diversify and have multiple income streams.