Cryptocurrency vs Stocks: Difference between cryptocurrency and stocks
Cryptocurrency is very discussed topic now a days. Why are people so much interested in cryptocurrency? Because it has given return in last decade which no other investment could have given. The total value of all these cryptocurrencies is about $2 trillion and bitcoin is the most popular being worth more than $1 trillion.
Cryptocurrency is not a legal tender in India, but if you want to buy a certain crypto like Bitcoin, Dogecoin, etc. you can trade in it. India does not have regulatory proceedings to govern cryptocurrency till now.
What are stocks/shares? Shares are financial instruments issued by companies or corporates to raise funds from the general public. A share is the smallest unit of the company’s overall net worth. The holders of these shares are called shareholders and they are part owners of the company. The extent of ownership of a shareholder in the company depends upon their holdings in the company. For example, if ABC company issues 100 shares and if you own 1 share of it then you are 1% owner of company.
Why does the price of stock rise or fall?
Price of shares depends upon the ability of company to perform well in future and give good returns. Investor become optimistic about stock and buys at higher price. So, the price of stock rises. But, if investor thinks company wont perform well and give good return in future then he may sell the stock at lower rate. And the price of stock fall. Ultimately demand and supply is responsible for price change.
Read also: SHARES OR MUTUAL FUNDS? WHICH IS A BETTER INVESTMENT VEHICLE FOR COMMON PEOPLE?
Why does cryptocurrency rise or fall?
Cryptocurrency is not backed by any asset or cash flow or any company or any government. Cryptocurrency is driven by only sentiment that someone will buy it at higher price in future.
Cryptocurrency vs Stocks: Difference between cryptocurrency and stocks
Real goal to create cryptocurrency was to make it a global currency that can be exchanged like ordinary money but then it got so much popularity and crypto started getting treated like asset. People started investing in it to fetch return on investment. Many people now associate crypto with stocks but they are completely different. Both cryptocurrency and stocks can be accessed through the digital exchange, brokerage account, mobile application, or other online platforms. Even though both cryptocurrencies vs stocks might look similar from the buying and selling point of view, stocks and cryptocurrency are different. Lets take look at differences between stocks and cryptocurrency.
| Stocks | Cryptocurrency |
| When you buy stock, you own part of the company | Cryptocurrency is digital currency which was invented to use for exchange like real currency |
| Stocks need to be created and cleared by government | Anyone can mine cryptocurrency and it is not backed by any government |
| There are less chances that stocks can be fraudulent as stocks are regulated by government agencies and goes through complete yearly auditing | As cryptocurrencies are unregulated and not governed by anyone, there can be fraud or scam |
| Stocks are volatile but less volatile than cryptocurrencies | Cryptocurrencies are more volatile |
| Stocks are directly linked to company and its performance. How company is performing and what company will do in future is shared with public so investor can decide whether they want to buy or sell | The price of cryptocurrency suddenly goes down or higher without any warning. So, investor does not have any information about cryptocurrency to decide to sell or buy |
| Stock market is operational during business days only | Cryptocurrency market is 24/7 or 365 days operational |
| It seems difficult that stock market can be banned | Due to its volatility, countries can ban cryptocurrencies like China banned cryptocurrencies in 2021 |
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Bottom Line
Though cryptocurrency has given higher return which no other investment could have given but investor has to understand what is cryptocurrency and how it works. Cryptocurrency is considered to carry risk so you have to think how much risk you can take, your financial needs, time horizon. Just because many people are investing in it does not mean you will also invest without understanding the risk associated with it. Stocks can also give you good return if you study before selecting stock.
