Is It Better To Invest In Crypto Or Stocks? Pros & Cons
Stocks may be a better investment choice for those with a long-term interest, while cryptocurrencies tend to be a better choice for day trading. However, consider building a portfolio made up of a healthy balance of both types of assets, taking into account their advantages and disadvantages:
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Stocks Pros: Capital appreciation, Dividend income, Fundamental analysis, Market participation, Wide selection (there are more than 65,000 shares traded globally)
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Stocks Cons: Limited trading hours, Bankruptcy risk, Market Centralization, Additional fees
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Crypto Pros: Short-term gains, 24/7 market, Decentralized, Innovative technology
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Crypto Cons: Volatility, Regulatory uncertainty, Security risks, Highly speculative
For both traders and investors looking to significantly grow their capital relatively fast, stocks and cryptocurrencies frequently pop up as a viable solution. Yet, one is a financial market comprised of dozens of developed economies and thousands of businesses with a decades-long track record, while the other is a young, innovative, technology-driven market made up of virtual assets whose prices can drastically change overnight. Knowing whether the stock market or the crypto market is best for you poses difficult dilemmas, whether you’re investing or day trading.
In this article, we’ll help make the decision between crypto or stocks easier, by explaining the similarities and differences between the two, as well as their advantages and disadvantages. By the end, you should have a better grasp of which one is best for you.
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Is it better to trade crypto or hold?
That depends on your trading style, financial goals, the health of the crypto market, and the specific coin. If crypto is in a general uptrend, it may be better to hold, as most crypto has seen huge gains in the past year or so. However, rapid and large fluctuations in price occur daily, so you could capture some profit by day trading the swings.
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Is it better to invest in crypto or stocks?
It depends on your preference. If you prefer long-term investing using fundamental analysis, stocks may be preferable due to their historic growth and security. If you have high risk tolerance and can stand higher volatility with the potential for quick gains, cryptocurrency might be a better option.
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Is crypto still worth investing in?
Crypto is highly speculative. Some may tell you the biggest bull run is already over, yet many coins keep hitting new all-time highs, even recently. The adoption of Bitcoin for ETFs, and growing institutional investment in crypto, could lead to further growth in the future. However, cryptocurrencies are highly volatile and could plummet at any time, so invest at your own risk.
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Is crypto bigger than stock market?
The global stock market is valued at over $109 trillion, while the total crypto market cap is currently $2.83 trillion. However, some predictions put the crypto market at a value of $8 trillion by 2026. In the distant future, it’s possible that the crypto market could outgrow the stock market, but it's highly unlikely.
Is trading crypto better than stocks?
Answering whether cryptocurrencies are a better investment or trading instrument than stocks is a purely subjective question, as the answer will largely depend on your individual preferences, risk tolerance, and investment goals. Both stocks and crypto have different use cases depending on what you’re hoping to achieve.
In a nutshell, cryptocurrencies can provide huge returns in a short amount of time but are highly speculative with little fundamental data. Stocks, on the other hand, involve a lot more fundamental analysis and their prices are tied directly to the performance and valuation of a company, as well as the situation in a particular industry, the national and global economy and the stability of the stock market..
Use Cases for Cryptocurrencies
Cryptocurrencies provide huge opportunities for large profits, depending on when you enter a trade. The total value of the crypto market has seen incredible growth since Bitcoin first burst onto the scene in 2009, with a total market cap of $2.492 Trillion as of March 2024.
Total Market Cap of Crypto Market
Bitcoin alone has grown 2,054% in 10 years. If you’d entered the crypto market before 2021, you would’ve seen huge profits up until the all-time highs seen by most cryptocurrencies in the second half of 2021. The ‘crypto winter’ that followed in 2021-2023 saw most coins plummeting in value and many investors suffering heavy losses. However, if you’d invested in 2023, you would now be seeing huge gains again, as the whole crypto market is currently booming and hitting new all-time highs, largely thanks to the approval of Bitcoin ETFs by the Securities and Exchange Commission (SEC) in January 2024.
Each cryptocurrency has supposed use cases that are touted by their creators. Nevertheless, cryptocurrency in general hasn’t seen widespread adoption and therefore does not have much practical use in society yet, other than as an investment and speculative trading tool. The Bitcoin ETF approval has legitimized crypto somewhat and brought in huge institutional investment. But since crypto is not directly tied to the economy, or to any commodity or company, each coin's prices are mostly based on sentiment and the wider crypto market. You may notice that when Bitcoin prices move, most other cryptocurrencies tend to follow. Therefore, investing in a coin is like betting on widespread positive crypto sentiment.
For a better understanding of how the Bitcoin ETF works, see this article: Explaining the Bitcoin Spot ETF.
Use Cases for Stocks
In contrast to the highly speculative nature of cryptocurrencies, stocks represent ownership in well-established companies, providing investors with a more traditional and proven avenue for wealth accumulation. The stock market, with a total global market capitalization exceeding $109 trillion, has been a cornerstone of investment strategies for centuries. Stocks offer various use cases that align with both short-term and long-term financial goals.
S&P500 chart
Some of those use cases include the potential for dividend income, ownership in companies and a stake in their success, diversification of capital across various sectors and industries, and long-term growth opportunities. In fact, the S&P 500 US stock market index has provided average annual returns of 11.13% for the past 50 years, indicating a more reliable long-term investment.
Stock prices are heavily influenced by fundamental data, making determining their movements much less speculative than with crypto. An individual stock’s price is impacted by company earnings reports, mergers or acquisitions, dividend payments, cash flow, revenue growth, and much more. Meanwhile, GDP growth, inflation rates, employment data, political events, regulatory changes, and other factors influence the broader stock market. This makes stock investment and trading a more involved process requiring a deeper understanding of the market.
What are the similarities between stocks and crypto?
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Market-based Pricing: Market participants, including buyers and sellers, influence the pricing of both, and their prices are determined by supply and demand dynamics.
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High Volatility: Both stocks and cryptocurrencies can exhibit high levels of volatility, with price fluctuations occurring due to various factors, including market sentiment, economic conditions, and external events.
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Risk and Return: Both asset classes involve high risk, and potential returns are tied to risk levels. Higher-risk investments can bring higher returns but also come with increased volatility and uncertainty. Crypto is generally higher risk than stocks.
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Market Sentiment: Investor sentiment plays a crucial role in both markets. Positive sentiment in the stock market and crypto market can lead to increased buying activity, while negative sentiment may result in selling and price drops.
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Public Perception: Both assets respond heavily to media coverage, and significant movements in both lead to media coverage. Positive or negative news and public sentiment can influence investor behavior and contribute to price movements.
What are the differences between stocks and crypto?
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Underlying Asset: Stocks represent full ownership of a portion of a company's assets, while cryptocurrencies are digital assets with no collateral.
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Regulation: Stocks are issued by companies and regulated by financial authorities in the relevant countries. Cryptocurrencies are generally not issued or regulated by banking or fiscal authorities.
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Market Hours: Stocks are only traded during the hours that their respective stock markets are open. Crypto exchanges operate 24/7.
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Market Maturity: Stock markets traditional financial markets with a long history and well-established regulations and practices. Crypto is a relatively new asset class that’s still evolving, with less institutional involvement.
Best crypto exchanges
What are common stocks pros and cons?
As with all trading and investment instruments, there are benefits and drawbacks for stocks. Some of the advantages may be a disadvantage for you depending on your financial goals and trading style, and vice versa. We’ll focus on the pros and cons that don’t also apply to crypto. Let’s take a look:
👍 Advantages Explained
• Capital Appreciation: Stocks offer the potential for significant capital appreciation over time, allowing you to benefit from the growth of the companies you invest in, and the long-term growth of the stock market.
• Dividend Income: Some stocks pay dividends, providing you with a regular income stream. This is particularly appealing if you’re an income-focused investor.
• Tangible Assets: Stocks represent ownership in companies with tangible assets, products, and services, unlike crypto, which is virtual.
• Company Fundamentals: Stocks allow you to assess company fundamentals, such as earnings, revenue, and growth potential, to make informed investment decisions. Cryptocurrencies lack this.
• Institutional Participation: Traditional stocks often attract significant institutional investment from funds, pension funds, and other large entities, leading to more stable growth.
• Market Regulation: Stock markets are generally well-regulated by financial authorities, providing you with a level of investor protection.
👎 Disadvantages Explained
• Market Hours: Stock markets operate during specific hours and are closed during weekends and holidays. This could be a pro if you prefer limiting your trading sessions.
• Limited Accessibility: Some stocks, such as those on foreign exchanges, may be harder to purchase limiting your access.
• Market Centralization: Stock markets are centralized and subject to the rules and regulations of specific countries, which can limit trading opportunities.
• Corporate Bankruptcy: If a company goes bankrupt, you could lose your entire investment, though this is rare.
• Liquidity: Some stocks, particularly those of smaller companies, may lack liquidity, making it challenging to buy or sell large quantities.
Let's say you are questioning whether you should trade stocks intraday. But there are demo accounts to try. You don't lose anything. Sound advice and instructions for beginners are in this article: How To Start Trading On The Stock Market
Is crypto trading worth it?
As with stocks, whether cryptocurrencies are worth investing in is completely dependent on what you hope to achieve financially, your risk tolerance, and your trading strategy or style. We’ll examine some of the pros and cons of crypto trading that do not apply to stocks, so that you can make an informed decision on which is best for you.
👍 Advantages Explained:
• Decentralization: Cryptocurrencies operate on decentralized blockchain networks, reducing reliance on central authorities and providing a more distributed and democratized system.
• Accessibility: Traders from anywhere in the world can participate in the market without the need for a traditional brokerage account, offering broader accessibility.
• Lower Entry Barriers: Cryptocurrencies often have lower entry barriers, enabling you to purchase fractional amounts with limited capital.
• 24/7 Market Operation: Cryptocurrency markets operate 24/7, providing continuous trading opportunities. However, be aware of overtrading leading to exhaustion.
• Innovation and Technology: The cryptocurrency market is at the forefront of technological innovation, with ongoing developments in blockchain, smart contracts, and decentralized finance (DeFi).
• Anonymity and Privacy: Cryptocurrency transactions can offer a degree of anonymity and privacy, as users are identified by wallet addresses rather than personal information. This can be a disadvantage when considering usage in crime.
👎 Disadvantages Explained:
• Volatility: Cryptocurrencies are perhaps the most volatile asset out there. While this can lead to significant gains, it can also lead to huge losses in a short period.
• Regulatory Uncertainty: Cryptocurrency markets face regulatory uncertainty in various jurisdictions, leading to potential legal and compliance risks. This may change with future adoption of crypto similar to the Bitcoin ETF approval.
• Security Risks: Cryptocurrencies are susceptible to security risks such as hacking and fraud. As a crypto investor, you are responsible for securing your private keys. The lack of centralized oversight can also pose security challenges not present in traditional stock markets.
• Limited Fundamental Analysis: Traditional stocks allow you to analyze companies using established fundamental analysis metrics. Cryptocurrencies mostly lack comparable financial indicators.
• Market Manipulation: The decentralized nature of cryptocurrency markets can make market manipulation more prevalent, such as “pump-and-dump” schemes or other coordinated efforts that influence prices.
One of the more regulated and popular cryptocurrencies is Bitcoin. Despite its high price, its increasing regulation and growing adoption make it a safer and more reliable option in crypto. We look at the pros and cons here: Is Bitcoin (BTC) a Good Investment in 2024?
Should I buy crypto or stocks?
At the end of the day, the decision on whether to invest in crypto or stocks depends on:
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Investment Goals: If you're looking for potentially high and quicker returns, and are comfortable with higher volatility, cryptocurrencies might be appealing. If you seek long-term stability and growth, and are interested in companies with established track records, stocks may better align with your goals.
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Risk Tolerance: Cryptocurrencies are known for their price volatility, and values can change rapidly. If you can tolerate the ups and downs without panic selling, crypto might be suitable. Stocks on the other hand generally have lower short-term volatility compared to cryptocurrencies. If you prefer a more stable investment environment, stocks might be a better fit.
Strategy and Style: If you’re day trading, crypto may be best for you, due to higher volatility and short-term price movements. Its 24/7 market means you can trade during whichever hours you prefer. If you’re thinking long-term, traditional stocks offer the potential for dividends and capital appreciation over time.
Rather than simply settling for either cryptocurrencies or stocks, you could consider a hybrid approach, with a portfolio comprised of a mixture of both. Having a healthy balance of long-term stock investments and cryptocurrencies for shorter-term gains would provide you with ample opportunity for growth while letting you reap the benefits of portfolio diversification.
Before investing your hard-earned capital into either, consider using a demo trading account using virtual money. That way, you can test out your strategies, gain some hands-on experience with both, and figure out whether each asset is right for you.
At Traders Union, we regularly assess which cryptocurrency brokers are best for beginners, and give them each a score. You can see our list of the best crypto brokers in the US here: Best Crypto Broker For Beginners In the US 2024 - TOP 5 Comparison.
Conclusion
The decision between investing in cryptocurrencies versus stocks is a challenging one. On the one hand, stocks provide opportunities for stable, long-term growth and dividend income, while owning a tangible asset with plenty of fundamentals for deeper analysis. However, they also come with high risk and are limited to stock market hours. On the other hand, cryptocurrencies can provide huge short-term gains through trading on a 24-hour market, but come with very high risk and a lack of regulation.
To maintain a diversified portfolio, consider investing in both. A mixture of long-term investments in stable assets, paired with some higher volatility, higher-risk assets could lead to desirable gains without introducing too much risk. Above all, make sure to do your own research into any asset before using real capital.
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Team that worked on the article
Jason Law is a freelance writer and journalist and a Traders Union website contributor. While his main areas of expertise are currently finance and investing, he’s also a generalist writer covering news, current events, and travel.
Jason’s experience includes being an editor for South24 News and writing for the Vietnam Times newspaper. He is also an avid investor and an active stock and cryptocurrency trader with several years of experience.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.