Crypto vs Stock Market: which should you invest in?

When deciding between crypto vs stock market, investors must strike a balance between comfort and risk. Investors in digital currencies have had to deal with wild price swings. The ups and downs of stock prices can be dizzying, but not quite as wild as the ups and downs of the cryptocurrency.

Understanding the strengths and weaknesses of each asset, as well as the role they play in a portfolio, is essential for meeting the investor’s objectives.

The rapid rise of cryptocurrency has many investors reconsidering the role of stocks in their portfolios. However, there are numerous distinctions between stocks and cryptocurrencies. The most important difference is that a stock is an ownership interest in a business (backed by the company’s assets and cash flow), whereas cryptocurrency is not.

When purchasing cryptocurrencies, it’s critical to understand what you’re getting and how it compares to traditional investments like stocks, which have a proven long-term track record.

Should you put your money into cryptocurrency or stocks?

Any wise investor must understand exactly what they are investing in. It is critical to weigh the risks and rewards of investing, as well as the factors that will drive the investment’s success. They cannot perform the calculation unless they have this type of information. It’s not really investing in this case; it’s more like gambling.

Here are the most important things investors should know about stocks and cryptocurrency.


In general, cryptocurrency is not backed by any hard assets (with the exception of specialized stablecoins), and this is true for the most popular crypto coins, such as Bitcoin and Ethereum. A cryptocurrency may enable you to perform specific functions, such as sending money to another person or using smart contracts, which execute automatically when certain conditions are met.

Since crypto is not supported by assets or cash flow, the only thing moving cryptocurrency prices is speculation driven by sentiment. Prices shift as sentiment shifts, sometimes dramatically. So cryptocurrency is only motivated by the hope that someone will buy it for a higher price in the future — a concept known as the “greater fool theory of investing.”

Read More: How To Start Day Trading Crypto


A stock is a portion of a company’s ownership. It’s easy to lose sight of this if you’re distracted by fluctuating stock prices — and the potential for profit. The stock, as a legal ownership stake in the company, gives shareholders a claim on the company’s assets and cash flow. These serve to back up your investment and provide a foundation for its valuation.

crypto vs stock market - two people discussing about the stock market

Why do stocks rise and fall? A stock’s price fluctuates as investors assess the company’s future success. While investors may become overly bullish on the stock in the short term, the stock price ultimately depends on the company’s ability to grow profits over time.

That is, a stock rises over time as a result of the underlying company’s success.

The underlying company must operate well over time for a stock to be a successful investment.

Read more: How to Invest in Stocks

The main differences between stocks and cryptocurrencies

While both stocks and cryptocurrencies are respectable investment options, their functions within a portfolio differ. The way they are purchased and sold, as well as how they support an investment strategy, differ significantly. Here are some essential traits of stocks and cryptocurrencies:


A buyer typically needs to open an account at a brokerage like Charles Schwab, TD Waterhouse, or Fidelity in order to purchase and retain stock. In the buyer’s name, the brokerage executes trades and holds stock. Although companies like Coinbase have simplified the process, their product offerings aren’t as extensive. A buyer must also provide personal information like their street address and Social Security number. A certain level of security is provided by using a brokerage.


Accredited exchanges around the world offer stock trading. They provide security, stability, and transparency to stock buyers and are designed to handle significant daily trading volumes. Although specifics vary by country, exchanges are strictly regulated, protecting both buyers and sellers.

person drinking coffee while looking at trading chart

Exchanges that let users buy and sell cryptocurrencies are more recent. There are dozens, if not hundreds, of crypto exchanges. The two biggest are Coinbase and Binance. Some exchanges collaborate with outside parties to make it simple to convert fiat money, like the dollar, into cryptocurrencies.


The United States established the Securities and Exchange Commission (SEC) to create and uphold investor protections in the wake of the 1929 stock market crash that sparked the Great Depression. Companies must disclose all information that could affect the price of their stock. There is a wealth of information available for investors and their financial advisors to use when making investment decisions.

The fact that cryptocurrencies are still largely unregulated, in contrast, is seen favorably by some crypto investors. Cryptocurrency markets have no regard for national boundaries or governmental authority. However, if something goes wrong with their investment, it leaves cryptocurrency buyers without any protection.

The Benefits of Investing in Cryptocurrency

Potential hedge against fiat currency

One of the most appealing aspects of cryptocurrencies to some investors is their decentralized nature. It is not governed by central banks or governments that like to print money and inflate fiat currencies like the US dollar or the euro. Some investors refer to cryptocurrency as “digital gold” because they believe it will prevent them from inflation.

Potential for large gains

Investing in cryptocurrencies has the potential for large gains. Since their inception, the prices of several cryptocurrencies have skyrocketed . People are drawn to cryptocurrencies for these gains, but the possibility of price growth comes with serious risks.

Widespread interest in digital currencies

Cryptocurrencies appear to be gaining popularity among investors, businesses, and governments. Tesla has Bitcoin on its balance sheet and shortly accepted it as payment before changing its mind. The International Monetary Fund has prompted El Salvador to reverse its decision to make Bitcoin legal tender in 2021. Investors may benefit from the increased acceptance of digital currencies.

The growing number of coins

Initially, there were only a few coins that could be invested in, however speculative interest has changed that. New coins are released on a regular basis, and now there are thousands to select from.

The Cons of Investing in Cryptocurrency

Extreme volatility

Since their inception, cryptocurrencies have been extremely volatile. Because they are not backed by anything, the price at which they trade is determined by the whims of traders. Fortunes can be made and lost quickly, and no one knows where a coin will trade next.

Cybersecurity threats

Despite cryptocurrency geeks talking up the security benefits of digital coins, notable hacks involving cryptocurrencies have occurred. Recovery of stolen funds is frequently difficult.

No intrinsic Value

Cryptocurrencies have no intrinsic value, which means they aren’t backed by underlying assets or earnings like stocks are. Stocks are valuable because of their future earnings potential and what they will return to their owners, whereas cryptocurrencies do not.

Advantages of Stock Investing

Long History of Quality Returns

Stocks have a long-standing history of creating quality investment returns, with the S&P 500 returning approximately 10% over the long term. Stocks can be volatile over the short term, but they have historically been safe to hold for long periods of time.

Have intrinsic value

A stock represents a stake in a company, and its value over time is determined by the underlying company’s success. Companies own assets that generate earnings and cash flow for investors, resulting in intrinsic value.


It is now simpler than ever to invest in stocks, with many online brokers offering no-fee trading. You can invest in equities or decide to buy a diversified bundle of stocks thru an index fund. Index funds can help you build a diversified portfolio even when you don’t have a lot of money, to begin with.

Increased regulation

Stock exchanges, brokers, and businesses are all heavily regulated by various government agencies. Companies are required by the Securities and Exchange Commission to disclose specific information to investors. Although no regulatory body is perfect, stocks have been around for a long period of time and certain investor safeguards are in place.

Cons of Stock Investing


Stocks are much less volatile than cryptocurrencies when you invest in index funds that hold a diverse selection of stocks. Individual stocks can be more volatile than cryptocurrencies, but usually not as much. Due to this volatility, it is best to hold stocks as part of your long-term investment strategy so that you have time to recover from any temporary losses.

Lower potential for extreme gains

The S&P 500 and other large stock indices presumably have less potential for the sometimes-found extreme gains in cryptocurrencies. Over the long term, stocks have returned about 10%, whereas cryptocurrencies frequently move 10% in a single day.

Managing your portfolio

When deciding how to build your portfolio, you don’t have to choose between stocks and cryptocurrencies or between other asset classes like bonds or funds. It all comes down to weighing your portfolio according to your risk tolerance and time horizon.


Given its inherent risks, cryptocurrency performs best when only a small portion of your total portfolio is allocated to it. Consider 5% or less.

If cryptocurrency really takes off, even a small allocation could work wonders for your investment portfolio. Additionally, keeping your allocation small protects you from suffering a total loss if cryptocurrency doesn’t take off.

If your portfolio’s exposure to cryptocurrency increases, you can shift more funds to stocks to reduce the overall risk of your holdings.


Given the strong long-term performance of stocks, the majority of your portfolio should consist of a diversified selection of stocks, particularly if you have decades before you need to use them.

To maximize your returns when investing in individual stocks, you must thoroughly research your choices.

If you invest in mutual funds, you can take advantage of the potential for high returns by investing in a broadly diversified fund with little research, such as an S&P 500 index fund.


It’s not either-or when it comes to investing. It pays to diversify your investments so that you can balance riskier bets with safer ones. In the same vein, investors don’t have to choose between stocks and cryptocurrencies; they can pursue both as long as they’re okay with having some risk in their portfolio.

Finding out more about Martina’s Trading and Investing Crypto training program can be the first step in acquiring a sound knowledge of investment strategies and portfolio management if you’re thinking about a career or even a hobby in investing especially with Day Trading Crypto. The community offers a solid foundation in the fundamentals of crypto and advanced topics, which may lead to a fulfilling career.

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