Cryptocurrency vs. Stocks: Which Investment Is Best for You?

What’s the difference between crypto and stocks?
The main difference between crypto and stocks is that crypto is a digital asset while stocks represent fractional ownership of a business.

Table of Contents

• What is cryptocurrency?
• What are stocks?
• Major differences between stocks vs. crypto
• Cryptocurrency vs. stocks FAQs

Debating whether to invest in cryptocurrency vs. stocks? Both stocks and crypto have a lot to offer beginner investors eager to diversify their portfolios. 

While cryptocurrency offers new investors a dynamic trading experience, stocks boast decades of market exposure and are protected by government regulations. 

While both assets differ in terms of long-term value, trading techniques, and diversification options, don’t be surprised if both find their way into your investment portfolio down the line.

What is cryptocurrency?

Cryptocurrency is a digital asset used as an alternate form of payment. Unlike physical currency, or fiat, cryptocurrency remains largely unregulated and has become a key player in the decentralized finance (DeFi) movement.

Every crypto transaction is publicly recorded on a digital ledger system known as blockchain technology. Nodes of data, called smart contracts, are linked together to form transaction blocks that are verified by anonymous computer networks.

Although Bitcoin is the most popular cryptocurrency, there are over 26,000 crypto tokens and coins to choose from. Investors can buy, sell, and trade cryptocurrencies on digital exchanges 24/7. 

Investors hold cryptocurrencies as they appreciate in value, then sell them for a profit. The price of crypto can range from less than a cent to thousands of dollars. Don’t let the price of a single coin scare you—it is possible to purchase a fraction of any cryptocurrency.

Emerging asset classes like cryptocurrency are quickly finding themselves on the radar of experienced and beginner investors alike. Like any investment, cryptocurrency comes with pros and cons that investors should carefully consider.

Pros and cons of cryptocurrency

Cryptocurrency has taken the world by storm due to its accessibility and high ROI potential. Here’s what crypto investors like about this digital asset:

• Crypto has a low barrier to entry: anyone with internet access can buy, sell, and trade cryptocurrency. There are no income requirements or legal barriers to entry like citizenship requirements or age limits.
  
• Cryptocurrency is a highly liquid asset: cryptocurrency can be exchanged for fiat 24/7. There is no limit to the number of times a coin or token can be swapped, and crypto can be traded into multiple types of fiat currencies.

• Crypto operates independently from centralized banks: investors do not have to wait for financial institutions to verify their transactions. Investors are solely responsible for their digital assets and are free to store their crypto online or offline.

Long-term investors who hold their digital assets with “diamond hands” can potentially be rewarded with unparalleled returns. However, crypto also has risks to remain aware of:

• Crypto lacks thorough regulation: since cryptocurrency is a decentralized asset, the Securities and Exchange Commission (SEC) is not able to thoroughly regulate the crypto market. This has led to multiple cases of fraud and misleading crypto offerings.
  
• Cryptocurrency has a history of volatility: the crypto market is far from stable and is still too young an asset class to warrant methodical investment strategies backed by decades of market research.
  
• Crypto isn’t widely accepted as payment: few countries around the world have begun to accept Bitcoin as payment, so altcoins have a long way to go before being accepted as a mainstream currency.

If an unregulated market bursting with potential and price volatility resonates with your investment goals, then cryptocurrency could be your next portfolio add. 

If not, let’s see what stocks have to offer beginner investors seeking a strategy backed by over a century of market exposure.

What are stocks?

Stocks represent shares of a tangible company. Shares equate to fractional ownership of a business and entitle shareholders to a proportionate slice of revenue. For example, the S&P 500 is a collection of 500 stocks across nearly a dozen economic sectors and is a respected stock index, or list of potential securities to invest in.

Investors can buy, sell, and trade stocks in the stock market. The stock market can be accessed online, however, it’s usually open during regular business hours on weekdays. Stock exchanges operate on a global scale and have been operating in the U.S. since 1792, boasting centuries of market exposure and investor research.

Similar to cryptocurrencies, an investor can buy and hold stock while it appreciates in value, then sell it for a profit. Depending on the company, investors can also earn a profit from their stock via regular dividend payouts.

An entity might sell stock to raise capital for business expansion or upcoming projects. In turn, stock shareholders may be able to vote at board member elections and make decisions about the company.

Pros and cons of stocks

Pros	Cons
Leverage economic growth	Dependent on an emotional market
Potentially pay dividends	Subject to high taxation and regulation
Backed by centuries of market data and research	Require specialized knowledge

Stocks have a long and respected global history. Here are the top reasons why stocks continue to be a go-to asset class for all levels of investors:

• The stock market leverages economic growth: since the stock market is tied to mainstream economic functions, stakeholders can potentially profit from economic growth. Shareholders who invest in a business before it peaks can benefit from capital appreciation.
  
• Stocks potentially pay dividends: some shareholders will have the option of receiving dividend payouts, or regular payments, from companies. This can result in more consistent profits as opposed to capital appreciation.
  
• Stocks are backed by centuries of history: the global stock exchange is the inspiration behind many research institutions, investing schools, and stock investing businesses due to its centuries of history and effect on the global economy. Thanks to these institutions, beginner investors have a plethora of stock market investing resources at their disposal.

Since the stock market has been around for so long, it has seen its share of crashes. Here are some cons associated with the stock market:

• Stock values are dependent on an emotional market: since the stock market is ruled by centralized institutions like the government, the value of stocks can be heavily influenced by current affairs and the collective outlook of the economy.
  
• Profits are subject to high taxation and regulation: high-paying dividend stocks may seem like a wholly beneficial element of stock investing, but dividend payouts and capital gains are subject to high taxation and strict government regulation.
  
• Stock investing requires specialized knowledge: the average beginner investor may have a more difficult time investing in the stock market vs. cryptocurrency. Since the stock market is older than digital assets, it has become a more complex and bureaucratic process.

Now that you know the basics of both assets, it’s time to learn about the major differences between stocks vs. crypto.

The major differences between stocks vs. cryptocurrency

The main difference between crypto vs. stocks is the years of experience between the two investment asset classes. The stock market has been shaped by increasing regulations and a close tie to everyday economic factors. The crypto market, on the other hand, is as innovative as it is unpredictable. 

The long-term value of crypto has yet to be seen, and crypto critics claim it needs more rules for investors to trade comfortably. Here are the major differences to note before you invest in crypto or stocks.

Long-term value

Since the crypto market has only been around since 2009, it’s difficult to say whether the asset possesses any real long-term value. However, Bitcoin has gone from being worth $5 to $39,000 in roughly a decade.

The stock market, on the other hand, enjoys an annual ROI of about 10%. Despite market dips, historical data shows why stocks are a preferred long-term investment. Both asset classes offer access to innovative Web3 entities, although cryptocurrency has closer ties due to its shared value of decentralization.

Diversification

Both stocks and cryptocurrencies offer assets across various economic sectors. The most visible difference between diversification opportunities is that crypto assets typically relate to digital assets and entities, while stock shares generally relate to brick-and-mortar businesses.

If you’re hoping to expand your investment portfolio into a variety of economic sectors like industrial, real estate, and retail, then stocks are a great idea. 

If you want to potentially capitalize on digital economic sectors like video gaming, decentralized finance, and Web3 entities, then cryptocurrency might be a better match. 

Trading

If you want to have the ability to liquify your investment at any time, crypto is a worthy asset class to consider. There are dozens of crypto exchanges, and all are available to anyone with internet access. 

Both cryptocurrency and stocks can also possess value past the amount of fiat it’s worth. Blockchain projects are often ruled by Decentralized Autonomous Organizations (DAOs) which are similar to shareholder groups within the stock market. 

Although the stock market is limited to regular business hours as trading times, this restriction adds a competitive edge for stock investors interested in trading regularly. 

Regulation

The SEC’s stock market regulations were created to protect individual investors from scams and keep them from investing in assets they could not afford to maintain. This strict regulation has increased the taxation on capital gains.

Cryptocurrency, however, is largely unregulated, so investors are prone to scams since almost anyone can create and sell crypto. The freedom of decentralized finance also comes with an added layer of due diligence for potential investors.

Now that you’re aware of the main differences between the crypto market vs. stock market, consider browsing through our other investment options to learn about potential portfolio opportunities. 

Cryptocurrency vs. stocks FAQs

Still have questions about crypto vs. stocks? Find the answers below. 

Is it better to invest in crypto or stocks? 

It depends on your investment goals. Cryptocurrency could be a good investment for investors looking for low barriers to entry and autonomy over their digital assets. Since stocks are backed by centuries of market exposure and research, beginner investors may feel more confident investing in them. 

Which is safer, stocks or crypto? 

Stocks are generally considered to be a safer investment due to SEC regulations and years of market research. However, this does not make investors less prone to stock market crashes or invalid shares.

Is cryptocurrency a stock?

No, cryptocurrency is a digital asset that operates outside of centralized financial institutions. Stocks are a regulated asset class that offers shares in legally recognized companies. However, both crypto and stocks are categorized as investment asset classes.

Should I invest in crypto?

It depends on which cryptocurrency you want to invest in and why. A good rule of thumb is to never invest more than you are willing to lose. Consider your financial goals, time horizon, and risk tolerance before investing in any asset.

If you still want to invest in cryptocurrency, heavily research a coin or token before investing, and consider taking a long-term investment approach.

How does cryptocurrency impact the stock market?

Cryptocurrency, stocks, and real estate all affect each other since each asset class is reliant on the same economic flow of investment capital. Cryptocurrency can impact the stock market by attracting investment capital that would otherwise be pooled into the stock market.