Cryptocurrency or Stocks: What’s the Right Investment Option for You?

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When you’re planning for your financial future, investing can play an important role. However, the ways you invest can become complex parts of the equation. There are far more choices today than there were in decades prior. And, as interest in cryptocurrency has become more mainstream, many aspiring investors are wondering whether crypto or stocks, a tried-and-true investment, are the better option.

In most cases, the decision about how to invest is a personal one based on your goals and comfort level with certain types of investments. But by understanding the paths you can take, you’ll have an easier time selecting a direction that meets your needs. If you’re finding it a challenge to decide between cryptocurrency and stocks, here are a few things to consider first.

Stocks vs. Cryptocurrency: Understanding Your Options

Cryptocurrencies and stocks are both investment options, but they’re incredibly different when it comes to their design and function. In the simplest sense, a stock is a piece of a company. It represents a stake in the business, which each stock representing a particular fraction of ownership in that company. When you purchase a stock, you’re buying a tiny share of its business.

With crypto, the investment is in a digital currency. It exists entirely in a virtual space, relying on special coding techniques to secure any transactions that occur. Many cryptocurrencies are based on digital money ledgers referred to as blockchain technology. However, that isn’t an inherent requirement, and some do use other approaches. Unlike stocks, crypto isn’t a reflection of fractional ownership of an underlying entity. These currencies generally aren’t backed by any other assets.

The Pros and Cons of Cryptocurrency Investing


With cryptocurrency, there’s the potential for fast gains. While that also means you could experience significant losses fast, it does create an opportunity for far greater yields in a shorter amount of time.

These days, investing in cryptocurrency is also far simpler. There are several reliable platforms that allow you to get started with relative ease, including some that are entirely crypto-oriented and others that let you to invest in various assets, like stocks. Additionally, on these platforms it’s normal to find a solid selection of coins to choose from, allowing you to select investments that meet your needs.

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The risk of value drops involved in cryptocurrency means you’re just as likely to experience large losses as you are substantial gains. At one point, Bitcoin experienced a 21% decline decline in value in mere hours, showing how far it can tumble in less than a day. Overall, the crypto market can be quite fickle, responding more to trends and memes than true financial potential or other typical markers of possible financial success.

Additionally, there are scam cryptocurrencies and crypto platforms to be aware of. If you encounter one of them, there’s little to no recourse if you experience a loss, even if it’s substantial. Online wallets may also be vulnerable to hacking to a degree that stock holdings aren’t. Once you lose cryptocurrency, you’re unlikely to get it back because its anonymity features make tracing transactions impossible.

Even on proven platforms, you may not get access to every cryptocurrency you’d like to purchase. Each one can choose what it offers, so you may not find your preferred up-and-comer on your current platform.

Finally, emerging government regulations could turn the market on its head with little notice. If that occurs, you may have little — if any — time to make adjustments before values plummet.

The Pros and Cons of Stock Investing


With stocks, there are market fluctuations, but they’re usually much less volatile than cryptocurrencies over time. Additionally, with centuries’ worth of information, experts often have an easier time spotting shifts in trends or investment patterns, potentially allowing them to anticipate changes in stock market directions in advance — information you can use to prevent losses.

Overall, the stock market is highly accessible, particularly with platforms that allow individual investors to buy and sell stocks, purchase fractional shares and do much more. The marketplace is also highly regulated, which provides an innate level of security — the same isn’t true of the crypto world.

Diversifying your investments is also easier in the stock market, as you can choose companies operating in a range of sectors or go with products like ETFs for some built-in diversification. Additionally, stocks are backed by a specific entity — a business itself — making them a bit less subject to speculation.

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While stocks are less volatile, that doesn’t mean there isn’t any volatility in the entire market. High-risk investments are certainly available in the stock market landscape. In some cases, newer investors can develop a false sense of security simply because the market as a whole is viewed as a smart place to put their money.

Stock price movements are largely dictated by how investors feel about a company’s odds of success. While that means changes in value usually reflect concrete conditions — like product launches and profitability — they’re also tied to broader economic shifts. In some cases, these downturns can happen quickly, such as what happened during the pandemic; in just one day in March 2020, the NASDAQ stock exchange fell by by 12.3%.

Additionally, stocks can become worthless. If a company collapses or closes down, there’s nothing backing the stock. That causes its value to functionally disappear.

Cryptocurrency vs. Stocks: Time Horizons

When you’re investing, your time horizon matters. A time horizon is the length of time you plan to hold onto an investment before you want to (or expect to) profit from it. As an example, and depending on your age, saving for retirement is an example of an investment with a longer time horizon. If you need to cash out an investment in the near future, you’ll want to use a different strategy than if you plan on holding it for the long term.

Usually, stocks are viewed as the better option if your time horizon is short. They’re less volatile, so there’s more of a chance that the value will be there when you need to exit.

Cryptocurrencies’ volatility makes them less than ideal for short time horizons. Prices can swing dramatically over the course of hours, let alone weeks or months. If you need to exit in the near future, the value of your crypto wallet may be far lower than you anticipated, leaving you in a tough position.

With long time horizons, either option is potentially viable. You have the benefit of time, increasing your odds of securing gains to some degree. However, value increases aren’t guaranteed for every investment type with any time horizon, so keep that in mind.

Choosing the Right Investment Option

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The investment option that’s best for you depends on your unique needs and your overall risk tolerance when it comes to potentially losing money on an investment. Generally speaking, cryptocurrency isn’t ideal if your time horizon is short, as the volatility in that space could open you up to dramatic losses that you can’t avoid.

However, if your time horizon is longer, either option could be viable. In some cases, using a combination of investments could be your best bet, allowing you to capture the benefits each one has to offer while mitigating some risk.

Ultimately, diversification is a safeguard against catastrophic losses, so including both stocks and cryptocurrencies in your broader plan can be wise. But if one option is a better fit for your needs and style than another, use that as a guide. All investments come with risk and can lead to losses, but they may also have the potential for gains as well. Do plenty of research and diversify to make the right decision for your financial future.