A popular adage, states – Never put all your eggs into one basket.
Well, nowhere is it more applicable than in the arena of investments.
The success of investments depends upon so many external factors, such as global economic situations, trends in marketplaces, changing political scenarios, etc. Therefore, it would always be best to have a diversified investment portfolio in hand. In other words, the portfolio should have a combination of bitcoin motion, such as commodities, stocks, real estate, cryptocurrencies, bonds, etc. This way, there is a spreading of risk, and preventing of huge losses from just one type of investment.
A comparison of two assets – cryptocurrencies and stocks/shares – should suffice to provide better understanding. If you are new to Crypto investment or trading check Bitcoin smart an advance trading platform.
Kinds of Assets
As the name suggests, only virtual currencies come into the picture, in the name of assets, as far as cryptocurrencies are concerned. They include Ether, Bitcoin, Solana, Cardano, etc. In contrast, the stock market exchanges deal only with the shares/stocks owned by diverse commercial establishments.
Regarding ownership, the cryptocurrencies only go to a purchaser (investor) or a seller (trader). There is no partial/complete ownership of the coins/tokens on display. It is different when purchasing stocks/shares. The purchaser becomes a partial owner of the company from where they were bought.
Can people buy as many coins/tokens of any cryptocurrency, as they want? No, it is not possible, for every digital currency has a cap in place. If the demand was more, then the value of the concerned cryptocurrency would increase. The reverse would happen if the demand was less.
It is up to the publicly traded business venture to decide how many shares/stocks it would like to put up for sale. It depends upon how much of funds it is keen to raise, albeit keeping within the confines of the company’s regulations and local laws.
Marketplace Maturity
Digital currency exchanges are not yet on par with stock exchanges. The former isnew in comparison to the latter. Furthermore, they still need to undergo certain developments, to be considered fully mature. Furthermore, their activities are not under the governance of political parties, or any kind of regulations.
Even the volume of trade that goes on in a cryptocurrency exchange is far lesser in comparison to that, which goes on at a stock exchange. Stock exchanges may boast of high volumes of trade, even in just a single day. Additionally, they trade in diverse kinds of assets. They can move ahead confidently, for local laws and stringent regulations are in place, to prevent frauds and criminal activities. Legitimate and licensed companies have government backing. Companies are also careful to keep all activities transparent, including the agendas and discussions of general meetings. The public is always aware of the financial situations of diverse companies.
Thus, stock markets have greater maturity in global marketplaces.
Fees and Costs
Stock market activities operate under specific rules and regulations. The idea is to ensure that every trader/investor, whether a beginner or an expert, is treated fairly. It is also the reason fees/costs are generally high. Deals take place via brokers, who charge commissions/fees. Even if banks are involved in the transactions, they charge for them. Finally, there is a tax to be paid for capital gains.
In contrast, digital currency exchanges demand less fees. In fact, they are extremely nominal, only involving mining costs. Even the cryptocurrency exchanges demand reduced charges for purchasing/selling of coins/tokens.
Volatility
Digital currencies are subject to tremendous price fluctuations. There is no saying what will happen next! After all, whale traders hold sway over global marketplaces.
Who is a whale trader?
A whale trader is someone, who invests heavily in a particular cryptocurrency. For instance, it could be Bitcoin. It follows, therefore, that the marketplace will follow the whims and fancies of these whale traders. To illustrate, when Elon Musk, the world-famous entrepreneur, purchased $1.5 billion worth of BTC in 2021, Bitcoin’s pricing took a massive jump of 17%! Naturally, everyone wished to purchase/sell the coin/token, at the best prices!
Unlike cryptocurrency exchanges, stock exchanges cannot expect immediate financial rewards. Geopolitical events, large/small trade volumes, impact of governmental actions, etc., are key influencers. Therefore, they are also subject to volatility, bringing profits/losses to the owners of various shares/stocks.
