”Virtual Currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” -
”Virtual Currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” – Ben Bernanke
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” – Dave Ramsey
Let us see a brief comparison and Decide what is best for the investor.
What are the similarities of cryptocurrency and stock markets?
First of all, both of the markets function the same way. By their simplest, the price of both are determined by demand, meaning how much people are willing to pay for a share or a currency. This means that when someone pays more than the previous person the price goes up. When no one is willing to pay a certain amount at a certain time, and someone is willing to let go of their ownership for less, the price goes down.
Secondly, both of them can be valued based on the idea behind them. A stock is based on the business behind it and a currency is based on the idea, but the value in both lies behind the idea to some extent.
Thirdly, both of them are so far valued in fiat currencies. This might change, if the dream of cryptocurrencies comes true. But for now, we are stuck with this.
What are the differences of cryptocurrency and stock markets?
To begin with, even when the value is based on the idea of the currency or the stock, in the stock market you actually invest in the company, in the cryptocurrency market you invest in the technology or the currency, however you want to see it, but you never really get to own any part of the company, even if the business of the company affects the price of the currency.
This also affects the total evaluation of the cryptocurrency market, there is none. No one really knows what the total market capitalization for cryptocurrencies is. The cryptocurrency market also acts ten times faster (I don’t know how true this statement is, but it is my guess, as I’ve said before). This affects everything. Prices go up faster, prices go down faster, prices change at larger magnitudes.
Market manipulation is something that doesn’t really exist in the stock market, however, in the cryptocurrency market it definitely does. Is it a bad thing? Well, it depends if you get caught in between or not. To some extent it might be beneficial for the wider adoption, since it gets more people involved.
Following the last difference is the reason the stock market doesn’t really have market manipulation, or a very minimum amount of it, and that is that it is regulated, whereas, the cryptocurrency market isn’t. This affects a lot of the behavior. Any old tricks can be used, because no one regulates it. However, no one is saying that you must do what is allowed by an agency. Also, new competitors can come in much easier.
Finally, because new competitors can enter so easily in the cryptocurrency market, old currencies die much faster than old businesses die in the stock market. There is no reason for hundreds of cryptocurrencies to exist, where as there are reasons for hundreds of businesses to exist.
I would like to conclude with the fact the fact that Crypto-market is highly volatile and Risky but there is a saying that “More Risk More Returns”,hence there are high returns on it for a short run as Regulation for the tradeable market of Cryptocurriences are not fixed yet in many countries,whereas the Equity market is already in function offering many returns to the instruments being traded. Hence an Investor must be careful about the amount and the risk associated to what is being invested.