How Smart an Investor I am? – Cryptocurrency Vs. Equity

In recent history, when we used to talk about cryptocurrencies i.e. either bitcoin or ethereum, we always talked about how it works out?, how mone

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In recent history, when we used to talk about cryptocurrencies i.e. either bitcoin or ethereum, we always talked about how it works out?, how money is transacted? etc. etc. But post the second half on 2017, the talks are about how far the bitcoin will go?, will the bitcoin bubble be bursted?… This is how perception of people changes when it comes to monetary benefits.

Investment in bitcoins is not a matter of concern for people as far as they can generate high profits. A market place which is totally dependent on sentiments is suddenly too easy for people to understand, if general sentiments of people are of buying bitcoin, then the price will rise and the reverse, if majority of people start selling, the price falls. This logic comes out very easy for people as compared to investing in stock market or equity. A proper equity investment must have to be backed by some amount of technical analysis, traditional analysis or some company insights. One must be able to understand the past trends of market, macro-economic factors of the world, government policies, nature and scope of business and what not for a profitable equity investment.

The concept of cryptocurrency generated from the advancement of Blockchain technology. Blockchain also has potential applications far beyond bitcoin and cryptocurrency. Blockchain is a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The major innovation is that the technology allows market participants to transfer assets across the Internet without the need for a centralized third party. This has generated some trust among the users such that no third party is involved, and the flow of information is transparent. In earlier days, transparency was a major issue in equity trading which has led to scams such as the Harshad Mehta Scam. A broker i.e. a third party is always involved in an equity transaction and moreover all the things do not come out to the common people. So, in terms of transparency and involvement of third parties, bitcoin has a upper hand than equity investment. But it is far too early to comment on the safety as there is still an ambiguity about the owners and developers of bitcoins.

The generation of bitcoin is done by a process called mining. Bitcoin mining is the process of adding transaction records to bitcoin’s public ledger of past transactions or blockchain. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. So every bitcoin miner can earn a specific amount of bitcoins every month. In case of equity owners, how well the shares or stocks of a company are doing is totally dependent on the performance of the company in the actual market. Company play with their figures in order to show a high quarterly or annual growth, to raise their share price and can show higher market capitalization.

An Investment in Equity in India is expected to give you a return of 15% per year with a little risk involved. On the other hand the investment can be grown multiple times in bitcoin but the risk involved is very high. On seeing the past trends of bitcoin, no one can be certain about the growth and no one knows when the bubble will burst. The investors are in a fix weather to take higher risk or go for a safer play.



  • comment-avatar

    Bitcoin is one of the most known cryptocurrencies out there. There are in fact more than 100 cryptocurrencies and many platforms are available to trade in them. But investestors must understand that the risk and volatility in case of cryptocurrencies are much much higher as compared to equities.