The road to wealth and comfort relies on not only hard work but the management of your earnings. Investing in shares is one of the most popular and reliable ways to accomplish this, but there are other ways and means to invest your money.
Cryptocurrency is one of these methods. Although the history of cryptocurrency dates back to the 1980s, it was until 2009 that Bitcoin became the first decentralized cryptocurrency, with others entering the market over the next few years. But what is the difference between the stock market and cryptocurrency? The basic difference is that while the stock market is a real market, Crypto like Bitcoin is a virtual market, operating entirely online, with actual tangible currency.
Although the stock market is inherently volatile, Bitcoin is considered to be a way more volatile asset. This is because Bitcoin doesn’t have tangible backing and is entirely determined on demand. The value changes wildly. If it is sought after prices will go up but if it is not then prices will go down. This can happen in a very short space of time.
The stock market, however, is markedly less volatile than Bitcoin, mainly because there are far more regulations and rules set in place that have been around for hundreds of years. People have been investing in shares for decades now, so it is a more stabilized way of investing compared to Bitcoin which is only a few years old and hasn’t had time to mature yet.
When it comes to cyber security, stocks are much safer than crypto because the stock market is heavily regulated and is not anonymous. If you want to buy ASX shares, for example, then you have a stock trade that is closely regulated by the SEC. Harsh laws are in place for anyone attempting or caught committing fraud, where the infamous Bernie Madoff Ponzi scheme is a good example.
Because crypto is entirely virtual, widely unregulated, and decentralized, it is much more subject to cyber-attacks by hackers. When you purchase crypto such as Bitcoin, it goes into an online wallet which can be easily susceptible to online attacks by cybercriminals. It is more secure than it was in the earlier days, and it is recommended that you take security precautions such as using an encrypted wallet.
Trading on the stock market will often involve a brokerage fee and bank fees. Taxes are to be paid on capital gains and working out what to pay can be a tricky endeavor. Some of these costs can be high so it is important to do the research to work out how to legally pay as little capital gains tax as you can.
Crypto, such as Bitcoin has relatively few fees as a broker is not needed to manage transactions. Any Bitcoin transaction requires a fee, which goes to the miner who confirms and validates the new transaction. Other fees also include third-party exchanges such as a Bitcoin ATM.
Whether you decide to invest in stocks or crypto, remember there are both upsides and downsides to either platform. Keep in mind that you can have a portfolio that involves investing in both if you want to perhaps make the most out of both concepts. Either way, do your research to get as much knowledge on your chosen investment platform as you can.