Is crypto better than stocks? Make the right choice for you
Today’s investors have more options than ever before—from funds to futures to alternative investments. But with so much choice comes the fear that you might be missing out on a better opportunity elsewhere. A question plaguing many investors is whether crypto is better than stocks, so here’s a roundup of the evidence.
Bitcoin was once worth less than a dollar, but it hovers closer to the $50,000 mark these days. Those are more impressive returns than even the most successful stocks—for instance, Google was launched for around $52.5 in 2004 and is now worth closer to $3,000. Still, these kinds of numbers are atypical (for crypto and stocks), so they don’t necessarily mean crypto is better than stocks for investing.
Who should you back: the new boy or the old guard? Or maybe there’s room for both? Let’s dive in and find out.
Crypto vs. stock performance
The obvious way to assess whether cryptocurrencies are better than stocks is to look at the past performance of both assets. But before we go any further, let’s run through some quick caveats.
For one, “cryptocurrencies” and “stocks” are two very broad categories. The cryptocurrency market is still relatively young and new coins are launched all the time—there’s not much comparison between a big player like bitcoin and a currency launched by an indie developer a few weeks ago.
It should therefore go without saying that the success of one cryptocurrency doesn’t mean all cryptocurrencies are good investments. The same applies to stocks—blue-chip stocks like Microsoft are far safer than newly-launched stocks and small-cap stocks, for instance.
And, as all good investors know, past performance doesn’t guarantee future results (but it’s certainly a good place to start).
With With that in mind, let’s compare the most prominent representations of both asset classes to see whether crypto is better than stocks.
The NYSE vs. Bitcoin
The New York Stock Exchange (NYSE) is the world’s largest stock exchange in terms of market capitalization, so it’s a good baseline for assessing stock performance. And bitcoin is the original and best-performing cryptocurrency, so it makes sense to use it as our representation for all other cryptocurrencies.
Bitcoin was launched during the financial crisis in 2009 and was initially worth just a few cents. By October 2014, its price was $338.82. Two years later, it increased to $700.97 (up 106%), and by October 2018, it was worth $6,317.61 (up 1764%). Today, its value is closer to $50,000—that’s an increase of 14,657% in just six years.
Now let’s look at the NYSE. In October 2014, one unit was worth $10,845. Two years later, the value actually decreased—a unit cost just $10,481. But by October 2018, it was up to $12,208; today it’s worth around $16,801. That’s a 54.9% increase between 2014 and 2021.
There’s a clear winner here: Bitcoin. But as you’ll soon see, that doesn’t necessarily mean you should pour all your money into crypto.
It’s easy to look at past returns, see that bitcoin has performed well, and assume that cryptocurrency is your best bet. But you also have to consider risk.
Whatever you invest in, there will always be a certain level of risk (especially in the short term), but cryptocurrencies amplify that.
Bitcoin was only launched in 2009, while the stock market has been around for hundreds of years—nobody really knows if cryptocurrencies will even be around a few years in the future, never mind whether they’ll be profitable investments. But the S&P 500 has an average return of around 10% a year, with some years experiencing incredible growth and others negative growth.
Cryptocurrencies are also primarily speculative since most retailers don’t accept them, whereas stocks have more inherent value since they represent profitable companies (for the most part).
If you’re going to invest in non-bitcoin crypto, things get even riskier—countless cryptos that once led the market capitalization leaderboard have now been wiped out completely.
Admittedly, individual stocks can be risky since there’s always a possibility a company will go downhill. But if you select a large selection of different stocks or an index fund tracking the stock market, you’re hedging yourself against risk significantly.
In conclusion: some people might be willing to accept the risk involved in cryptocurrency investment, but if you want a safer option, a diversified range of stocks is the way forward.
No need to choose
So far, we’ve been framing this discussion as a binary choice between cryptocurrencies and stocks. Can you have your cake and eat it too? But why not have your cake and eat it too? Smart investors realize they can have the best of both worlds.
We recommend investing a significant portion of your portfolio in a diverse range of stocks or an index fund to mitigate risk, which should form the basis of your savings for the future. This way, you’ll sleep at night knowing that whatever happens to bitcoin, you’ll still have a good chance of being able to enjoy retirement.
But once you have your retirement nest egg accounted for, you may be willing to allocate a smaller portion to “fun” investments like cryptocurrencies. And considering the enormous potential, your crypto holdings might end up being a hundred times larger than your stock portfolio.
Besides, diversification is a great investment strategy, so a portfolio exposed to various markets and asset classes will get the approval of most experts.
Thanks to online investing, getting started has never been easier—just set up a few accounts from home and you can get involved in crypto and stock investing straightaway. Of course, you should do your research first.
MyConstant can support your investment strategy
As you can see, there’s no clear answer as to whether cryptocurrency is better than stocks—it depends on your risk appetite (among other factors), and there’s no reason to choose one or the other.
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