There is no doubt that 2022 has been one of the most turbulent years for the cryptocurrency industry. The collapse of FTX shows once again that stocks are safer than cryptocurrencies. The world’s largest cryptocurrency, bitcoin, is currently trading at less than $17,000, down 65 percent so far this year.
Investors lost billions of dollars in May when the algorithmic stablecoin Terra USD lost its peg to the US dollar. As if that wasn’t bad enough, FTX, a cryptocurrency exchange that was valued at $32 billion earlier this year, recently filed for bankruptcy, shocking the crypto community. It seems increasingly likely that millions of people and businesses who trusted the cryptocurrency exchange with their money could be holding the bag, even as investigations continue to determine what really happened to FTX.
These dramatic events once again showed that stocks are inherently safer than digital currencies and somehow permanently damaged the chances of including cryptocurrencies in mainstream portfolios.
Read on to learn more about the differences between stocks and cryptocurrencies and why Funded Trader should choose stocks.
Differences between stocks and cryptocurrencies
Cryptocurrencies, or cryptocurrencies, are digital currencies based on blockchain technology. Cryptographic methods used to protect currencies from being spent or counterfeited more than once are referred to as “crypto”.
The most famous cryptocurrencies include Bitcoin, Ether and Dogecoin. Over the past few years, the use of cryptocurrencies has been steadily increasing. You can buy cryptocurrencies on a cryptocurrency exchange like Coinbase or Binance. Stocks, on the other hand, represent the value of a going concern and represent partial ownership of equity in that enterprise. Stocks are mostly traded on exchanges such as the Nasdaq Stock Market or the New York Stock Exchange.
Why Stock Trading Is Better Than Cryptocurrency
Are Less Volatile Stocks have long been an attractive financial instrument for many investors and traders. People who have invested in stocks benefit when the company does well. You have the option to sell the shares at a profit if their value increases. Naturally, businesses don’t always do well, so there is a chance that your investment will also lose value.
Stocks are generally much more stable than cryptocurrencies, despite the fact that they are subject to volatility due to changes in interest rates and uncertainty caused by war, inflation and changes in monetary policy. The price of cryptocurrencies can fluctuate dramatically and suddenly, sometimes without warning, and are notorious for their volatility. It is not uncommon for Bitcoin to gain over 600% in a year or lose nearly 50% in four days. If a cryptocurrency fails, you will most likely lose all the money you have invested.
Traders are protected by stock market regulation.
Cryptocurrencies are largely unregulated. Because there are not enough checks and balances, both large investors and everyday traders are more likely to commit fraud. Shares, on the other hand, are strictly regulated. To protect investors, for example, the Securities and Exchange Commission in the United States mandates that all publicly traded companies disclose information that could affect their stock price. Investors are protected and fraudulent activity on the exchange is stopped by regulations.
Stocks offer more liquidity
Because there are so many active traders in the stock market, stocks usually have high liquidity. A trader can easily enter and exit a trade when there is a lot of liquidity. The liquidity of cryptocurrencies differs significantly from each other. Due to the high trading volume, Bitcoin is more liquid than most cryptocurrencies. However, the liquidity of many cryptocurrencies is lower.
In conclusion, both on and off blockchain projects benefit greatly from using cryptocurrencies as a form of digital asset. However, due to the above factors and the fact that the crypto industry is still in its infancy, it is better to stick with stocks.