Despite the adverse of the pandemic on the economy of several countries around the world, Bitcoin and several other cryptocurrencies have witnessed significant growth leaving a lot of people confused as to which is better to trade between stocks and cryptocurrencies. With this in mind, this piece considers; how coronavirus has affected cryptocurrencies, how bitcoin has evolved so far in 2020, and the similarities and differences between stocks and cryptocurrencies.
Cryptocurrencies are virtual currencies that use blockchain technology to track transactions through a network of computers. They can be used as an alternative currency to buy goods and services, but many people buy them as an investment, hoping that the value is pushed up because others want them in the future. Although it is possible to get very rich by investing in cryptocurrency. However, you could also lose all your money. Like most investments, crypto assets come with a host of risks but also vast potential rewards. The cryptocurrency market has been historically volatile, which means there is no 'yes or no' answer about the wisdom of investing in cryptocurrency.
The Evolution Of Bitcoin This Year
Bitcoin held a 66 percent share of the total cryptocurrency market in 2020. The virtual currency has had a volatile trading history since its creation in 2009. The first price hike occurred during 2013 when one bitcoin was trading at around 1,124 U.S. dollars in November. Four years later, bitcoin experienced a meteoric rise and reached record highs, with some exchanges having the price of a single bitcoin at approximately 20,000 U.S. dollars in late 2017. However, prices soon started to tumble in the months that followed. In the third quarter of 2020, there were around 18.5 million bitcoins in circulation worldwide, and the market capitalization of Bitcoin was approximately 200 billion U.S. dollars. The average price of one bitcoin was approximately 18,000 U.S. dollars in November 2020. If you are looking to improve your finances, US-Reviews provides you with an ample amount of wealth management companies' reviews and you can also check out for reviews about Motley Fool to gain an insight into how the company provides you with advice on how to make better financial and investing decisions.
Meaning Of Stock Market: Differences And Similarities Between The Stock Market And Cryptocurrencies
Stocks are an investment in a company and that company's profits. Investors buy stock to earn a return on their investment.
Simply put, stocks are a way to build wealth. They are an investment that means you own a share in the company that issued the stock.
Stocks are how ordinary people invest in some of the most successful companies in the world. For companies, stocks are a way to raise money to fund growth, products, and other initiatives. US-Reviews hosts reputable companies like; option income system that provides subscribers with in-depth information on how to improve their financial freedom by teaching them on issues such as stock and stock trading by which a person gets to learn how to trade option as their source of income.
Though there are lots of arguments about how the crypto market and the stock market are completely different things and one should not look at the stock market as if it was the same thing. However, comparing some of the similarities and differences between the stock market and the cryptocurrency market will help to give a better picture of how they compare and contrast.
Both of the markets
function the same way, in the sense that the price of both is 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. While 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.
, both of them can be valued based on the idea behind them. 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.
This is something that doesn't really exist in the stock market, however, in the cryptocurrency market it definitely does. There are the so-called "Whales" in the crypto community who make moves to alter the prices of digital assets. These individuals or groups of individuals at given periods set in motion the FUD (Fear, Uncertainty, Doubt) phenomenon, propaganda aimed at lowering the prices of crypto assets. However, in the case of the stock exchange, market manipulations are quite minimal since the stock market is regulated, unlike the cryptocurrency markets.
Profit & Loss-Making Margins
One of the most significant differences between both exchanges is the big gap in profit-making margins that exist between both exchanges. Investments in stock markets require patience as making a significant amount of profit is mostly a slow process, sometimes running into years. However, with cryptocurrency trading, this is a different case. The volatile nature of digital currencies causes a massive swing in the value of assets and is potentially a swifter alternative for making a profit, but similar making losses in the same volatility.
Ownership and Voting Rights
A big difference between shares and cryptocurrencies on a conceptual level is that cryptos give you no ownership interests or voting rights in the underlying entity. If you own shares representing 1% of the share capital in a company, you also own 1% of the company. In the event of bankruptcy, you have the right to receive 1% of the company's remaining assets. That is after the payment of certain prioritized debts. You also have the right to vote for your shares at such a company's general meetings. When you own 1% of the outstanding coins that a company has issued, you own 0% of the company and you are not entitled to vote at such company's general meetings.
Conclusively, an investment in cryptocurrencies is riskier than an investment in shares. The market can more correctly price a share (as the company releases financial statements periodically that are the basis for different valuation models to apply. But, on the flip side, an investment in cryptocurrencies provides less "obstacles" to be concerned with. That is less prohibited trading practices and unlimited trading hours. Also, the potential for generating extreme profits is much bigger in the crypto world. This is mostly due to the volatility in the crypto world.