Stocks verses Cryptocurrency Investments: Why and When Cryptocurrency Investments Are Preferable

In terms of similarities, cryptocurrency and stock markets function the same way. The prices are largely determined by demand and supply.

And although valuation of stock is much more advanced compared to cryptocurrencies, most of the rules are similar for both crypto and stock markets. First, both of them are valued in or the value is usually quoted in fiat currencies.

Also, both can be valued based on the ideas behind them with both backed by the business and idea behind them. Most people will also look at the number of people investing in the said stocks and cryptos or public support.

There are some differences, however, with market manipulation common in cryptocurrencies. Cryptos are much more volatile too compared to traditional stocks and most of the crypto projects are relatively new. One of the greatest advantages of stock compared to crypto is that there is a large amount of investor protection with regulations and things like that. So you are shielded against unprecedented circumstances that could cause huge loses or wiping of your entire investments. These include registration for the stock firms and exchanges, predictability of prices (stability), and insurance in some cases.

Of course there are so many other differences but the purpose of the article is to discuss reasons you would want to invest in cryptocurrencies than ordinary stocks.

Lower barrier to entry factor

When it comes to ease of entry barriers, cryptocurrencies are much easier to start trading compared to stock markets especially in terms of the capital required for day trading and swing trading.

You will therefore require a larger amount of money to make a full time living by trading stocks. This is usually followed by the high fees charged by stock trading and investing platforms. For instance, if we can compare right away. TDAmeritrade -- the #1 Broker for Traders 2018 by StockBrokers.com charges $6.95 for stock trades and $6.95 + $.75 per contract for options trades; Fidelity charges $4.95 for Stock Trades and $4.95 + $0.65 per contract for Options Trades with a minimum deposit of $2,500;  for those who buy and sell a stock. Investing $100 means you lose 20% by buying and selling only.

Crypto exchanges also charge much lessee than stock exchanges. You can for instance start trading $100 on Coinbase and be charged for as low as 1.49%. Most other exchanges charge as low as 0.5% for trades.

Product variety in cryptocurrencies: multiple opportunities to diversify

Product variety means you can choose to diversify in cryptocurrency investments. For instance, you can choose to invest in ICO, trading specific coins, and what's more? Today you can use Bitcoin futures, CFDs etc to hedge against risks.

Still, you can expect to benefit from a variety of other things. For instance, thanks to tokenization aspects, you can buy real world assets using Bitcoins and other cryptocurrencies. This is big because owning tokens or cryptocurrencies will not be only for purposes of investing but also for daily use of the cryptocurrencies. If you can follow ICO news, then you understand a lot more is happening with adoption of cryptocurrencies in more fields or industries. This will boost investing in the future.  Besides that, you can also invest in mining of cryptocurrencies whether through staking or POW mining although this is somewhat pricy.

Additionally, there are loan products you can invest in with a number of projects and yes, platforms. Merchants can also diversify their payment options by accepting cryptocurrencies in addition to accepting fiat. That may allow them an opportunity to invest the received coins or cash them out at a higher rate hence gaining some profit. Further, the options are expected to diversify with entry of more products.

Another thing is cryptocurrencies also present options in terms of the coins you can invest in:  There are more than 5000 cryptocurrencies right now. 

Benefits of being nascent

A nascent industry present a number of advantages to any investor although there are so many challenges. For instance, for any technology case early adopters tend to benefit more than late entrants. This happens before technology will flood the market. Also, entry into any shares during an IPO has historically proven that there are many benefits because the shares will almost always pick up when they start trading.

That rule also follows in relation to ICOs with most coins starting to trade under a dollar and the value increasing to thousands of dollars within a few months. A study noted that investing in ICOs including the scam ones would have generated profits of

Besides, the high number of ICOs present great opportunities for investors both in consumer and institutions categories alike. Also, although there is a large learning curve for traders and investors, the opportunities keep expanding as the industry grows and adoption grows.

Although volatility, hype and manipulation can turn against you, it is also possible to benefit from the swings in value of any particular coin. If you do not like volatility, then as a merchant you can go for stable coins.

Trade all day even weekends and holidays

With cryptocurrencies, the market happens during the day and also at night non-stop. Therefore, you might want to continue to trade at your preferred time without any obligations and you can keep hunting for profits even at night.

Therefore, you might not have to worry missing a session because you were busy in the day or if there is a technical problem that affected a trading session as happens sometimes in stock trading. Most stocks trade between 10 am to 4 pm Monday to Friday after which markets close.

Another clear advantage is that there are little regulatory guidelines for the cryptocurrency markets. Low entry barriers also means you might not need a bank, a credit history, or even barriers relating to running an account such as the need to keep operating balances, and need to register sometimes. Lack of regulation is obviously considered a disadvantage because you may not know what might happen to your trading platform the following day for simple reason of low requirement for accountability. But it presents many advantages.

No brokerages, and it is P2P

Absence of intermediaries comes with so many advantages among them forcing low transaction fees. P2P transactions and exchanging in cryptocurrencies are governed by smart contracts that ensure trustless dealings.

With the P2P features, you might also end up avoiding the many delays relating to participation of many intermediaries. Plus intermediary dealings are always more prone to effects of personal interests when compared to using smart contracts.

The p2p features eliminate the need for contacting brokers and opening broker accounts with the fees involved as happens in stock trading both in local and international scenes. Opening these accounts also takes time.

With so many technologies and applications coming up daily, you can expect a number of advantages including lowering of trading fees and commissions and many offers.

In comparison with volatility nature of cryptocurrencies, making vast amount of money for a given single stock requires patient because the profit margins are always smaller per trade event.

Better global reach

The strict requirement of formal accreditation in many traditional investments means most are limited to certain regional reach. Most are therefore traded in countries where they are incorporated. Again, most tend to be restricted to qualified institutional buyers.

There are certain restrictions to stock trading and buying that make cryptocurrencies favorable options such as the need to go through a broker to purchase most of stock from a different country in the world in most cases. Besides that, it takes time in most cases to obtain a broker account including need for KYC procedures and need to prove ownership of enough assets to trade.

Now easier to own and control

One among the many drawbacks of crypto investing then was that you previously required to have technical knowledge to buy, send, trade and store Bitcoin and cryptocurrencies. Especially the technicalities involving setting up of wallets and nodes for mining, etc. Not any more today.

Entry of futures markets in cryptocurrency markets also allow you to invest in cryptocurrencies without necessarily storing the coins yourself. Nevertheless, owning -, storing, trading and sending and receiving coins is not something you can't learn easily.With cryptocurrency, you can easily manage payments, send to single person or multiple parties via contracts and receive the coins in payments.

You can even invest in masternodes today without extensive knowledge of how to manage the masternodes. You do not need a lot of training on that.

However, just as you require certain skills and experience when trading stocks, you would also require knowledge of technical analyses when trading cryptocurrencies although there are options and tools that can help you avoid that.

Again, it is much more easier to launch projects and ICOs.

David Kariuki

David Kariuki likes to regard himself as a freelance tech journalist who has written and writes widely about a variety of tech issues that affect our society daily, including cryptocurrencies (see cryptomorrow.com and coinpedia.org); climate change (cleanleap.com), OpenSim and virtual reality (see hypergridbusiness.com). He is currently pursuing a MSc in Environmental Management at Open University. He does write here not to offer any investment advise but with the intention of informing audience, and articles in here are of his own opinion. Anyone willing to use any opinion here as advise to invest in crypto should obviously take own responsibility and accountability of their losses (or benefits) thereof. You can reach me at eqariu@gmail.com or david@cryptomorrow.com