Crypto Is a Speculation, and Stocks Are an Investment – Truth or Myth?

The crypto industry has secured a lot of success over the last decade. While many were predicting its failure even from the earliest days of its launch, it has defied all the odds. Now, in 2024, Bitcoin has a spot in ETF, Dogecoin is literally going to the moon, and new tokens are being welcomed by an enthusiastic market. 

But even with this, crypto cannot escape the criticism and comparison to other asset classes. Specifically, it is compared unfavourably to stocks and this leaves some investors stumped. In this article, we break down the controversy. 

What Is Crypto?

The first thing we’ll want to do is explain what crypto assets are in the first place. Simply put, cryptos are digital currencies based on blockchain technology. Cryptos, unlike fiat currencies like dollars or euros, are not released by a country or any other sovereign region. Instead, they are usually privately designed assets that operate semi-independently of their creators. 

All cryptocurrencies have an underlying blockchain, for which they act as the native token e.g. Ether being the native token of the Ethereum. One of their most distinguishing features is the blockchain, which divides its processing power across thousands of computers worldwide. This means that no single person can control the token or blockchain, not even its creators. Instead, the value of the tokens is left up to the forces of demand and supply, which has proven to be very powerful. 

Bitcoin, the first and most popular crypto, is worth almost $90,000 for the time being per unit and many smaller cryptos have raised millions in the market. With all of this success, cryptos have become a very popular investment vehicle and even a purchasing tool. The last few years have seen a rise in cryptos being used in the gambling space, for example. The chance to earn even more money should your tokens increase in value has been a big draw for players and now, many are on the lookout for the best crypto casinos to maximise their funds. 

Also, crypto coins have become popular with gamers in general, from play-to-earn games to NFTs and even as a means of buying traditional video games on the Web. But there’s even more to crypto than fun and entertainment. 

Benefits of Crypto

Cryptocurrency has become a globally-used asset class thanks to the myriad of benefits it comes with, some of which are as follows:

• Profit Potential

As we’ve said before, cryptos see their values go up all of the time. Bitcoin, for example, went from being worth a few dollars to almost $100,000 per unit. Love them or hate them, a lot of people are investing in cryptocurrencies whether at the presale level, through ETFs, or simply buying from exchanges. All this demand offers investors the sort of returns that they might not be able to get with traditional assets and this is a major benefit of these assets.

• Fast Transactions

Anyone who has tried to complete a cross-border transaction will tell you how slow the centralized financial system can be. It is not unusual to wait hours or even days for a single transaction to be completed. But cryptocurrency addresses this issue with its fast speeds. Specific tokens like XRP and Litecoin have made a name for themselves by sending huge amounts in only a few seconds. In most cases, consumers can bid with higher gas fees to push their transaction to the front of the line. This has made the asset class popular even among those who aren’t buying crypto to invest with. 

• Low Fees

Whether you’re sending funds from one destination to another or buying assets, there is no doubt some sort of cost implication. Those who gamble or send money across borders will be well aware of fees eating into their funds and this can be very discouraging. Luckily for them, cryptocurrency can complete the same transactions while costing very little in fees. XRP, for example, has famously sent millions of dollars across borders while charging only pennies in fees. When we consider the fast speeds on top of the fee structure, the appeal of cryptocurrency only becomes clearer.

• Privacy and Decentralization 

At the centre of blockchain as a whole is the philosophy of privacy and decentralization. When a user opens up a crypto wallet and begins using it, their transactions are recorded on a public ledger. However, their names and other personal details are kept private at a level that they simply cannot enjoy with a centralized system.

Speaking of decentralizaiton, crypto users have complete control over their assets as they are not subject to any centralized body. So, they can buy whatever tokens they want whenever and in any quantity. Not even their wallet provider or the owners of the blockchain can restrict their activities, which is a major perk.

Downsides of Crypto

But even with all of these benefits, cryptocurrency has some downsides that consumers should be aware of. 

• Volatility 

As much as there are potential profits to be made from the crypto sector, it is also notoriously volatile. Bitcoin has gone through several months of winder multiple times and tokens are known to see their value rise and drop overnight. This means that anyone investing in them has to be ready to deal with this uncertainty. It has also led to critics denouncing the asset class as not being legitimate and comparing it unfavourably to other like stocks. 

• Lack of Centralized Support

While, on the one hand, cryptocurrency allows consumers to do whatever they want with no interference, it leaves them with limited support. If a crypto transfer is done in error, it cannot be reversed and there is no central body consumers can look towards for help. Also, there is less protection from regulators for crypto consumers compared to other asset classes. Those who choose to invest in it basically have to ensure a lot of their own protection and this is not an ideal situation for everyone. 

• Scam Cryptos and Shitcoins 

As much as there are legitimate crypto assets all over the market, investors also have to deal with scam tokens that look to swindle them of their money while not providing anything. There are also shitcoins which purport to be legitimate investment opportunities but don’t have anything to offer. On top of this, the limited centralized structures around cryptocurrency mean that there is less help for investors and limited recourse if they fall victim.

What Are Stocks Today?

Stocks have existed for much longer than crypto and have the backing of the mainstream financial world. Simply put, stocks represent a piece of ownership in their issuing company and entitle the owners to a cut of the company’s annual profits. Stocks are sold, obviously, through the stock market, and companies must go through a vetting process before they can invite the public to invest in them.

Many of the top companies in the world like Meta, Apple, and Amazon are publicly traded. Investors are advised to hold on to stocks as they have been offering for decades and are considered a fairly stable way to grow wealth.

Pros of Buying Stocks

Stocks have been one of the most popular forms of investment in history for the following reasons:

• Regulation

Stocks are regulated by the governments of whatever country they operate in. Before a company can issue stocks, they have to register with a regulator and even after the stocks are issued, they are under observation. This means that the chances of market manipulation and fraud are much lower. On top of this, consumers have several organizations that will protect their interests and who they can turn to if they run into any issues. For those who are more risk-averse, this ensures peace of mind.

• Reliability 

Stocks are one of the oldest forms of investment and this means that they have been perfected over decades. Investment techniques, regulatory procedures, and market trends have been analyzed for longer than any of us have been alive. Anyone looking to get into stock will have no shortage of resources to look into and they can rest assured that it is a tried and tested asset class. This means that while individual stocks will always carry some level of risk, stocks as a whole are a fairly reliable way to invest. 

Cons of Stocks

While stocks are considered solid investments, they are far from perfect. In fact, they have a few drawbacks you should be aware of.

• Limited Profit (Compared to Others)

In the crypto industry, it is not unheard of for multiple tokens to see 50 times or even 100 times profit in the space of a week or a month. Bitcoin has seen its value grow by several tens of thousand percent over the years, which is why it is so sought-after. Stocks, on the other hand, tend to see less dramatic spikes in value. Even the best-rated stocks will deliver returns but perhaps not to the level of runaway-successful cryptos. For investors seeking hyper-growth assets, this might be a drawback. 

• Lack of Privacy 

While your transactions will not be put on a public ledger, you cannot anonymously buy stock the way you can cryptocurrency. If you’re buying through a stockbroker or even on an investment app, you’ll have to provide sensitive details like your name, address, government ID, and so on. Plus, the government can place restrictions on how much, when, and how you buy your stocks. Investors who are very particular about their privacy will have a harder time with stocks, unfortunately. 

Crypto vs. Stocks 

So, with all the pros and cons of each considered, is crypto merely speculation and are stocks the golden ticket to financial freedom? To answer this, it is worth comparing the two based on various metrics. 

• Volatility 

The asset market is, by its very nature, an unpredictable one. Assets rise and fall in value every day, though not to the same degree. The stock market has seen major crashes like in the late 1920s and the early 2020s and even the biggest companies in the world have reported disappointing stock performances. The crypto market, however, sees more frequent and more dramatic bouts of volatility. Tokens are known to multiply their value a hundredfold overnight and 

Lose all their worth just as quickly. If we consider volatility alone, stocks would be a more stable option.

• Profitability 

There is a reason why Bitcoin beat out stocks to be crowned the top asset of the 2010s. Crypto tokens have been known to deliver record profits year in and year out. As volatile as it is, the crypto sector sees more tokens reporting record growth than any other asset market in the world. In fact, many would argue that its infamous volatility is the reason why it is so profitable in the first place

• Support 

When you’re putting your money into any assets, you typically want to be sure that you will be supported throughout the process. Within the crypto space, wallet providers, crypto exchanges, and even ETF providers look after investors’ needs. But even with this, the space is relatively newer and thus, most investors navigate the market using their own tools and research. On top of this, the decentralized nature of crypto means that investing in it will always be DIY to some degree. Stocks, on the other hand, have more support structures in place.

• Regulation 

It is a no-brainer that stocks enjoy much more regulation than crypto assets. No one needs permission from anyone to release their own crypto token and begin soliciting donations but no stocks are put into the market without prior approval from regulators. The unregulated nature of crypto has caused issues in the past, with the SEC having to shut down and sue several operations for violating laws. This also means that people who invest in shitcoins and pump-and-dump schemes have fewer avenues for recourse. So while crypto investors have fewer restrictions when spending their money, they also have less protection than other investors. 

• Accessibility

When it comes to accessibility, crypto takes the cake. Buying crypto can be done anonymously, with little setup, and in only a few minutes. There is no restriction on what crypto you can buy based on where you live and your activities are entirely up to you. The same cannot necessarily be true of stocks. As we’ve said before, you have to register with a broker, provide information, and trade within the limits of regulations. You can technically buy $100 million in crypto without explaining yourself to anyone (if it’s done outside of a centralized exchange) but you can’t do the same with stocks.

Choosing Between the Two

While no single investment vehicle is perfect for everyone, there are a few factors that can help investors choose between crypto and stocks. 

• Budget and Income

Perhaps the first thing to consider before choosing either is your budget. Crypto tokens can be bought easily for fractions of pennies while stock might generally be more expensive. still, consider the options in the market to figure out which is most compatible with your budget.

• Risk Tolerance 

A major theme with both crypto and stocks is the amount of risk attached to each. One has certainly proven to have more risk attached, though more chances of high rewards. At the same time, not everyone is built to navigate a high-risk market and some would rather have less volatility in their portfolios, even if it means lower rewards. You’re best off deciding what type of investor you are and then using this to choose one asset class over the other. 

• Location and Regulation

When it comes to buying assets, you are, unfortunately, restricted to the assets legally available in your location. If you’re buying stocks, you have to navigate the complex regulatory framework and access the ones available to you. If you live in a country where cryptocurrency is banned, you cannot invest in them without running afoul of the law. Your best bet will be to find out what assets, of whatever kind, you are allowed to legally invest in within your environment and put your energy into those.

• Personal Tastes

While investment is mainly done to make a profit, it also reflects investors’ tastes. After all, people invest in companies because they like them or because they believe in certain causes. You need to ask yourself what type of investment you are drawn to. Maybe you’re an innovator who wants to put their money in the hip new crypto token based on your favourite meme. Maybe you prefer the classic investment route of stocks, leaving the shiny crypto assets to others. Whatever your tastes are, let them guide your decisions.

• Added Benefits 

Crypto assets tend to be tied to larger blockchain ecosystems which come with other benefits from investing. These include merchandise, access to events, access to games, and so on. If you have interests outside of making a profit and want to claim some of these benefits for yourself, crypto might be right for you. Similarly, you might want to skip this if none of these benefits appeal to you.