Most financial experts or professionals agree on traditional investments like stocks, mutual funds, and ETFs as they are justified as being genuine investments. The surge in popularity of cryptocurrency might seem like a new viable asset class but isn’t comparable with traditional investment assets.
One of the biggest issues with cryptocurrency is its growth through the development of more forms of cryptocurrency. The chance of investing in a cryptocurrency with a vague name and growing in value in a few years in a crypto boom is very slim.
The same money used to invest in an uncertain investment like cryptocurrency can be put towards a diversified investment portfolio that is designed to grow over time. The people who strike in a crypto boom typically invest in an obscure cryptocurrency that is new with a relatively low share price and benefit once the crypto surges in popularity.
Unlike traditional investments, cryptocurrency is volatile and can rapidly change due to a piece of news or going viral on social media, drawing more people to invest, ultimately driving up the price. The more reliable cryptocurrency investment is crypto that is guaranteed to maintain value in the future such as Bitcoin or Ether which are both used on the Ethereum platform.
These two types of cryptocurrencies are further advanced compared to other cryptocurrencies that are moving towards practical real-world uses in the future and becoming more than investment vehicles. Some countries have implemented an option to pay with Bitcoin for goods and services transactions.
Cryptocurrency also poses another consideration as it is expensive to purchase and while the values could still rise, it can just as easily sink. Despite there being cryptocurrency options that can be used beyond investments, they are still considered volatile currencies making the values harder to predict than the stock market.
The price of stocks can be volatile like cryptocurrency through developments in the news and economy. For stocks, the dollar cost averaging largely neutralizes the erratic effects that the news has on the value of a stock on a given day.
One advantage of investing in stocks is neutralizing your risk from a single stock by investing in a bucket of stocks through ETFs or a mutual fund. For example, with a diversified portfolio tech stocks can take a plunge but others in your portfolio can balance out a market fluctuation. A traditional portfolio also has the advantage of accessibility for everyday investors.
Bitcoin is exploring a venture offering ETFs with the goal to attract more people to less risky cryptocurrency investments. There are some Bitcoin ETF programs that exist but are yet to be approved by the Securities Exchange Commission (SEC) which makes the Bitcoin ETF programs hard to find.
Cryptocurrency charts and market theories do exist, the hard reality is that familiarizing yourself with the cryptocurrency landscape is more obscure than establishing an understanding of traditional investing. As many people struggle to understand how crypto works it seems like common logic that they shouldn’t invest in things they don’t understand when they can choose to invest in another asset that is more understandable like an investment portfolio.
Another aspect when considering crypto is the rise of digital art or NFTs. It might seem like a wise investment like cryptocurrency but if investors don’t understand how it works, they would be better off investing in something they understand and is more stable.
Access to financial information is obscure but not that much money is essential to purchasing stocks or ETFs. It gets more complicated with cryptocurrencies such as Bitcoin, Ether, and NFTs are likely to gain value overtime but aren’t affordable. The cryptocurrencies that are affordable don’t have any guarantee to actually grow in value that can be closer to gambling rather than investing.
Like gambling, investing in cryptocurrency is more about luck as timing in crucial in this investing model as cryptocurrency can boom but if an investor doesn’t sell in time, they can miss their chance to trade in time. Cryptocurrency is unique in the fluctuation of value that can astronomically increase in value within a moment’s notice which is impossible to achieve with stock market investments.
Despite stock investments being less lucrative in some cases compared to cryptocurrency, there is more security and certainty with traditional investments. One crucial component to consider before investing in crypto is the personal risk threshold, this is determined on a personal financial basis that can be considered too risky for you.