Cryptocurrency VS Shares – is there a winner?

Many people, especially newcomers to the market believe that investing in cryptocurrencies is the same as investing in shares.

15:05 30 October 2018

This point of view can sometimes be perpetuated because many online trading platforms are now offering the general public to get involved in crypto trading along with shares, forex, and commodities through CFD or spread betting. In a fact, if you visit City Index, you can learn all about spread betting just as easily as cryptocurrency trading. However, we can state definitively, that crypto trading is not the same as share trading. Therefore, the question which begs to be answered is always the same, which is the better place to invest?

 

If we look at the performance in 2017 it is clear the cryptocurrency outperformed the traditional shares market. The top performing market in terms of shares (not taking into account Venezuela, which is experiencing massive inflation) was Zimbabwe with a 111.7% advance, however the top performing cryptocurrency Ripple was up by an unbelievable 10,900%!

 

Both markets essentially function in the same way in simple terms. The price of both is determined by the demand, meaning how much people are willing to pay for either a share or a cryptocurrency coin. So, when someone pays more than the previous person this results in the price going up and when no one will pay the price it is currently set at, or someone is willing to sell their share or currency for less, it will reduce.

 

When investing within stocks in the shares market you are investing in a company and own a part of it. However, when you invest in cryptocurrency you are investing in technology and never own a part of the company; even though its performance affects the value of your investment.

 

Most risk averse investors are probably going to prefer to invest in the shares market, due to the volatile and extremely fast-moving nature of cryptocurrency. It is also not really possible to manage risk within cryptocurrency investment with a diverse portfolio. This is because new competitors can enter the crypto market so easily, old currencies die much faster than businesses in the shares market do.

 

If you buy stocks or shares you will be covered by a certain level of insurance. So that, if a company you invest in goes out of business you will be entitled to some kind of reimbursement; especially if you have purchased preference shares. However, cryptocurrencies are not yet even treated as legal securities and their status is basically the same as football stickers or beanie babies. This means that should a cryptocurrency disappear so will your investment, therefore many view the stock market as a safer place to trade.

 

Ultimately, whether you should invest in cryptocurrency or shares really depends on your personal circumstances and preferences. Realistically you need a decent amount of capital to invest in either market, but if you would like to trade and see yourself as quite risk averse you may prefer to look at shares, CFD trading or spread betting. This is even more so, because of the highly volatile nature of the cryptocurrency world. On the other hand, the global 24/7 nature of crypto trading can appeal to those that don’t want to just be able to trade within the hours of the stock market.