You may think that it's easy to know the similarities and differences between cryptocurrency and stocks, but in this article I want to try to explain it in more detail.
Cryptocurrency is a currency that can be stored in a unique cryptographic combination of letters and numbers, transferred peer to peer over a computer network, and recorded on a blockchain. Meanwhile, stocks are units of company ownership that are traded fractionally on a stock exchange, which can be bought or sold by a stock trader.
The natures of the two things turned out to be not as simple as the definitions above, but at least the definitions above can outline them.
Here are some similarities between the two:
1. Both can be traded
Therefore, both are traded based on the same trading principles. Both are bought when the price goes down and sold when the price goes up. Both are bought when the price is expected to rise and sold when the price is predicted to fall. The decision to buy and sell them can be made based on technical or fundamental analysis.
2. Both can be used as investment assets
Assets are goods that have economic, commercial, and exchange values. Both have all three values so people can use both of them as investment assets. The purpose of investment is to protect the value of money from inflation and if possible to increase the value.
3. Both can produce passive income
Cryptocurrency is divided into PoW-based and PoS-based. The first type does not produce passive income, while the second type does. People can get passive income just by holding PoS-based cryptocurrency, up to 100% of the amount held annually. This passive income is similar to dividends obtained by people who own stocks.
The differences between the two include:
1. Cryptocurrency has a weaker fundamental aspect than stocks
Cryptocurrency is not supported by a strong fundamental. Its value depends more on the technical aspects. There is nothing that guarantees its worth other than trading activities and market acceptance.
Meanwhile, stocks have strong fundamental aspects so that their value does not depend too much on trading activities but on company activities. Stocks will remain valuable despite the lack of market acceptance as long as the company exists and is economically active.
So, cryptocurrency is too risky to become an investment asset.
2. Cryptocurrency is more accessible than stocks
The decentralized nature of cryptocurrency makes it more accessible than stocks. People do not need to meet the administrative requirements of a country to own and trade cryptocurrency so that more people accept cryptocurrency.
3. Cryptocurrency is more suitable as a medium of exchange and value transfer, while stocks are more suitable as investment media
This is the conclusion of this article. Ease of accessing cryptocurrency across administrative boundaries of countries makes it easy for people to exchange and transfer the value of their money to all countries in the world. This ease creates a large community of cryptocurrency users.
It seems that this large community has resulted in busy cryptocurrency exchange activity. This is a lucrative business opportunity for traders.
In contrast to that, people can buy stocks in other countries only if they have crossed the administrative boundaries of those countries. Moreover, stocks can not be transferred peer to peer, so they are not media of exchange, but only investment assets.
Do cryptocurrency trading business but invest in stocks.