Cryptocurrency has taken the world by storm over the last few years with digital currencies like Bitcoin and Ethereum. There are also different types of crypto that are combining humour and currency, like Floki. You might not have heard of this approach before and wonder “What is Floki?” so be sure to check out what other unique crypto currencies have to offer. With the increasing popularity of crypto, you might question if it’s worth investing in over stocks? Read on to find out whether you should be investing in stocks or crypto.
What Are Stocks?
Stocks are fractional ownership interest in a business which entitles the owner of the stock to a proportion of the corporation’s assets and profits equal to the amount of stock they own. Stocks are bought and sold mainly on stock exchanges but there can also be private sales too. Corporations sell stock to raise funds to operate their business, and as the holder of stock (a shareholder) you may have a claim to a part of its assets and earnings. The shareholder is now an owner of that company; however, the ownership is determined by how many shares a person owns compared to the overall outstanding shares.
When you’ve invested in stock, your stock prices can rise and fall which gives you the potential for profit. While investors may become optimistic about stock initially, the stock price eventually depends on the long-term growth of the company. For stocks to be an overall successful investment, the company must perform well over time as stocks are a not a quick fix for wealth.
Risks & Benefits of Stocks
- The success of the stocks you’ve invested in over the long term depend solely on the underlying customers success.
- Many stocks can rise quickly over the year but can also fall just as quick.
- Stock is rarely worthless, unless the company goes out of business.
What Is Cryptocurrency?
Cryptocurrency isn’t generally backed by hard assets like stocks; however, it allows you to perform certain functions like sending money to another person or using smart contracts that automatically end after certain conditions are met. Cryptocurrency is a digital or virtual currency secured by cryptography which makes it almost impossible to counterfeit. They’re usually stored and shared on a blockchain which is a distributed database that stores information electronically in a digital format which gives them a crucial role for maintaining a secure and decentralized record of transactions.
Cryptocurrency isn’t backed by assets or cash flow like stocks, the only thing moving cryptocurrency prices is the predictions steered by sentiment. As the sentiment changes, the prices in cryptocurrencies change. For crypto to be a successful investment, you must have someone buy it from you for more than you paid for it.
Risks & Benefits of Cryptocurrency
- As it’s not backed by assets or cashflow, cryptocurrency relies solely on sentiment. Traders can decide they don’t want to own a cryptocurrency and it could quickly plunge to 0.
- Countries could ban cryptocurrencies.
- Cryptocurrency is relatively new and is not yet an established asset class.
Cryptocurrency has soared in price and popularity, but it’s important to know what you’re investing in instead of investing just because others are. You need to consider how it fits in with your own risk tolerance and financial needs.