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Why Is Crypto Riskier Than Stocks?

Why Is Crypto Riskier Than Stocks?
Written by publishing team

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Here’s why crypto investors need to be extra careful.

You will often hear that there is no such thing as a risk-free investment, and there is a lot of truth to that. The truth is that even so-called safe investments like bonds can harm investors. Bond issuers can default on interest payments or fail to pay their principal investments to bondholders. True, these are rather rare cases, but they do happen from time to time.

Stocks are now generally considered a riskier investment than bonds. Stock values ​​can fluctuate significantly from day to day, while bond values ​​tend to be stable.

But even stocks are not as risky as the investment that has grown increasingly popular in the past year – cryptocurrency. Here’s what makes cryptocurrency more risky than stocks.

1. Stocks have been around for longer

Some of the publicly traded companies today have been around for 100 years or more. By contrast, encryption is a much newer concept. The first digital currency, Bitcoin, has only been around since 2009. So we don’t know if the cryptocurrency actually has the same long-term staying power.

2. Stocks have a proven history of recovering from deflation

The stock market has seen its share of crashes over the years, and in the end, it manages to recover from each crash. Many investors who kept their shares and were able to overcome these collapses were able to get out of these events unharmed.

Meanwhile, we have yet to witness a major crash in the cryptocurrency. Sure, the cryptocurrency market has crashed at certain times, but it hasn’t gone through a prolonged event like the Great Depression or the more recent Great Recession.

Does this mean that the cryptocurrency I can not Withstand such an event? No. But the point is, we don’t know what the potential for recovery looks like.

3. The stock value is easy to measure

There are many tools and formulas you can use to determine the value of a stock, and whether it is trading at a fair price. For example, you can see how much a stock is trading in relation to its earnings, which gives you an idea of ​​whether it’s a good time to buy that stock or if its current price is too high. And if you have a good brokerage account, you will have access to educational resources that can help you better analyze stocks, even if you are new to investing.

With cryptocurrency, it is very difficult to know whether the current price of a particular currency is fair, or whether it reflects the actual value of that currency. Reason? Cryptocurrency prices are largely dependent on news events and demand – not the company’s earnings, as is the case with stocks. This alone makes cryptocurrency a more risky investment.

Is coding right for you?

Although cryptocurrencies are risky – more dangerous than stocks – that doesn’t mean you need to stay away from them. What about you Act What you need to do, though, is invest with caution.

First, research cryptocurrency exchanges as well as different coins to ensure that you are choosing the right option for your wallet. Next, figure out the right amount of money to put into the cryptocurrency, bearing in mind that you could lose most or all of your investment if the conditions go along like this.

Finally, make sure that the cryptocurrency is only a part of your total investment portfolio. It’s always a good idea to diversify your portfolio, which means you shouldn’t Just You have your money in stocks, too. A healthy mix of stocks, bonds, and cryptocurrencies can be your ticket to growing wealth without risking too much.

Buy and sell cryptocurrencies on an exchange chosen by experts

There are hundreds of platforms around the world waiting to give you access to thousands of cryptocurrencies. In order to find the right feature for you, you will need to decide which features are most important to you.

To help you get started, our independent experts have tested the options to bring you some of our best crypto exchanges for 2021. Check out the list here and start your crypto journey, today.

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publishing team