Bitcoin and Stock are two of the most liquid assets that have made many millionaires. The stock exchange has been in existence for over 200 years while Bitcoin has only been around for 11 years. People buy Bitcoin and stock for the same reason, which is to grow their money and become financially buoyant.
The two assets have caught the attention of the public lately, more and more people are getting to know about Bitcoin and stock every day. Bitcoin popularity grew exponentially in 2017 when the price went from around $800 to $1150 and reached an all-time high of $19,783 on the 17th 0f December. This implies that investors at the time would have made about 1,277% of their investment. Bitcoin became even more popular about four months ago. In December 2020, bitcoin price went from less than $20,000 to a new all-time high of $60,000, which also implies that investors would have made close to 300% of their investment.
Stock, on the other hand, has always been one of the favourite assets for investors. We have heard of billionaires like Warren Buffett who have made a fortune from it. However, the wave of Stock increased this year in January, just last month when investors of a particular stock called Gamestops’ stock invested $50,000 and made around $13 million.
Bitcoin and Stock
The simplest explanation of stock was given by Micheal Sincere in his book “Understanding Stocks”. He defined it as a huge auction or swap meet where people buy and sell pieces of paper called Stock. On one side, there are the owners of corporations who are looking for a convenient way to raise money so that they can hire more employees, build more factories or offices, and upgrade their equipment.
The way they raise money is by issuing shares of stock in their corporation. On the other side, you have people who buy shares of stock in these corporations. The place where they all meet is the stock market.
Bitcoin, on the other hand, was designed to be a digital currency, but its usefulness has surpassed that, people now see it as an investment asset. People buy Bitcoin as a store of wealth and also as an investment just like that of stock.
Bitcoin is the first successful decentralized cryptocurrency. It is not regulated or controlled by any entity, individual, or government. The price of bitcoin is controlled by forces of demand and supply.
Both markets provide an avenue for investment. Whether you buy Bitcoin or you buy stock, your major reason for doing so is to make money. However, we have looked at the simple definition of the two, what are the similarities between the two.
Similarities between Bitcoin and Stock investment
- Investment opportunity – They are both avenues to make money.
- Demand and Supply – Another thing they have in common is, their prices are both controlled by the forces of demand and supply. The more people are willing to buy Bitcoin or stock at a high price the more the price goes up, and the more people are selling for a lower price, the more the price goes down.
- Value – Their valuation depends on the preconceived value of their investors. The value of a stock depends on the value people place on the business behind it, while that of Bitcoin depends on the idea and use case of the cryptocurrency.
- Both of them have values that can be converted to the traditional fiat.
- Bitcoin and Stock are high-risk assets, they have volatility, you can make 50% of your money in a short period and you can lose close to that amount in a short period.
- You need to understand the market for both and have a strategy in place before you invest in both.
- Bitcoin and stock are high liquidity markets. Activities are constantly taking place in the market and businesses have been created around both.
Now that we have reviewed the similarities between the stock and the Bitcoin market, let briefly look at some of the differences between the two.
Differences between Bitcoin and Stock investment
Although bitcoin and stock are amazing investments and have a lot of things in common, yet they are two different commodities.
- Bitcoin is riskier than the stock. Bitcoin has higher volatility than the stock, the price of Bitcoin can increase and decrease faster and can be in a larger magnitude.
- Bitcoin is a decentralized platform which means a buyer and a seller can deal directly while stock is a centralized market.
- Stock investment is regulated while Bitcoin is not regulated.
- It is easier to buy Bitcoin than to buy stock. Anyone can just open a wallet and buy Bitcoin while stock requires more.
- Investing in stock is quite technical than Bitcoin. It requires a great deal of technical know-how and research to invest in a profitable stock. You, however, need to conduct thorough research before you invest in Bitcoin to avoid falling victim to scammers. Once you take a grasp of its concept you are ready to go.
Should you Buy Bitcoin or Stock?
To make a decision on which to buy, you have to consider which you prefer, is it to invest in a company or technology. Do you have time to make rigorous studies to invest in stock or just acquire the basic knowledge to invest in Bitcoin?
Both bitcoin and stocks have different degrees of risk and uncertainty that may present dangers to an investor. It is important to do your research and determine your risk tolerance before deciding to buy bitcoin or stock.
Personally, if I am to choose I will go for Bitcoin, Bitcoin has lots of benefits aside from being an asset. It can be used as a medium of exchange and no stock has equalled the ROI BTC has been able to produce in 11 years.
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