Cryptocurrency is all the rage now, and it is no wonder that more and more people are exploring that avenue and trying to see what the hype is all about.
One question that is particularly piquing everyone’s curiosity is how cryptocurrencies are different from traditional investment options, such as bonds, stocks, or foreign exchange (Forex). If you have been wondering this, you are in luck, as this article will compare cryptocurrencies with the more conventional forms of assets.
Compare Cryptocurrencies with Traditional Assets
Crypto vs. Stocks
From the traditional investment arena, stocks are the closest thing to cryptocurrencies. This is because the market for either asset, when strong, leads to an appreciation in the price of assets. Furthermore, both markets have good and bad days.
Of course, since stocks have a lengthy history, there is more data to guide investors about the direction of the market. However, that does not mean that stocks come without risks. Some of the risks associated with stock trading includes financial risk, business risk, market risk, purchasing power risk, government regulations, and even the unpredictable state of the macroeconomy. Moreover, since there are thousands of stocks to pick from, investors do not find it easy to foresee how a particular company’s stocks will behave in the future.
Crypto vs. Bonds
Bonds, being fixed-income securities, are somewhat different to stocks and cryptocurrencies. Regardless, they are a popular conventional investment method. A bond allows an investor to loan money to a third-party for a certain amount of time, during which the investor will receive regular interest payments.
In comparison to cryptocurrencies and stocks, bonds carry lower risk as they promise a fixed payment over a known time period. However, with lower risk comes lower reward, and therefore, bonds have a relatively low return over the long term. Visit the Bitcoin Compass Login to know more about the bitcoins.
Crypto vs. Forex
Next up on this comparison list is foreign exchange, popularly known as forex. Investors involved in the forex market buy and sell foreign currencies. Compared to cryptocurrencies, forex has a higher element of risk, since the gain entirely depends upon the currency of the country that is being traded.
Crypto vs. Precious Metals
Some people also trade in precious metals. Kiana Danial, in her book ‘Cryptocurrency for Dummies’ states that, “the precious metals comparison is actually the best argument when someone tells you that cryptocurrencies are worthless because they do not have any intrinsic value.” She points this out because, in today’s day and age, people investing in precious metals would primarily do so to buy items such as jewelry or to invest in an alternative currency.
There are several risks involved with the trading of precious metals, the most prominent of which is the fact that the market for metals like gold and silver is dependent largely upon market sentiment. Other risks include the import taxes associated with metals and the high level of security required to protect precious metals.
In contrast, cryptocurrencies do not generally require investors to make any physical transfers – a digital wallet is sufficient to carry out trades.
Compared to the traditional investment forms, cryptocurrency is very much a newcomer. However, we can already see that cryptocurrency investment has many benefits that conventional investment options do not. This does not mean that cryptocurrency will deliver guaranteed profits – as we mentioned, the crypto market will also have its share of bad days. However, with better understanding of the market trends and predictions, you will be able to maximize your profits while keeping your losses to a minimum.