Stocks Vs. Crypto: What’s the Smarter Choice?

Investing in stocks is a wiser choice than investing in cryptocurrency – that’s the case this article will try to convince you of, with solid evidence and strong logic. You’ve likely read many articles over the past year with titles such as “Five reasons why you should invest in Bitcoin” or “Why cryptocurrency is the investment model of the future,” etc. Such articles often argue that, as the price of Bitcoin will always grow, and that as more businesses and even nations are embracing it as a valid currency, it’s an almost perfect investment strategy. And, they say, it’s also safer as it’s almost impossible to hack into. Other pro-crypto arguments cite the chance to make large returns on a small investment… but perhaps the biggest claim is that cryptocurrency is the future – while stocks represent the past. And, who wants to fight the future? –Don’t miss the train, right? Well, there are a lot of flaws in these arguments, and many beg to disagree, contending instead that stocks are not only safer but are also more likely to earn investors solid returns – especially over the long run. 

Owning stock means that you own a fractional part of a business. Many people forget this when they’re looking at squiggly lines on a screen representing the ups and downs of the market. But the stocks that you own have tangible roots in reality. A good investing app can help you see the market as more than red and green lines or arrows. The app also lets you execute trades with zero delays, at zero commission, and zero markups… all available from on your smartphone. Some new investment apps also give users as much as US$10,000 in “practice money” – this is designed to help new investors learn how to use the app and understand the market. It’s not real money, but you invest it as if it were real, giving you a chance – even if you’ve never invested before – to experience investing, without experiencing any real losses.  


But back to the crypto vs. stock: As noted, a company is a physical entity. It has assets beyond just bits of information that are said to have value because some have decided they do. Cryptocurrency has experienced an exciting boom over the last few years and the value of all digital currencies currently is roughly around US$2 trillion according to Bloomberg. Of course, Bitcoin is the most popular of the lot – and worth more than US$800 billion. But if this whole crypto market strikes you as a bit similar to the gold rush of the American 1850s, you’re not wrong. Everyone is getting into this without asking enough questions, without enough proof that there is indeed “gold in ‘dem hills,” and forgetting that cryptocurrency in most cases is not backed by anything whatsoever. For cryptocurrency to be successful as an investment you have to persuade someone to buy it from you for more than you paid for it and overall, the market has to be optimistic that this currency is on the up and up. But as you can tell from those last few sentences, this depends a lot on the mood and emotional state of both the buyers and sellers of cryptocurrency as well as global events. People can get spooked by reading about the potential for conflict in some country or the price of oil or inflation and suddenly – within just a few hours – a  plunge can take a cryptocurrency from soaring heights to a sudden bottoming out and then the next day repeat the scenario all over again.

Stocks, as we noted, have actual value; they represent ownership of a part of a company and companies must state their earnings, and transparently document their transactions according to the law so that investors have a pretty clear opportunity to see what they’re getting into. Stocks, some people forget, have a long track record of producing investment returns. The S&P 500, for example, has a 10% return rate over the long term. And while 10% is perhaps not as amazing as hitting the jackpot in a lucky Bitcoin sale, it is a solid return and a lot safer and more consistent than risky cryptocurrencies which may or may not even be a part of the global economy in 5 to 10 years. Bear in mind that China has already banned cryptocurrencies totally and there are rumors in many other places as well of perhaps not complete bans but severe regulations and high taxes.

To summarize: here’s a great example of why stocks are a wiser choice. In 2021 Bitcoin lost more than half its value over a few months… and later shot up by 100%. This kind of volatility made some people very wealthy, but as you might have guessed, the majority of people lost money – and lost significant amounts during the roller coaster year of 2021. There is a reason investing geniuses such as Warren Buffett refuse to even consider touching cryptocurrency. He understands that there is great potential in these new investment models, but he also understands that the stability and regulations of established markets have more long-term value.

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Steve has been living in Saudi Arabia since 2013 and writing about Saudi rules, regulations, guides, and procedures since then.