Should You Invest in Stocks or Bitcoin?

Technology has completely redefined the investing trend. Earlier, trades were tracked from the wall streets where chalks and blackboards were used to write stock details. But now, transactions are updated in real time. Stock market live can get you all the live updates instantly on profits and losses, current market prices, stock exchange etc. To make the most of your investment, you need to understand the pros and cons of two most popular investment options – stocks and bitcoins.

Let’s first understand Bitcoins, everyone’s favourite cryptocurrency.

What is Bitcoin?

Bitcoin can be termed as cryptocurrency or digital currency created in the year 2009.  It is a type of money which has no physical identity, but everyone has the transparent access to the balances kept on a public ledger. You can use these bitcoins, an online version of cash to buy various products and services, but not accepted at many shops. Most of the people use bitcoins as it offers lower transaction fees than other traditional online payment mechanisms. The flow of bitcoin is operated by a decentralized authority. Bitcoin is a computer file stored in a digital wallet app on a smartphone. Bitcoins can easily travel, people can send it to your digital wallet and you can send it to others. All the transactions are recorded in a public list known as blockchain.

What are Stocks?

Stocks are termed as an investment that represents a partial ownership of a company which provides shareholders voting rights and residual claim on the company’s earnings.

Stock markets are electronic marketplaces where investors come together to buy and sell shares. The prices of shares are set according to the demand and supply in the market and the order flow is maintained by specialists ensuring an orderly market.Companies use stock money to fund new products, expand their market operations, invest in growth or to pay off debt. There may be many reasons to own stock but the primary one is to earn a good return on their investment. This return comes in two ways-

1.Dividends– Dividends are basically payments made to the shareholders out of the company’s revenue.

2. Capital Appreciation– The price of stocks are rising in value so you can simply sell them to get maximum profit.

Stock markets are the most popular means of investment among investors for a long time whereas bitcoins have traditionally been approached as digital currency. Despite the volatile nature of bitcoins, it is proved to be a feasible alternative asset for millions.

Below given table shows the difference between investing in bitcoins and in stock markets. The following information will give you a clear view of both the investment types.

 StocksBitcoins
Profit-Making Capacity  Requires a lot of patience while investing in the stock markets as it can take years to make a considerable amount of profit on your investment.Investing in bitcoins can be a swift alternative in terms of profit-making.  
Global ReachWhile performing traditional investments, one requires formal accreditations.   It is limited to qualified institutional buyers and invites high trading fees.  Bitcoins are global in nature as they are accepted in over 180 countries worldwide.   These are easily transferable with low transaction fees.  
SupplyThe share market ensures a predictable trend between demand and supply.The use of bitcoins by more and more people is helpful in generating a firm rise in the demand for Bitcoins.
Risk FactorThe risk factor is the same in both the investments but the only difference is that the stock market is safe in terms of government backing.Because of the volatile nature of the bitcoin system there are some concerns as it is purely based on demand and supply.    
Ease of TradeIt takes a considerable amount of investment in the form of trading charges, taxes etc in stock markets.   Trading on the stock is not at all easy, one has to find a registered broker for creating a demat account and lose some amount as a brokerage charge.  As the bitcoins includes minimal transaction fees,transactions are fast, transparent and non-reversible.   While trading, one has to provide the right wallet addresses for making the transaction process swift.   Bitcoins are not affected by any government or  financial policies.      

Advantages of Bitcoin Investment

  • High Liquidity
  • Lower Inflation Risk
  • New opportunities
  • Minimalistic Trading

Disadvantages of Bitcoin Investments

  • Volatility
  • Threat of online hacking
  • No regulations
  • Threat of crashed wallets

Below given table provides you basic information like minimum capital to start trading, risk involved, regulating body and liquidity for both the investment types-

VariablesStocksBitcoins
Starting CapitalP5,000No minimum capital required.
LiquidityDepends on the bid-ask spread.Depends on the method of receiving your cash and time of placing the order
RiskVolatileHighly Volatile
RegulationsPSEThere are no regulations involved as there is no regulating body.

From all the above explained factors, you are now ready to decide the best investment option for yourself. Take your time to research and consider all the risk factors before deciding which investment option is best for your portfolio. It is important to remember that the pricing involved in Bitcoin tends to be more volatile than stocks. Considering pros and cons of both the investment options, bitcoin clearly wins the race when it comes to tax treatment. All these factors are explained to make you aware of all the risks and uncertainty that may rise a danger to your investments.

It totally depends on your knowledge and objectives of what type of market you should invest in. If you are a fresh investor and want to learn the investment trend, opt for a safe investment option. But if you are already a trader and ready to take any kind of risk, venture into Bitcoin to gain good returns.

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