The cryptocurrency industry is quickly expanding, with the larger cryptos, in particular, surging over much of the summer and fall. According to a CoinDesk story, the crypto market cap has risen to a record $2.7 trillion, more than triple the $770 billion figure at the start of the year. Bitcoin (BTC) just hit a new all-time high of $66,000, while Ethereum (ETH) recently hit a five-month high of more than $4,200.
All of this is encouraging organizations of all sizes to invest in cryptocurrencies, owing to the fact that cryptos have outperformed traditional assets and various indices.
But how does investing in cryptocurrency compare to investing in traditional assets?
CRYPTO VS. STOCKS
Both cryptocurrencies and stocks have ups and downs. As of this writing, the European stock market is experiencing sluggish activity as a result of Asia-Pacific worries. Due to concerns about the Chinese real estate market, the pan-European Stoxx 700 recently closed just below the flatline. These are specific cases that have lately had an influence on markets. Market volatility, government regulations, and other sources of uncertainty, on the other hand, can frequently result in losses for even the most seasoned and careful investors. Stocks, on the other hand, have a long history, which makes identifying trends and forecasting future moves easier. Stock markets are also heavily regulated and regularly traded, which sets them apart from decentralized digital assets.
BONDS VS. CRYPTO
A bond is a loan made by a person to a corporation or the government. When an investor purchases a bond, the business that sold the bond owes that individual money. For a set length of time, the investor will get interested (say, 3% p.a.) on the amount given out, and eventually, the full money will be returned to him or her. The only significant risk associated with bonds is that an investor will not receive any interest payments (or even the principal amount) if the borrower declares bankruptcy or fails for any other reason. Bonds may also fail to deliver returns that keep pace with inflation. When inflation grows, the value of issued bonds frequently depreciates.
CRYPTO VS. FOREX
When compared to bitcoin or any other market, foreign exchange of global currencies (or FX) delivers unrivaled liquidity. However, the value of currencies in this market is governed by the economic circumstances and volatility of the countries that issue them. This is why, during moments of high volatility, investors pay close attention to changes in significant currency pairs. The transaction volatility charts at FXCM demonstrate this form of tracking. They essentially show bid and ask values for important pairings like the EUR/USD and USD/GBP, but they do it in such a way that the pairs with the most movement are highlighted.
GOLD VS. CRYPTO
According to a recent gold market report from Reuters, gold prices have recently extended gains due to a weaker dollar. With US government rates rising due to inflation fears, gold trade has remained steady and liquid, trading in a range between $1,720 and $1,820. These are the circumstances that give rise to gold’s reputation as a “safe-haven asset.” Some have begun to apply this name to cryptocurrencies as well, mostly because they provide a “safe haven” during times of escalating inflation, as we have seen in the autumn of 2021. However, cryptocurrency is significantly more volatile in general.
Overall, the decision to invest in cryptocurrency is influenced by your risk tolerance and portfolio objectives. Digital money is a smart method to diversify away from traditional assets since it is not connected to a certain fiat currency, country, or financial market. However, cryptos, like any other investable asset, include dangers that must be properly handled. Timing the main ups and downs of the cryptocurrency market is critical.