Cryptocurrency Investor vs Traditional Finance Instruments

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by Simone Mickey

Cryptocurrencies in recent times have risen as an appealing investment option. Veteran crypto trader Glenn Goodman considers the rise of virtual cash as a “once-in an era” opportunity. He further adds that individuals should “grab it with both hands.” However, Glenn does warn investors that, like the reward, the risks are also greater while investing.

A majority of investors are usually risk-averse in their investments.They prefer to invest in the cryptocurrency trading platform that can give them the maximum benefits at zero or minimal loss. For them, traditional financial instruments are a no-loss safe investment, but when it comes to digital currencies, they have apprehensions.

However, lately, investors have started to rush to the digital currency market, shedding their underlying scorn. In a recent study by Grayscale Investments, and Q8 Research, 40% of the respondents out of the 1,100 U.S.A. based investors, the survey indicated enthusiasm for owning Bitcoin (BTC).

Let’s discuss the comparison between cryptocurrency (Bitcoin), and traditional financial instruments (shares and bonds), to comprehend their advantages and disadvantages.

Stocks And Bonds vs Bitcoin/BTC

Bonds resemble a fixed-income loan that an investor provides to an organization, or to the government. Although, investing into stocks gives investors shares in a public-traded company. At the point when investors invest into Bitcoin, they become owners of virtual coins, which are free of any central bank control.

Dissimilar to the peer-to-peer transaction of digital coins, there are some administrative authorities that oversee the investment in stocks and bonds.

Investors can sell their bitcoins to a third party for cash, or for an equivalent value in goods or services. Bonds can be reclaimed at the time of development, where the investors get the par value of the security. Also, the investors can sell or transfer the shares at the market price.

If the market is good, selling would bring them a profit, if not, then it would be a loss.

Unstable Asset Class

Both bitcoins and shares fall under volatile or unstable asset class as the variance in their respective markets decides their value. Bonds are generally stable assets, and thus, they will in general gain lower returns.

Bitcoins are more volatile than shares as the digital currency market is still developing. If on one hand stock markets are well-established financial institutions controlled by regulatory authorities, on the other hand there are no regulatory authorities to control cryptocurrency exchanges.

However, in the coming years when the cryptocurrency exchange market develops further, the volatility of bitcoin may reduce proportionately to the number of organizations trading on stock exchanges.

For example, in October 2018, Cboe Global Market (Cboe) had noticed that the 20-day historical instability of bitcoin had fallen to 31.5%, beneath that of Amazon (35 %), Netflix (52%), and Nvidia Corp (40%).

Additionally, the Cboe market saw that Bitcoin’s cost was as stable as Apple stock.

Return On Investment

The interest earned on bonds are exceptionally low. Interestingly, the risk-offs outshines equities when the markets go astray. Nonetheless, when the market is bullish, investors can win a great return on their investment.

Bitcoin can give its investors a whopping “2000% yearly return.” Loses are similarly enormous, if the market is going through a dramatic rise and fall.

Conclusion: As ICOs are slowing down in the cryptocurrency exchange market, it is quite clear that start-ups are deliberately looking for some new approaches to raise their capital. Also, the investors are looking out for new ways to protect, and grow their assets.

Believe it or not, cryptocurrencies have gradually found acceptance almost all over the world in recent years, and it is expected to continue for an indefinite period of time.

I, Simone Mickey, am a content writer. My current focus is on cryptocurrency and blockchain technology, and I am a blockchain “enthusiast.” In addition to content writing, I am an experienced SEO and Social Media strategist. I specialize in the following topics: finance, cryptocurrency exchange platform, technology, and politics.