Since the launch of the first-ever cryptocurrency in 2009, crypto trading has taken the world by storm, especially within the last few years. The total value of all digital cryptocurrencies is estimated to be over $2 trillion, with Bitcoin holding more than 40% of the total value at $800 billion. There is a high amount of interest in crypto from investors, but many approach investment with little knowledge and a lot of hope. But this launch has also sparked a huge debate about crypto vs traditional stocks; the traditional investment vehicle. So which one should you invest in?
What are stocks?
Stocks are a type of investment that allows you to have fractional ownership of a business. Once an investor buys a stock, they can make a profit through dividend payments from the business and capital appreciation.
However, it is easy to lose sight of the potential downside of owning stocks. Once you invest your money, the value of your stock can rise or fall on the stock market at any given moment due to any factor such as an economic crisis, a change in the view of the success of the company from a significant investor, and many other factors.
What is cryptocurrency?
A cryptocurrency is a digital currency that is designed to work as a medium of exchange online that is not reliant on any central authority such as a government or bank, to uphold and maintain it.
What is the difference?
It is very clear that stocks and cryptocurrencies are very different, one is used to purchase fractional ownership of a business, and the other is used to make online transactions without a central authority. Although the clear difference is very obvious, what are the other differences between the 2 investments?
When we’re talking about cryptocurrency vs. stocks, there is a big difference in how they are traded. Cryptocurrency can be bought at a cryptocurrency exchange which is open 24 hours a day, every day of the week, whereas you can buy stocks at the stock exchange which is only open during business hours.
Normally, the crypto market is more volatile than the stock market. However, the stock market is also subject to volatility due to interest rate changes and uncertain situations like war, inflation rate and monetary policy changes. But, what about tax implications for cryptocurrency vs. stocks?
Although the tax on investments can seem like a rather intimidating area, the tax implications are exactly the same for trading on the stock market vs the crypto market, as any and all investments are seen as an asset and therefore treated the same by HMRC. However, there are ways you can be more tax-efficient when trading cryptocurrencies which can reduce the amount of tax you would pay in comparison to trading stocks. You can be given advice by specialist tax advisors and taxefficientcrypto.com can put you in touch with them to help you manage your profits and taxes.
So which one should I invest in?
Cryptocurrencies and stock are excellent investment vehicles and they both hold significant value to investment portfolios, but which one you choose to invest in depends on your goal.
Although there are clear differences, as well as similarities, between crypto and stocks, it is still worth remembering that both are valid investment choices, and they can serve different purposes in your portfolio. Regardless of which one you choose, any investors that want to dive into crypto or stocks need to know exactly what they’re investing in, and it is always worth researching ways or seeking advice from crypto tax advisers or stock advisers on how you can be tax-efficient when it comes to managing your investments.