Cryptocurrencies once seemed like just another fad, but they’re now proving to be a serious investment. They even share some eerie similarities to the stock market. But is crypto a good alternative to the stock market? We’ll examine how the two assets compare and why crypto may be a good alternative.
Cryptocurrencies are no longer the super-niche assets they once were. As they’ve become more mainstream and versatile, adoption has increased. And the crypto market has taken on an eerily similar face to one we know very well; the stock market.
But is it time for investors to turn to crypto as an alternative to the stock market? Are the two even comparable?
We’re going to look at why crypto has become so popular and compare it with stocks as an investment option. And we’ll tell you a bit about how to get started.
The explosion of alternative investments to stocks
Stocks have been the backbone of most investment portfolios for a long time now. For non-accredited investors, they have long been one of the lowest entry-cost investments available.
However, in the face of increasing market volatility in stocks, other opportunities have gained traction. P2P lending, fractional real estate investments and other fintech services have taken a hold of the market.
The crypto explosion
Although crypto assets are considered “alternative” investments, things might not be that way for long. The days where crypto was limited to tech geeks buying Bitcoin are long over — these days, everyone from your work colleagues to your grandmother is considering a crypto investment.
Sound hard to believe? A recent study from Finder suggests that 8% of Americans now have investments in cryptocurrencies. Most of them invest in Bitcoin, which 5% of Americans own. And in the UK, 2.6 million people reportedly own cryptocurrencies, making up around 5% of the population. That sure sounds like traction, doesn’t it?
Why cryptocurrencies may be an alternative to stocks
While crypto has the whole blockchain angle to consider, the coins themselves have taken on increasingly similar features to stocks.
As you know, stocks represent shares of publicly listed companies (e.g., Apple and Google) that members of the public can buy. When the value of the firm increases, your stock’s value will increase — and since most companies rely on their shareholders, they’ll consider their opinions when making business decisions.
Crypto might seem a world apart from stocks, but there are more similarities than you may realize.
Owning a cryptocurrency is like holding a share of the Blockchain project that the coin represents. For many protocols, cryptos are distributed to the public to raise funds for the project much like in an IPO. These events are aptly called ICO’s.
And as the value of a particular crypto project gets bigger, the value of its coin goes up (much like stock). Crypto owners even get voting rights on certain blockchains based on the number of coins they own, helping decide the future of the platform.
The similarities don’t stop there.
Crypto has its own exchanges where you can trade between coins in a mixture of forex and stock trading. On the biggest crypto exchange, Binance, trading volumes reached $129 billion in August of 2020.
You can even trade crypto options contracts at up-and-coming sites like FTX.
Crypto may be a good stock alternative, but…
New traders flooding the stock market through fintechs like Robinhood have seen increased volatility in the traditional markets. However, there’s a huge variation in the returns and risks of stocks and crypto.
Cryptocurrencies can offer some mouthwatering returns.
The cryptocurrency DASH, for example, has seen a return on investment (ROI) of 25,457% since its launch in 2014. Binance coin (BNB) has had an ROI of 11,309.9% since its 2017 launch.
It’s hard to imitate these types of numbers in the stock market. The ROI of Tesla since its launch in 2010 is 4,125%, and it’s one of the most successful stocks of the last decade.
Unfortunately, not all crypto assets are as successful as top-performers like DASH and BNB. Many other coins see their values plummet. Bitcoin has undergone many bubbles and crashes over the last few years.
The downsides of crypto
While many crypto projects have made a lot of money out the gate they’ve often met obstacles. In the face of regulatory uncertainty from local governments and lack of immediate viability, many coins have suffered devastating crashes.
Although stocks can also plummet in value (just check any airline or cruise company’s stock performance this year), they’re less prone to bubbles and speculation.
There were once hopes stock investment alternatives like crypto would behave similarly to a safe harbor investment like gold, retaining a stable value during economic instability.
Sadly, this didn’t prove to be the case during the recent COVID-19 market crash — if anything, cryptocurrencies have been even more volatile.
So, what is the best alternative investment to stocks?
Ultimately, choosing which assets to invest in is a personal decision. Don’t opt for crypto just because some random guy on the internet tells you to!
Crypto offers an attractive option thanks to the potential for high returns and relative stability, but it might not be right for everyone — you certainly need a good stomach for risk. Any experienced investor will tell you you’re better off diversifying your assets into many high and low-risk investments.
Today, there are platforms out there that can help you diversify into crypto, as well as other low-risk options.
How to get into crypto and explore other stock alternatives at the same time
Think crypto investment could be the one for you? At MyConstant, we have some great tools to help you get started.
We’re a crypto-backed peer-to-peer (P2P) lending platform. Investors on our platform lend money directly to their peers, who come to us instead of a conventional loan provider. Borrowers on our platform must secure 200% of their loan value with cryptocurrency as collateral.
You can invest in our P2P loans for up to 7% APR with either USD or stablecoins tied 1:1 with the USD. Stablecoins can be spent like dollars but can also be transferred to crypto exchanges like Binance to purchase cryptos like Bitcoin and Ethereum.
While most crypto-lending platforms make you pay steep fees to buy stablecoins, we make it cheap to buy them and easy to transfer them. AND we give you great options for earning interest on your crypto.
Our Crypto Lend product offers up to 8% for investors and you can withdraw your money at any time.
Sound appealing? Create your account today.