Cryptocurrency vs. Traditional Finance Instruments (for an investor)

FinanceTrading / Investing

  • Author Simone Mickey
  • Published August 30, 2019
  • Word count 590

Cryptocurrencies in the 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."’ But does not miss on to warning you by saying, 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 percent of the respondents out of the 1,100 U.S. - based investors survey indicated enthusiasm for owning Bitcoin.

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

Stocks, Bonds versus Bitcoin

Bonds resemble a fixed-income loan that an investor provides to an organization or to the government; though 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 central bank control. Dissimilar to the peer-to-peer transactionof digital coins, there are some administrative authorities that oversee the investment in stocks and bonds.

Investors can sell their bitcoins to 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, about the share they own, the investors can sell or transfer the shares at the market price. If the market is good selling would bring them profit, if not, then 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 there are no regulatory authorities to control cryptocurrency exchanges.

However, in a couple of years when the cryptocurrency exchange market develops, the volatility of the bitcoin may reduce proportionately to the number of organizations trading on stock exchanges. In October 2018, Cboe Global Market had noticed that the 20-day historical instability of bitcoin had fallen to 31.5 percent, beneath that of Amazon.com (35 %), Netflix (52 percent), and Nvidia Corp (40 percent). It additionally saw that the bitcoin's cost was as stable as Apple stock.

Return on Investment

The interests earned on bonds are exceptionally low. Interestingly, the risk-offs out shines equities when 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 percent yearly return." Loses are similarly enormous if the market is going through a dramatic up and down.

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 too 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 the recent years.

I am a content writer. Mine current focus is blockchain technology and cryptocurrency and I am a blockchain "enthusiast." In addition to content writing, I am experienced in SEO and Social Media Strategist. On a daily basis, I work on articles regarding the following topics: finance, cryptocurrency exchange platform, technology, and politics.

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