The time has come, when keen investors must consider and compare stocks vs crypto investing.  Most investors are familiar and comfortable with stock investing.  However, when it comes to cryptocurrency investing, most investors are unsure.  Prudent investors know to invest in companies they know and understand.  And they’ve known the importance of evaluating stocks before deploying their hard-earned money. 

But, when it comes to investing in cryptocurrency, the stock investing rules do not apply.  Although cryptocurrencies are exploding in value and popularity, no one is able to properly determine the value of a single crypto.  Given this, why would anyone invest in anything they don’t understand?

I don’t have all the answers, but I now have a small speculative position in crypto.  Below I share some of what I have learned.  Without further due, let’s get into stocks vs crypto investing. 

Contents

• How I Started Investing in Crypto
• Why Investing in Stocks and Cryptocurrencies?
• Is Crypto the Same as Stocks?
• What Are Stocks
• What is Cryptocurrency
• Security and Fraud Concerns When Investing in Crypto
• Why Should I Invest in Crypto?
• Stocks Vs Crypto Investing Returns
• Is Bitcoin a Hedge Against Inflation
• Crypto Institutional Demand
• Stock PE Ratios and Valuations – Technology and Innovation
• Stocks Vs Crypto Investing Risk and Reward
• Should I Invest in Crypto?
• How Much Crypto Should I Own in My Portfolio?
• Dollar Cost Averaging When Investing in Cryptocurrencies and Stocks
• How to Invest in Cryptocurrencies – Cryptocurrency Exchanges
• My experience with Crypto Exchanges
• What Crypto to Buy – Bitcoin vs Ethereum Vs Altcoins Investing
• What Crypto Should I Start With?
• Stocks Vs Crypto Investing Taxes
• Trading Stocks and Cryptocurrency is a Dangerous Game
• Stocks vs Crypto Investing Diversification
• Crypto and Blockchain ETFs and Funds
• Never Borrow Money to Invest in Crypto or Stocks
• Is Cryptocurrency in a Bubble?
• Reasons Not to Invest in Crypto
• Stocks Vs Crypto Investing Conclusion

How I Started Investing in Crypto

I first started investing in stocks in 1995.  My investment did very well, at least while I maintained a buy and hold strategy.  In this time frame I’ve learned much about stock investing and investing in general.

In 2017 I became interested in bitcoin and reading and listening to podcasts.  One book I enjoyed is Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper. 

The book covers some fascinating accounts such as how bitcoin’s creator Satoshi Nakamoto was the only person mining bitcoins for a long time.  The fact that he was mining 50 bitcoins every 10 minutes still blows my mind, given bitcoin’s price today. 

Although I was intrigued by bitcoin, I wasn’t quite sure this cryptocurrency was here to stay.  What I became really interested in was blockchain – the technology behind bitcoin. 

I won’t get into what blockchain technology is here, but what I will say is that as I researched blockchain I became interested in other cryptocurrencies.  In fact, I ended up investing a small amount of money in Ethereum.  And this is where my stocks vs crypto investing journey began. 

Soon the price declined to the point where I lost interest and I stopped paying attention.  Then in late 2020, bitcoin began making news when it reached a new all-time high. 

It was then that I decided to take a look at my original crypto investment and discovered it had tripled in value.  As I began reading about Ethereum again I decided to increase my position.  Today cryptocurrencies make up about 1% of my liquid portfolio.  This is a small percentage, but I am pretty excited about this market and the newly acquired diversification. 

Why Investing in Stocks and Cryptocurrencies?

The purpose of investing is to grow your wealth and/or produce income.  There are many ways to do so.  A common way of investing is to invest in the stock market.  This is in part because investing in stocks and/or funds is easy and does not require large amounts of money. 

In addition, stock investing is considered a passive investment.  In other words, with passive investments, investors do not have to be actively engaged in managing their investment. 

There are other reasons why stock investing is popular.  For example, stocks are a liquid investment, compared to other types of investments (i.e. real estate).  And stocks can be a way to quickly diversify an investor’s portfolio. 

When it comes to stocks vs crypto investing, there are some similarities.  Namely, cryptocurrency investing doesn’t require large amounts of money, it can be a passive investment, cryptocurrencies are liquid, and can be a way to diversify an investor’s portfolio.

Is Crypto the Same as Stocks?

No, although these asset types have certain similarities, they are very different in certain ways.  One of the fundamental differences has to do with ownership.  To better understand stocks vs crypto investing, let’s look at some definitions. 

What Are Stocks?

According to Investorpedia; A stock is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation’s assets and profits equal to how much stock they own. 

In addition, stocks are backed by companies that are regulated by the U.S. Securities and Exchange Commission (SEC).  The SEC exists precisely for the purpose of protecting investors from fraud and other bad faith practices. 

What is Crypto?

According to Investorpedia; A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.  A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

Most cryptocurrencies are not backed by a company or by tangible assets.  As a result, there is no financial information (such as revenue, earnings, etc) an investor can use to objectively evaluate cryptocurrencies.

To date the SEC has been fairly uninvolved when it comes cryptocurrencies.  Although the SEC is already getting involved in this space, as of now cryptocurrency investor remain somewhat unprotected from bad actors. 

Related 7 Essential Crypto Investing Tips for Beginners

Security and Fraud Concerns When Investing in Crypto

On top of the lack of regulation, security and fraud concerns are exacerbated by the explosion of new cryptocurrencies.  In fact, technology has advanced in such a way that anyone can create their own currency.  See How to Get Started on Creating Your Own Cryptocurrency. 

It is easy to imagine a situation where techy criminals become millionaires by selling a new cryptocurrency to gullible investors. 

To be clear, blockchain technology in and on itself has proven to be amazingly secure.  The concern with security comes from the human factor.  The easiest example in this area relate to human error.  

Stories abound of investors that have thousands if not millions of dollars stored somewhere but can’t retrieve their money because they lost their storage devices or access to them.

Related Man accidentally threw away $127 million in bitcoin and officials won’t allow a search

Related How a Forgotten Password Could Cost an Early Bitcoin Investor Close to $250 Million

Other human factor concerns relate to bad actors luring people into traps.  I am amazed to see tweets where bad actors pretending to be crypto currency influencers advertise crypto giveaways.  The unsuspected victim is supposed to send 1 crypto of some kind to receive 2 crypto in return.  Unfortunately, these victims never get their crypto back. 

See examples below of tweet seeking to deceive people.

Indeed, when considering stocks vs crypto investing, we must be mindful of the security and fraud concerns inherent with cryptocurrency investing.

Why Should I Invest in Crypto?

Given the fraud and security concerns, why should anyone consider investing in crypto?  The simplest answer is for the potential returns. Crypto prices keep going up as technology advances and as crypto acceptance grows.

Stocks Vs Crypto Investing Returns

Perhaps the most interesting comparison between stocks and crypto investing comes from actual returns.  In the last three years the S&P 500 has produced an annualized return of 12% (dividends included).  In the same period, Bitcoin has produced an annualized insane return of 177%!

If you follow cashkeen.com, you know I am particularly fond of investing in precious metals like gold and silver.  My gold investments did phenomenally well in 2020 and are poised to do even better in 2021.

One of the reasons why I like investing in gold is because gold is a great hedge against inflation.  Keep in mind governments across the world are in a rase to prop up their economies.  They do so through monetary policy that amounts to nothing more than printing more paper money. 

See Reasons Why You Should Own Gold

The result is that purchasing gold and other hard commodities requires more and more dollars as government monetary intervention continues. Hence it is not surprising to see gold doing well in the current environment. 

Amazingly, cryptocurrencies like Bitcoin performed significantly better than gold!  The chart below shows that in 2020, S&P 500 returned 3% on average for the year compared to a 35% return for gold and an outstanding 63% for bitcoin.  

Is Bitcoin a Hedge Against Inflation?

It is difficult to pinpoint precisely the reasons why Bitcoin performed so well.  However, it is worth noting that bitcoiners argue that this bitcoin, like gold, is also hedge against inflation.  This is precisely why so many call Bitcoin digital gold. 

Related ‘Hedge fund manager Paul Tudor Jones helped set off the frenzy when he said in May he was buying Bitcoin as a hedge against the inflation’

I believe a strong case can be made that bitcoin can serve as a hedge against inflation.  In my opinion, two conditions are necessary for bitcoin to be able to serve as a hedge against inflation.  First, there needs to be acceptance of bitcoin as a form of money, or an asset.  Second, there needs to be a perception of scarcity. 

The argument for scarcity is one of Bitcoin’s strongest arguments.  Satoshi Nakamoto made sure scarcity was a key element of bitcoin from its creation. 

On the other hand, wide acceptance was exactly the challenge Nakamoto and other early bitcoiners faced from the beginning. 

Even as late as 2017, when I became interested in cryptocurrencies, I wasn’t convinced people would widely accept bitcoin as a form of money.   Today bitcoin’s acceptance as digital money is hardly questioned. 

Given these two factors (scarcity and acceptance), it is more and more likely that bitcoin can serve as a hedge against inflation.  Stocks on the other hand, are definitely not considered to be a hedge against inflation, that is assuming we are not talking about gold stocks.

Crypto Institutional Demand

Proof of bitcoin’s acceptance as currency, or perhaps as a speculative investment, is the fact that large institutions are now acquiring and holding large quantities of bitcoin.  Also of interest is that some of these institutions are also looking into acquiring other cryptocurrencies. 

In total 81,154 BTC, or 0.5% of all BTC in circulation is held in the treasuries of publicly traded companies.

📈 https://t.co/Rx6Z8a5NqN pic.twitter.com/DHB7N2dm8J

— Messari (@MessariCrypto) November 11, 2020

Institutional demand of bitcoin is a huge bust to bitcoin and all other currencies.  Namely, it strengthens the argument of cryptocurrency acceptance.  If that wasn’t enough, institutional demand is just starting.  Yet, it has already caused bitcoin’s price to rise. 

Consider that institutions don’t want to be left out of the cryptocurrency bull market and some of them see little risk in allocating a small percentage of their investments to crypto.  However, a small percentage of a large investor multiplied by multiple investors can really move bitcoin’s price. 

And don’t forget that when bitcoin goes up, all other currencies tend to go up. 

Finally, it goes without saying, that stocks are the default investment of these huge institutions.  The question is can crypto begin occupying a small portion of these institutions’ portfolios.

Stock PE Ratios and Valuations – Technology and Innovation

One important thing to consider when comparing stocks vs crypto investing is valuation.  One metric stock investors use to evaluate a stock is the PE ratio.  The PE ratio of a stock is simply the Price of one share of the stock divided by the stock’s annual earnings per share.  That is PE = P / EPS

Stocks with low PE values are considered to be of good value.  Whereas stocks with high PE values are considered to be expensive. 

And as you probably know, technology stocks tend to have very high PE ratios.  This is because investors are betting the new technologies these companies are involved in will translate in to higher future earnings.  In other words, stocks related to technology and innovation are typically significantly more expensive than stocks in say utility companies.

Unfortunately, when it comes to cryptocurrencies, investors do not have information such as annual earnings to rely on.  Therefore, figuring out whether a given cryptocurrency is of good value using metrics such as PE ratios is impossible. 

Instead, cryptocurrency investors are simply betting on innovation.  Indeed, some cryptocurrencies are inventing an entirely new world, a digital world.  And some of these cryptocurrencies will very likely see their values skyrocket in time.

Given all of this, it is easy to conclude cryptocurrency investors are not investors, but rather speculators. 

Stocks Vs Crypto Investing Risk and Reward

When investing in stocks, investors can clearly choose to invest in companies with actual earnings.  Or at a minimum can chose to invest in companies with actual assets.  Thus, risk is somewhat measurable.  The same is not true when investing in crypto.

Obviously, the potential rewards of investing in cryptocurrencies come with a significant amount of risk.  Any cryptocurrency, including bitcoin, is at risk of becoming obsolete, being replaced, losing acceptance, etc.  And newer cryptocurrencies have the risk of never becoming accepted, even if they offer superior solutions.   

Consequently, investors speculating on cryptocurrencies should be fully aware that they could lose a significant portion of their investment, if not all.  And at a minimum, cryptocurrency speculators should brace themselves for extreme market volatility. 

Earlier I mentioned that in October of 2017 I bought Ethereum tokens at a price of $300 per Eth.  By early 2018 Ethereum had skyrocketed to $1,400.  That’s an increase of 460%.  And by the end of 2018 the price had fallen to $50 dollars!  That’s a drop of 96%. 

By then, I was so discouraged that I completely stopped paying attention to cryptocurrencies for several months.  They key here is I didn’t sell.  So now my initial crypto investment has grown fivefold.

Should I Invest in Crypto?

Prudent investors would not call cryptocurrency an investment, but rather a speculation or even a gamble. 

First, if you are new to investing or if you are not in a strong financial position, you should probably stay away from crypto investing.  Before speculating with crypto a prudent investor should be in a strong financial position.  Namely, the investor should have no debt, have a substantial amount in savings, should be contributing to a retirement account, have a diversified investment portfolio, etc. 

Second, if you are not good with technology, you should probably avoid crypto as things are likely to become extremely frustrating.  Creating online accounts with cryptocurrency exchanges alone can be daunting for many.  Trading crypto, setting up a crypto wallet, keeping track of passwords, key words, etc. has and will continue to be problematic for millions of people. 

Finally, if you are going to lose sleep due to extreme market volatility, you should probably avoid crypto. 

Related: 10 Signs You Shouldn’t Invest in Crypto

How Much Crypto Should I Own in My Portfolio?

Back in 2017, when I wasn’t quite sure about cryptocurrencies, I invested a miniscule amount.  And now that I am more bullish about the future of cryptocurrencies, I’ve increased my position significantly. 

However, cryptocurrencies make up only about 1% of my liquid portfolio.  By liquid portfolio I mean investments such as mutual funds, stocks, and cryptocurrency.  More specifically, this does not include investments real estate, timber, etc. 

On one hand I would be disappointed, but financially okay if the value of my cryptocurrency assets went down to zero.  On the other hand, I will be thrilled to see these investments continue to grow at a rate of 50% plus per year, which is what I’ve experienced to date. 

The thing about stock vs crypto investing is that a good argument can be made about the advantage of owning both asset types.  How much crypto should you own in your portfolio is a question only you can answer.  Certainly, don’t invest to the point where you lose sleep.  In my opinion, it is always better to start small and then increase your position over time, if it makes sense. 

Dollar Cost Averaging When Investing in Cryptocurrencies and Stocks

This brings me to the subject of dollar cost averaging (DCA).  I am a big fan of DCA for buying and selling stocks, mutual funds, and certainly cryptocurrencies. 

DCA is an investment strategy, that requires purchasing (or selling) assets such as stocks, mutual funds, and cryptocurrencies through periodic purchases (or sales), over a period of time.

For illustration purposes, the image below compares a lump sum investment of $8,000 to a DCA investment of the same amount.  The lump sum investment is shown in blue, at January share price of $10 per share. The price per share goes up and down for a few months. And by August, the share price is $10 per share.  In this case, the total gain after 8 months is 0%.

On the other hand, the orange color shows eight DCA purchases, of $1,000 each.  One purchase was done at a fairly high share price of $14.  However, other purchases were done at much lower prices.  Thus, the average price paid in eight months is actually $9.61 per share, which translates to a total gain of 4.07%. 

DCA can be a great way to overcome to survive the extreme volatility inherit in the cryptocurrency markets.  As mentioned, similarly, to dealing with stocks, DCA can be implementing when buying and when selling cryptocurrencies. 

Also see Mutual Fund Investing for Financial Freedom

How to Invest in Cryptocurrencies – Cryptocurrency Exchanges

Stock investors trade stocks through brokers, of which there are many.  I’ve used Ameritrade for many years but have also used others such as Fidelity, T. Rowe Price and Bank of America.  Online brokers with very low fees such as Robinhood have become extremely popular with Millennials. 

Likewise, the most common way and arguably safest way to trade cryptocurrencies is through cryptocurrency exchanges.  These are cryptocurrency platforms that lets you buy, sell, store and trade cryptocurrencies such as BTC, ETH, XRP, BCH, LTC and more.

Similarly to stock brokers, cryptocurrency exchanges make money from fees.  As you evaluate cryptocurrency exchanges it makes sense to pay attention to the fee structure. 

There are hundreds of cryptocurrency exchanges.  Below is a screenshot of the top 50 cryptocurrency exchanges by market cap from coinmarketcap.com, one of the more popular cryptocurrency websites. 

With so many choices, how do you choose the best cryptocurrency exchange?  Typically, exchanges with the largest market caps often offer more products and services.  In addition, larger exchanges often have better reputation.  Therefore, it makes sense to consider some of the exchanges at the top of the list. 

One of the perceived benefits of using cryptocurrencies to buy and sell items is the idea that transactions can be made anonymously.  This is true to some extent.  However, when using cryptocurrency exchanges for buying and selling crypto, you are far from anonymous.

My experience with Crypto Exchanges

When I first opened an account to trade crypto I was surprised to learn that Coinbase required a digital image of my face.  This was on top of all other very sensitive information.  When signing up with a stockbroker I have never been asked for a digital headshot. 

Speaking of Coinbase.  I’ve had a terrible experience with them.  Even as of today, I have a few thousand dollars locked up in Coinbase that I can’t access.  For some reason they deemed I had engaged in illegal activity and closed my account, though I never traded a thing.

To add frustration, Coinbase’s customer support is as bad as it gets.  It is impossible to talk to someone on the phone.  And they are terrible at responding to emails in a timely manner. 

As of now, I am using Gemini. This is a company owned by the Winklevoss brothers.  You may be familiar with these twins, as they were involved in a legal battle with Mark Zuckerberg over ownership and creation of Facebook. 

One thing I’ve been surprised to learn is that when trading crypto, the exchanges I’ve dealt with have limited buy and sell orders types, such as I am used to seeing when trading stocks.  When trading stocks, I often like to use a trailing stop sell order.  I use this type of order to sell a stock if it drops more than say 15% in price.  I use these types of orders to lock gains.  However, to date, I have not seen these types of orders available in cryptocurrency exchanges.  I suppose cryptocurrency exchanges will eventually offer these services. 

What Crypto to Buy – Bitcoin vs Ethereum Vs Altcoins Investing

If you are new to crypto you are probably drawn to Bitcoin.  And as you learn more about crypto and blockchain, you will come across Ethereum and other Altcoins. 

Bitcoin is by far the largest and arguably the less risky cryptocurrency.  Bitcoin is the default digital currency and as such it dominates the cryptocurrency market.  However, bitcoin has some limitations.  As such, other alternatives to Bitcoin (Altcoins) have risen to offer more specific cryptocurrency solutions.

The second most common cryptocurrency is Ethereum.  Ethereum is a lot more than a digital currency.  In an amazing article titled ‘Ether is the Best Model for Money the World has Ever Seen’, David Hoffman makes the case the Ethereum is a unique asset superclasss, capable of functioning as a capital asset, a consumable asset, and as a store of value. 

I am a big fan of Ethereum, mostly for its technology, rather than its value as currency.

And then there are all other Altcoins, thousands of them.  Many of them will rise from obscurity to offer solutions we can’t even imagine.  Others will never make it past go.  These Altcoins are extremely volatile.  Those gambling in this space will see their fortunes multiply and/or disappear, or both! 

What Crypto Should I Start With?

If you are just getting started, your best bet (and bet is probably the right term here) is probably starting with Bitcoin.  Then, as you become familiar with other cryptocurrencies, you may consider Ether.  A crypto portfolio of 80% bitcoin and 20% eth could give a new investor some nice exposure to two amazing cryptocurrencies. 

A number of investors fond of Bitcoin may also be interested in other coins resulting from Bitcoin forks. One such coin that appears to be on the move is Ravencoin, which is rumored to be ready to be listed on Coinabse. See Ravencoin Coinbase Listing?. Again, it is tempting to chase the news, but these strategies don’t work well in the long run.

Eventually, you may become interested in Altcoins not tied to the Bitcoin blockchain. I am in this camp.  I’ve considered several of them, including some lesser known cryptocurrencies such as IOTA and MANA.  However, as of now my crypto portfolio is 100% Ethereum. 

Stocks Vs Crypto Investing Taxes

When you sell stocks and you make money you pay taxes on the gains. The same thing applies to cryptocurrencies.  One big difference is that stockbrokers will provide you with Form 1099-B.  This is a federal tax form used by brokerages to record your gains and losses during a tax year.

To my knowledge, cryptocurrency exchanges don’t do this.  Yet, you are still required to pay taxes.  As such, it is your responsibility to track all your transactions and to document gains and losses for tax purposes. 

I suspect a large majority of crypto traders are unaware of this nuance and are in for a surprise.

Bitcoin Vs. Stocks: Which Is More Tax Efficient Investment?

Trading Stocks and Cryptocurrency is a Dangerous Game

I made the huge mistake of thinking I could make money trading stocks.  I’ve lost several thousand dollars attempting to play the trading game.  This was an expensive lesson, but one that I am grateful for. 

The reality is that very few people are successful at trading stocks and I suspect the same applies to trading cryptocurrencies.  The fact is that it is extremely difficult to beat a buy and hold strategy. 

Keep in mind no individual can time the market, at least not consistently.  Some of the best investors, are simply buy and hold investors.  

My recommendation is to stay away from trading stocks and crypto.

Stocks vs Crypto Investing Diversification

If you are a stock investor, you may already have a healthy degree of diversification in your portfolio.  The question is are you diversified into cryptocurrencies and/or blockchain technology?  If not, you may consider a small speculative position in cryptocurrency. 

Again, be mindful you could lose all your money.  And at a minimum, be mindful there will be extreme volatility.  For these reasons, you should never invest money you can’t afford to lose.

On the other hand, if you are crypto investor and don’t own stocks or funds in other industries, you lack diversification.  At some point, most investors learn about diversification or lack off, the hard way.  I speak from experience. 

Crypto and Blockchain ETFs and Funds

Most stock investors also invest in mutual funds and ETFs.  As it turns out, you don’t have to buy crypto to have exposure to the cryptocurrency market and blockchain technology.  First, there are ETFs such as BLOCK, BLCN, LEGR, and KOIN. See Blockchain ETFs

Second, there are funds such as the Grayscale Bitcoin Trust (GBTC), the Osprey Bitcoin Trust (OBTC).  According to Bloomberg Intelligence, a trust from Grayscale took in $4.7 billion in 2020.  And recently, Fidelity Investments introduced a Bitcoin fund for wealthy investors.  In addition, Bitwise Asset Management, a crypto index funds provider, recently surpassed $500 million in assets under management, a fivefold increase from the end of October.

And finally, if you are interested in investing in blockchain technology itself, through more traditional companies, you can buy stock in companies such as Square (SQ) Visa (V) Canaan (CAN), and IBM (IBM)

Never Borrow Money to Invest in Crypto or Stocks

Most stockbrokers allow qualified investors to borrow money to buy stocks.  This is referred to as using margin.  Using margin to buy stocks is a very dangerous strategy.  This is because if the stock goes down in value you may be required to sell your stock at a loss. 

The same applies to crypto trading.  If you borrow money or use a credit card to buy crypto and the value of your crypto goes down you may be required to sell your crypto at a loss.  And given the volatile nature of cryptocurrencies, chances are your cypto holdings will at some point be significantly down in value. 

Other Opinions on Stocks Vs Cryptocurrency Investing

If you would like someone else’s take on stocks vs cryptocurrency investment, you may want to check out the video below. 

Bitcoin vs Stocks vs Startup Investing

Is Cryptocurrency in a Bubble?

This is such a good question.  Prudent analysts looking at any cryptocurrency valuation the way they look at stock valuation would easily conclude cryptocurrencies are overvalued and therefore in a bubble.  The thing is cryptocurrency is a completely different animal.  Cryptocurrency investors are looking at the future of crypto, not at its current valuation.

And to be fair, some analysts could conclude that the stock market is in a bubble.  Just do a google search for “is the stock market in a bubble.” 

Reasons Not to Invest in Crypto

There are a lot of smart investors that have chosen to not invest in crypto.  And many of them make very strong arguments. 

If you’ve read this far, chances are you are seriously considering speculating with crypto.  Before you do so, it may be wise to consider other opinions.  Below is a video worth watching on this subject. 

Stocks Vs Crypto Investing Conclusion

Investing is about growing wealth and or producing income.  Stock investing is a proven way of doing so.  Crypto investing on the other hand is relatively new, but many have made a fortune owning crypto.

The average investor is familiar and comfortable with stock and mutual fund investing, but not so with cryptocurrency investing.  When it comes to stocks, investors know they have some ownership of the company backing the stock.  In addition, stock investors can use financial information to evaluate a stock.

However, when it comes to crypto, the investment does not have the backing of a company or a company’s assets.  Moreover, the lack of SEC regulation in the cryptocurrency space may present security and fraud concerns.  In addition, cryptocurrencies are extremely risky.

Given this, why would the traditional stock investor consider investing in crypto?  The short answer is for the potential returns.  Cryptocurrency zealots speak in terms of 5X, 10X, rather than 500% or 1,000% returns. 

Although investors may be tempted by such returns, the possibility exists that crypto investors are simply fueling an inevitable crypto bubble. 

Prudent investors interested in deploying capital into crypto should consider themselves as speculators rather than investors.  To be clear, in my opinion, there is nothing wrong with having a small speculative position, provided the investor is already in a strong financial position.   

When buying and selling crypto, investors should consider the dollar cost averaging method to help offset the dangers of volatility.  Finally, remember keen investors prefer long term investing over trading.  And keen investors don’t borrow money to buy stocks and/or crypto. 

Please consider none of this is financial advice.  I am not a professional in finance, crypto, or anything along these lines.  Simply, I am an engineer with a passion for personal finance.