Thursday, May 19th, 2022

Cryptocurrency vs Traditional Investing Options: Know the Difference

When it comes to investments, people in India generally choose something where they can get maximum returns within a specific time frame and involve minimum risks. While there are plenty of conventional investment options like stocks and bonds, many Indians are slowly but surely considering cryptocurrency, a digital form of currency that can be used to exchange value in the future. .

While the Reserve Bank of India (RBI) in 2018, banned all regulated banks from conducting or facilitating cryptocurrency transactions following reports of digital currency frauds, the Supreme Court struck down this in March 2020.

Following the reversal of the ban, Indians are increasingly looking at cryptocurrency as a viable investment option. But how is it different from traditional options? let’s take a look.

Cryptocurrency vs Shares

Let us start by discussing the difference between cryptocurrency and stock market. Both cryptocurrency and shares have their good and bad days. However, stocks have a long history that makes it easy for investors to predict the future. Stocks face a variety of risks including business and financial, market volatility, government regulations. However, on the other hand, cryptocurrency has a decentralized structure. They don’t have a government or a group of people controlling it.

Cryptocurrency vs Bonds

Bonds are loans given by an individual to a company or government. In other words, when an investor buys bonds, the company or the government from where the bonds were purchased owes a debt to the person. The investor will get interest on that amount for some time after which the company or government will refund the entire amount. The big risk with bonds is that if the company goes bankrupt, the investor will stop getting interest payments and even the principal amount.

Cryptocurrency vs Forex

Forex, also known as foreign exchange, generally attracts investors who invest in foreign currencies. Cryptocurrency is a globally accepted form of currency and investors who opt for foreign exchange deal globally as well. But the catch here is the different economic situation of the countries. Investors can expect positive results from foreign currencies only when the economy of the country they are investing in is in good shape. Capital gains for foreign exchange can be estimated only on the basis of the economy of the country concerned. This makes it riskier than cryptocurrencies.

Cryptocurrency vs Gold and Silver

We know that in today’s time the main reason for investing in gold and silver is to buy jewelery and other such items. Therefore, the only value determiner of metals like gold and silver is market sentiment. Now let’s talk about the risks. The risks associated with investing in precious metals include their portability, import taxes and last, but not least, their need for tight security. Whereas, on the other hand, cryptocurrencies do not require anyone to physically transfer them. Since it is all digital, it makes it comparatively easy for the investor.

Cryptocurrency vs Bank Fixed Deposits

Fixed deposits are backed by the government. FDs are good when you have a long-term investment plan when you have to wait till maturity. However, those who exit their FDs before maturity can also go ahead and invest in cryptocurrency. At least, there the market is volatile and people can take quick decisions.

People can opt out when they know that market prices are going down when dealing with cryptocurrency. But having said that, mining for FD does not require any extra effort. Cryptocurrency must be mined. They need investors’ time and attention. On the other hand, for FD, you can forget it till maturity after investment.

Although people are very comfortable and aware of traditional investment schemes, cryptocurrencies are new and can have their own advantages and disadvantages. So, choose wisely.