This guide will compare cryptocurrency vs tech stocks. Two very promising assets that are in great demand of investors and stock market traders.
During the last months, technological stocks have been growing and surprising everyone in the world. While the Dow Jones index measures the performance of some of the largest companies in the United States, the NASDAQ focuses on internet and financial-related firms such as Google or Apple.
After the Coronavirus crash in the market in March this year, technological companies showed to recover faster than other non-tech and financial firms. Indeed, the Nasdaq was able to reach new all-time highs a few weeks ago. The Dow Jones, instead, remains below the levels it had before the pandemic exploded in the United States.
In this guide, we will go through what tech stocks are, why they are growing so fast in recent weeks, their differences with Bitcoin (BTC), and both the pros and cons of stocks and cryptocurrencies. This is why this post could be very valuable for you to understand whether it is better to invest in cryptocurrencies or tech stocks.
Before I start the article, you must know we are not financial advisors. The information in this post should be considered for educational purposes only. You shouldn’t consider it investment advice. Neither the site nor the article writer is responsible for any decision you make after reading this post. Never invest more than what you are able to lose.
What is a Tech Stock?
Tech stocks make reference to stocks from companies that are currently offering products and services in the technological industry. These stocks work in the same way as stocks from non-technological companies in the market. However, investors tend to group together stocks in order to understand how the general sector is moving forward.
Some of the companies that are considered to be tech-related firms include Apple (APPL), Google (GOOGL) or Microsoft (MSFT), among others. These are perhaps the most representative tech stocks in the industry. Despite that, there are thousands of firms currently, offering tech-related solutions and services and that are considered to be part of the tech stocks definition.
While grouping together these firms could be a great way to have a macro idea of how the industry is moving forward, it can also be somehow misleading considering that APPL, GOOGL, and MSFT represent most of the technological industry in terms of valuation.
What Tech Stocks are Performing Best in 2020?
The first part of 2020 was very negative for tech stocks due to the Coronavirus crisis. However, there are some stocks that are performing certainly well and it is worth taking them into account.
Good examples of tech stocks that have been performing very well in 2020 are NVIDIA, Apple, Tesla, and AMD. All these tech stocks showed massive gains in recent months and they are also in a bull trend since the beginning of the year.
NVIDIA is 92% up, Apple 54.53%, Tesla 283.65% and AMD 65.6%. This shows that despite the massive uncertainty due to the COVID-19 crisis and the increase in unemployment around the world were not enough to stop the stock market, but more specifically, tech stocks such as the ones we mentioned before.
There are other small-cap tech stocks that have been performing very well too and that are worth taking into consideration at the time of building your investment portfolio.
Is it Better to Invest in Stocks or Bitcoin?
Many investors are asking whether it is better to invest in cryptocurrencies or stock. At the moment there is no clear answer on whether Bitcoin or stocks are better investment tools. However, we do know that having a diversified portfolio including stocks and Bitcoin could be a good decision to reduce risk and potentiate gains.
Investing in Bitcoin is not the same as investing in the stock market. Bitcoin has been created around 11 years ago and it has offered very high returns to users over the last decade. There were just few moments in the last years that was not worth to acquire BTC. However, if the digital currency continues growing, even these users could still enjoy returns on their investments.
Stocks are not bad investments. Indeed, we see that tech stocks surging despite the current uncertainty in the world. Bitcoin is also a good tool for individuals to move away from financial institutions and government control.
Thus, there is no clear answer on whether to invest in cryptocurrencies or stock.
Which is Riskier: Tech Stocks or Cryptocurrency?
Both tech stocks and cryptocurrencies are risky assets. It is clear that they are volatile and their price depends on a wide range of things. For example, both markets, cryptocurrencies and stocks, experienced bubbles in the past that pushed the price of stocks and digital assets to the highest point in history.
After these bull runs, tech stocks and cryptocurrencies lost more than 90% of their value. The dot-com bubble affected the tech stocks in the year 2000. Many large and small companies lost almost all their market capitalization and some others stopped operating. Moreover, these stocks took long time to recover and some of them didn’t even recover at all.
Meanwhile, the cryptocurrency market experienced the Initial Coin Offering (ICO) bubble at the end of 2017 and the beginning of 2018. While many new investors were discovering Bitcoin at that time and considered it couldn’t provide the large returns it had already given to thousands of investors, they decided to move to ICO tokens that were released to the market.
These ICO tokens lost more than 90% of their value and most of them ended up disappearing after two years since the bubble popped.
Is Cryptocurrency Better than Stocks?
As you may already know, cryptocurrencies are different than stocks. They play different roles in the market and their prices change due to different reasons. Holding Bitcoin and other virtual currencies are going to be certainly positive if you believe in the decentralized market and technology.
Meanwhile, owning stocks would be a good option for those that believe in the companies they are investing in. Owning a company’s stock would allow the owner of this stock to really own part of the company in which he invested. This is something that does not happen in cryptocurrencies.
Digital assets work in a similar way to normal fiat currencies with the difference they are not issued by governments, some of them have limited supply, they are decentralized and many other things.
Can I Invest in Blockchain Technology?
You cannot directly invest in blockchain technology but you can definitely invest in derivatives of blockchain technology and other solutions. You can invest in cryptocurrencies that run on top of blockchain technology. This could be a way of gaining exposure to the development of specific blockchain networks in the market.
Another way of investing in distributed ledger technology is by placing funds in Blockchain-based exchange-traded fund (ETFs). These ETFs represent a basket of securities that track an underlying index. Some blockchain indices track the price of stocks of blockchain companies that are publicly traded.
In addition to it, you can invest in blockchain technology by acquiring Tech Stocks of companies that are currently working with this technology. This is going to provide you with exposure to the blockchain market and also keep you invested in the stock market.
What are the best Blockchain Stocks?
There are several blockchain-related stocks that you can acquire if you consider the market will continue expanding in the future. We have already mentioned one of these stocks: NVDA, which represents NVIDIA in the NASDAQ index. This company is currently providing hardware components to crypto mining firms. Especially, these components are needed for protecting and securing Bitcoin and other blockchain networks.
IBM, which is traded in the New York Stock Exchange (NYSE) has been working with blockchain technology in recent years. Developers at IBM have developers the so-called IBM Blockchain that provided great solutions to a wide range of firms and companies all over the world.
DocuSign (DOCU) is also a Tech Stock that is currently providing signature technology to firms that need to sign documents. DOCU is using the Ethereum blockchain in order for clients to record agreements and keep them protected and safe at all times.
What are the Dangers of Cryptocurrency?
In the Cryptocurrencies vs tech stocks discussion, we should also take into consideration the dangers and risks of investing in cryptocurrencies. While there are many positive things about Bitcoin and digital assets, we need to understand there are some risks.
For example, tokens that are just released to the market through ICOs and other methods. In addition, they can and may not reach the top 100 cryptocurrencies in the market and will end up being abandoned or dying.
At the same time, virtual currencies are still in their infant phase. This means that there may be some unknown effects and issues that could harm the entire industry. Furthermore, cryptocurrencies are constantly affected by hacks and attacks (crypto exchanges and wallets). Thus, users can certainly lose their funds if the platforms they use are not secure.
Is it Still Worth Investing in Bitcoin?
The question you should do is: why not? It can be very useful to invest in Bitcoin and get exposure to the cryptocurrency market. Bitcoin does not only provide users with a great way to make profits (in the long term it may eventually grow to massive levels). Moreover, it also helps them transfer money all over the world without depending on a third-party.
Investing in Bitcoin has been worth during most of the time Bitcoin was created. There were just a few moments in time where Bitcoin was more expensive than now. This shows that it has been worth investing in Bitcoin for most of the traders since the digital currency was created.
However, we should always be conscious of the issues that can arise on the Bitcoin network. Additionally, take them into consideration before placing your funds in the crypto market.
All in all, we have to conclude that you really missed some serious gains if you had been holding into cash for the past year(and even before that). Whether it’s wise to invest in cryptocurrency vs tech stocks is really up to you to decide. Remember that both asset classes are quite volatile and you seriously could get suffer from mixed emotions on this.
If you got curious about investing in cryptocurrencies or Bitcoin, I would advise you to read how to start a bitcoin investment first to get you on the right track. Furthermore, whatever your next step will be, be cool and patient and profits are on your way!
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