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I believe that stocks are better than cryptocurrencies because:

1. Stocks have an underlying value (fundamentals).
2. A listed company’s operations are regulated.
3. Stocks are not as volatile as cryptocurrencies.

A share or stock is a unit that grants part ownership of a company. If you own one share out of 1 million shares issued by the company, then that makes you an owner of the company with a 1/1,000,000 share – in other words, a minority shareholder. Stocks are traded on stock exchanges and are regulated by the government and stock exchanges. The price of stocks depends on the demand and supply of the stock, which in turn is driven by the company’s profitability, business efficiencies, assets, and future outlook, among other factors.

A cryptocurrency is an unregulated digital asset that can be created by a blockchain professional or even an ordinary person who has the means to hire a blockchain coder with experience in creating cryptocurrencies. Cryptocurrencies are unregulated, and unlike stocks, they are not backed by fundamentals. They don’t have government support either.

With that said, here is why I consider stocks to be better than cryptocurrencies:

1. Stocks Are Backed by Fundamentals, Cryptocurrencies Are Not

Stock prices are governed by fundamentals. The demand for a stock increases based on a variety of factors such as its profits, business prospects, market conditions, the value of its assets, asset replacement costs, etc. Most companies own valuable tangible and/or intangible assets, which they deploy to earn revenues and profits. Typically, a company, and therefore its stock, is valued by discounting the future net free cash flows that it is likely to generate in the foreseeable future. Its market price is typically judged by analyzing its Price-to-Earnings (PE) Ratio or the PE-to-Growth Ratio (among other financial ratios).

A cryptocurrency does not have any fundamentals. Its price is determined simply by its demand and supply, and its hashrate (the computational power needed to mine one unit of cryptocurrency). Also, the initial price of a cryptocurrency is determined by its creator. To illustrate, if some people want to transfer a whole lot of Bitcoins (BTCs / BITCOMP) to their contacts in different countries, and if they start buying at market rates, then BTC’s price is likely to shoot up, especially if the supply is limited on that day.

Stock prices are backed by valuable assets and business prospects, while cryptocurrency prices are based purely on demand and supply – that is why I prefer stocks.

2. A Company’s Operations and Its Stock are Regulated; A Cryptocurrency Is Not

Every country has a stock and commodity markets regulatory body that ensures investors are protected: for example, the Securities and Exchange Commission (SEC) in the USA, the Financial Conduct Authority (FCA) in the UK, and so on. In addition, the stock exchanges clamp down on excessive speculation and require listed companies to disclose all information that can impact their stock prices. Investors’ interests are protected, and all investors have access to information that can help them make an informed investment decision.

In contrast, cryptocurrencies are largely unregulated. As the recent meltdown of cryptos and the bankruptcy of a few companies have proved, it is the wild, wild west out there in the world of cryptocurrencies.

3. Stocks are Not as Volatile as Cryptocurrencies

As pointed out in the previous section, regulators and stock exchanges across the globe are serious about investor protection. Therefore, they monitor stock volatility and step in to curb it whenever it crosses specified limits. In many countries, stocks cannot rise or fall beyond a pre-defined level that is updated daily.

Well, there is no meaningful regulation in the world of cryptocurrencies. In May 2022, BTC’s annualized 30-day volatility touched a mind-boggling 117% and all rational investment strategies in BTC and other currencies went out of the window. As of January 2023, the global cryptocurrency market cap is estimated at $856 billion; in 2022, it touched a high of about $2.9 trillion – that is how crazily volatile the crypto market is.

Buying a stock is an investment while buying a cryptocurrency is speculation because there are no fundamentals to go by.

Based on my reasoning above, I believe that investing in stocks is a much safer bet than investing in cryptocurrencies because investor interests are protected in stocks, while in cryptos investor interests are absolutely unprotected as everything depends on pure speculation.

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