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Crypto vs Stocks: 8 Key Differences Traders Should Know

By Colin Dodds · September 30, 2022 · 9 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Crypto vs Stocks: 8 Key Differences Traders Should Know

Whether to invest in crypto vs. stocks may sound like a crazy debate to longtime traders and investors. The two asset classes couldn’t be more different — in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), where you store these assets, and more.

So, is crypto better than stocks — or are stocks better than crypto? Each one offers its own compelling set of opportunities, as well as risks. For new traders considering investing in crypto, here are some things to review as you enter the crypto vs. stocks debate.

Stocks: A Quick Review

When thinking about the difference between crypto and stocks, the first point to remember is that a share of stock represents a percentage of ownership in a tangible, brick-and-mortar business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that reflects the value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

💡 Recommended: What Is a Stock? A Closer Look

Cryptocurrency: A Quick Review

Cryptocurrencies are types of digital assets that are created and stored digitally, using blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value, unlike fiat currencies. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re super volatile, most types of crypto aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is limited right now.

The value of a cryptocurrency reflects a variety of factors, including current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

💡 Recommended: What Is Cryptocurrency? A Beginner’s Guide

8 Major Differences Between Crypto and Stocks

Cryptocurrencies and stocks are very different assets. Here’s a look at some of the characteristics that set them apart.

1. Ownership

To purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature and more. This offers some protection in the event of identity theft or fraud.

Cryptocurrency offers more anonymity, but less security. You keep your coins or other digital assets in a crypto wallet, which can be fully virtual or it can exist on a USB drive. That anonymity may create unique risks, such as losing crypto to hackers or forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

💡 Recommended: How to Find Lost Bitcoins and Other Cryptos

2. Exchanges

Stock exchanges have existed in some form or another for more than three centuries, most famously on Wall Street, in New York City. Cryptocurrency exchanges, on the other hand, are fairly new. The largest one, Binance, launched in 2017. Coinbase, another major player, was created in 2012.

Binance had a daily trading volume of about $76 billion, as of August 2022. At the same time, the Nasdaq, which is just one small part of the global stock market, had a trading volume that was nearly three times that amount. And the Nasdaq is only 14.5 % of the total stock market by some estimates.

3. Liquidity

Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade at will is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is more liquid than most cryptocurrency, simply because it has a higher trading volume. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Both stock investors and crypto investors can fall victim to slippage, which involves losses when you have to sell a large amount of an asset during a period of low liquidity. However, the risk is higher for crypto owners, given the lower levels of liquidity in the crypto markets.

4. Volatility

There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades, with an average total return of about 10%. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is more likely to undergo sudden, drastic changes in value, sometimes without warning, leaving some to particularly wonder why crypto can be so volatile. Those swings can lead to potentially huge wins for crypto traders, but it can also create large losses in a very short period of time. More than 1,600 forms of crypto have vanished altogether in recent years. While it is possible for public companies to go bankrupt, they’re far less likely to lose all of their value than most cryptocurrencies are.

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5. Trading Costs

Every time an investor buys or sells stocks, they may have to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase low-fee, no-load index mutual funds — which are essentially baskets of stocks — have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

The difference between stocks and crypto here isn’t substantial, because crypto trading can also come with substantial costs. Crypto exchanges charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. Those fees vary widely from one form of crypto to another.

Some networks will raise the gas fees to speed up transactions. But by some estimates, the leading marketplaces charge at least 1.5% in fees to buy or to sell crypto. That will wipe out any gain under 3%.

6. Regulation

There are national agencies such as the Securities and Exchanges Commission (SEC) in the United States, which oversee stocks and stock markets. The regulation by those companies ensures a certain level of transparency into the publicly traded companies.

By contrast, cryptocurrencies remain largely unregulated.

That’s a benefit to some investors, who may have mixed feelings about government regulation. Decentralized networks run each cryptocurrency, with individuals focused on maintaining their technology and ensuring the integrity of the project.

Because the issue of crypto regulation is in flux, cryptocurrencies and exchanges remain at risk of facing drastic transformation or elimination. For example, a key debate in 2022 has been the question of whether crypto is a security or a commodity.

7. Trading Hours

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends.

By contrast, the crypto market runs around the clock, every day of the year. The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, investors often succumb to emotional impulses that can drive their investment behavior. Time off can help restore a sense of control and order.

8. Diversification

Many investors aim to build a portfolio with diversified holdings that perform differently in different markets. In general, stocks often perform in correlation with the broader economy and are impacted by factors like inflation, unemployment rates, interest rates, and more.

Some proponents of cryptocurrency believe that it’s a non-correlated asset, meaning that this asset class doesn’t react to market events like traditional securities such as stock and bonds. Some also believe that it could act as a hedge against inflation, making it a valuable counterweight in a portfolio that has more inflation-sensitive assets.

Pros and Cons of Investing in Crypto

The question of investing in crypto vs. stocks comes down to the advantages and disadvantages of each, and what matters to your goals and risk tolerance.

Pros

Crypto is a new and, for some investors, an exciting asset class with many potential opportunities. It’s driven by cutting-edge technology, which is itself driving many new digital assets and innovations.

When the cryptosphere first launched with Bitcoin in 2009, it was considered an outlier. Now owning crypto is key to participating in nascent digital economies, like Web 3.0.
While investors can buy and sell stalwarts like Bitcoin, Litecoin, Ethereum, Dogecoin, Solana, and others, there are thousands of newer, smaller coins that may bring new technologies and new opportunities.

That makes for a market with sudden outsize gains (as well as stomach-churning losses), and the endless promise of new frontiers.

Cons

Speaking of sudden losses, one of the big disadvantages to investing in crypto is how vulnerable the technology can be to cyber attacks. Entire coins have been wiped out, billions of dollars have been lost (maybe more), and the truth is that until there are real crypto regulations on the books, those kinds of risks are going to be endemic to the crypto space.

The cost of owning and trading crypto is also unpredictable, thanks to the fluctuating costs on different exchanges and crypto networks. Just completing transactions on different networks can come with hidden costs.

Pros and Cons of Investing in Crypto

Pros

Cons

Potential for big gainsPotential for huge losses
Exciting new technology, essential for Web 3.0 and other innovationsHighly unregulated and vulnerable to cyber attacks
Opportunity to invest in new coinsCoins can lose value and disappear

Pros and Cons of Investing in Stocks

Stocks may seem old-school next to crypto, but after hundreds of years the stock markets aren’t going anywhere, and investing in stocks vs. crypto still offers some advantages (as well as some risks).

Pros

Investors who put their money into stocks enjoy the benefits of an asset class that’s long established and highly regulated. This also makes trading stocks simpler and more straightforward. It’s almost impossible to “lose” stocks you own, because of guardrails that protect investors, thanks to existing structures and regulations.

While stocks can be volatile and risky, overall stocks may be less vulnerable to hackers. Their value doesn’t hinge only on digital functionality, but the performance of an underlying entity — the company the stock represents. Therefore stocks have intrinsic value.

Cons

While the swings of the stock market still occur, some investors now handle that volatility by investing in stocks for the long term. You’re less likely to see wild gains in the stock market, the way you are with the crypto market.

Stock investors may not be as vulnerable to cyber attacks and hacks, compared with crypto investors, but there are plenty of vulnerabilities in the existing markets. The stock market is highly complex, and new securities and investment products enter the market frequently — think robo advisors, various derivatives, and more — with accompanying opportunities and risks.

Pros and Cons of Investing in Stocks

Pros

Cons

Wall Street is highly regulated, with many protections for investorsInvestors may not have the same kind of opportunities for outsize gains
Stocks are less vulnerable to cyber crimes and hacksThe stock market is highly complex, and new products pose new risks
Stocks have intrinsic value

The Takeaway

Stocks and cryptocurrency couldn’t be more different. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. They are wholly digital and decentralized, which means they’re not regulated by a central authority like the Securities and Exchange Commission, which is one of the many agencies that help oversee the stock market and keep it safe for investors.

That said, of course, cryptocurrencies are new and exciting investments that present many opportunities that stocks, being more traditional, may not.

To some degree, investors can benefit from investing in both stocks and crypto, especially these days. When compared with crypto, stocks now seem like a fairly steady long-term play. And investing in crypto is going to be necessary in order to take part in the growing global digital economies, like Web 3.0.

If you’re ready to start building a portfolio with stocks or cryptocurrency — or both — one great way to get started is by opening an Active Invest account with SoFi Invest. You can buy stocks, ETFs, fractional shares, IPO shares — and you can set up a crypto trading account as well, to trade crypto any time, 24/7.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Does cryptocurrency work like stocks?

No. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto a better investment than stocks?

It depends on your priorities. If you’re looking for super high-risk, potentially high-return investments — and you’re willing to face big losses — crypto might be your bag. If you prefer a long-term investment with less risk and the potential for relatively steady average returns over time, stocks could be your friend.

How can crypto markets impact stock markets?

As of September 2022, what happens in the crypto markets seems somewhat correlated with what happens in the stock markets. Meaning, investors in each market are behaving similarly – as when the Fed raised interest rates, and both stock values and crypto values dropped. That said, it’s not clear that one market impacts the other, but that investors handle stocks and crypto in similar ways.


Photo credit: iStock/ljubaphoto

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade AmountBonus Payout
LowHigh
$50$99.99$10
$100$499.99$15
$500$4,999.99$50
$5,000+$100

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