The Dow Jones or digital assets? Comparing crypto vs. stocks

With centuries of history and total value exceeding $100 trillion, stock markets have long been the backbone of global capital markets. But they’re no longer the only option for investors. Since Bitcoin (BTC) sparked the crypto revolution, digital assets have reshaped the financial landscape, and many wealth managers and stockbrokers now offer them to their clients alongside traditional stock shares.

But before deciding how to allocate funds into crypto versus stocks, it’s important to understand their key differences and risk profiles to determine how each aligns with your strategy. In this guide, we’ll tell you what you need to know. 

Crypto versus stocks: Two different types of assets

Traders enter crypto and stock markets with the same primary goal: to earn a profit. However, while the objectives might be similar, there are far more differences than commonalities in how these assets operate.

What are cryptocurrencies?

Cryptocurrencies function more like transactional currencies like the U.S. dollar or euro than traditional investments like stocks. While investors purchase them with the expectation of price appreciation, unlike equity investments, they do not represent an ownership interest in any company. When Bitcoin launched in 2009, it presented itself as a form of decentralized peer-to-peer (P2P) virtual cash, challenging government-issued fiat currencies. Today’s cryptocurrencies rely on blockchain technology, which verifies transactions without the need for intermediaries and records them on public, distributed ledgers.

Because of their decentralized infrastructure, cryptocurrencies operate independently from centralized entities like banks or governments. Each cryptocurrency represents digital value based on the markets and is governed by its underlying code. While projects like Bitcoin and Litecoin (LTC) prioritize creating censorship-resistant digital currencies, others like Ethereum (ETH) provide platforms for decentralized applications (dApps), expanding the potential use cases for blockchain.

What are stocks? 

Stocks (also called equities) have been a staple of global finance since the Dutch Golden Age. They represent partial ownership in a company, and different classes of shares may have different voting rights, dividend structures, or levels of priority in asset claims. When traders purchase shares of companies like Apple (AAPL), Microsoft (MSFT), or Tesla (TSLA), they gain a stake in the company’s performance. 

Unlike cryptocurrencies, stocks are highly regulated by governmental and international bodies, ensuring they meet strict standards to be listed on public exchanges like the New York Stock Exchange (NYSE). Equity trading is facilitated by third-party brokerage firms, which match buyers with sellers and handle the custody of shares.

A deeper dive into crypto versus stocks 

The main distinction between cryptocurrencies and stocks lies in their structure: Crypto represents decentralized digital assets, whereas stocks signify ownership in a publicly listed company. Beyond this, these asset types diverge in several key areas:

• Market maturity: The origins of stocks date back to the Dutch East India Company in 1602. Cryptocurrencies, however, only emerged with Bitcoin in 2009. While the crypto market grew exponentially to over $1 trillion within a decade, it still lacks the maturity and liquidity of global stock markets.
• Trading hours: Cryptocurrency markets never close. Digital assets are traded continuously, 24/7, across exchanges, P2P platforms, or directly through digital wallets. Stocks, on the other hand, are restricted to specific trading hours during business days.
• Income generation: Both asset classes offer passive income opportunities, but they differ in execution and risk. Stocks may provide regular dividends, distributing a portion of the company's profits to shareholders. In contrast, earning yield on crypto often requires locking assets into staking protocols or liquidity pools – strategies with higher risks.
• Ownership rights: Cryptocurrencies in self-custodial wallets eliminate counterparty risks; holders retain complete control over their digital assets. Stockholders, however, rely on several intermediaries, including issuing companies, markets, and brokerage firms, to manage and execute trades.
• Regulatory oversight: Public companies face strict regulations and must regularly report earnings to ensure transparency. While regulatory frameworks for cryptocurrencies are emerging, they are still in the early stages compared to the well-established rules governing stock markets.
• Price volatility: Cryptocurrencies tend to experience more dramatic price swings than stocks. Their novelty, lower liquidity, and less regulatory oversight contribute to the higher volatility of digital asset markets.

Are stocks virtual currency?

With the rise of online brokerage platforms, 21st-century traders are accustomed to trading shares digitally rather than dealing with physical stock certificates. That said, stocks are fundamentally different from virtual currencies. While the process of buying and selling stocks may feel similar to trading crypto, stocks represent ownership in a company, whereas cryptocurrencies are digital assets operating on decentralized P2P blockchains. Stocks cannot be transferred to a private wallet like virtual currencies, and every stock listed on public exchanges must comply with stringent transparency standards set by regulatory bodies like the SEC.

What are cryptocurrency stocks? 

Despite the fundamental differences between stocks and cryptocurrencies, there’s now a class of equities informally referred to as "crypto stocks." These equities operate like shares in any public company and comply with all regulatory requirements from traditional markets, with the key distinction being that they represent businesses involved in the crypto industry. 

For instance, Coinbase (COIN), an American-based centralized exchange, is publicly listed on NASDAQ. Additionally, companies like Marathon Digital (MARA), Riot Platforms (RIOT), and Hut 8 Mining (HUT) are examples of publicly traded "mining companies" that power the Bitcoin blockchain. Some companies, like MicroStrategy (MSTR), earn their "crypto stock" status not by developing blockchain technology but by holding large amounts of Bitcoin in their corporate treasuries.

In addition to publicly traded companies, more financial institutions are offering exchange-traded funds (ETFs) and exchange-traded products (ETPs) that track the price of major cryptocurrencies like Bitcoin and Ethereum. Rather than investing in a company's stock, ETFs and ETPs provide shareholders indirect exposure to digital assets by tracking their market value without requiring direct ownership. 

Examples of crypto-focused ETFs and ETPs include BlackRock's iShares Bitcoin Trust ETF (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC).

Should I invest in stock or crypto? Picking the right investment 

Because every investor has unique financial goals, investment strategies, and risk tolerance, it’s difficult to say whether stocks or cryptocurrencies are definitively better. While common advice suggests that crypto is only for those comfortable with higher risks and volatility, and stocks are considered more stable, liquid, and accessible, these guidelines oversimplify the decision-making process.

Stocks generally have a longer track record, but not all stocks carry the same level of risk. Established companies and ETFs that track major indexes, like the S&P 500, offer more stability than newly listed or speculative stocks. Similarly, not all cryptocurrencies are equally risky. While digital assets such as Bitcoin and Ethereum are widely regarded as less volatile than new altcoins, they still present more market uncertainty than traditional equities.

Ultimately, investors must assess their time horizon, risk appetite, and financial objectives. Conducting thorough research on the historical performance of stocks and cryptocurrencies and developing informed predictions about future market movements can help determine the ideal balance between stocks and crypto in an investment portfolio.

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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.