These days, cryptocurrency is a raging phenomenon. Athletes, musicians, and celebrities have joined the party by having contracts paid out only in crypto rather than traditional payments and checks. The idea behind adopting Bitcoin and other cryptocurrencies as primary pay instead of the conventional dollar is the growth potential behind the currency.
A Wise Investment
For example, Russell Okung, an offensive lineman in the NFL, adopted payment in Bitcoin starting in 2019. At the time, he converted half of his 13.5 million dollar salary into Bitcoin. Now consider that in 2019, the valuation of Bitcoin was a little over $27,000, whereas today, the price of Bitcoin is $58,000 and growing.
The growth behind an initial $7.25 million in Bitcoin has more than doubled, meaning Okung made his full salary back at the time of his investment in two years. Since Bitcoin was released in 2013 and valued at $1.00, the value has been astronomical in a little over a decade. Considering where it could be in another decade, you can begin to see some of the attraction.
A Global Demand
Also, in 2020 there were only a handful of companies with Bitcoin on their balance sheets. Still, toward the end of 2021, that number has risen to almost 7,000 carrying Bitcoin and other Cryptocurrencies on their balance sheets, including a handful of countries that have begun to accept Bitcoin as a primary currency.
One example is El Salvador, which has switched its legal tender to Bitcoin. And though the start-up was a little shaky at first, the benefits have shown an increase in value for the tiny, impoverished nation. Other countries have been talking about following suit, lending stability to their local currencies.
A Reason for Growth
Another reason Crypto is trending is the uncertainty around two main factors. The first is the rising instability of the U.S. economy, which has encouraged government leaders to consider defaulting on their debts for the first time in U.S. history. As the world’s major currency, the value and good-faith credit of the United States, any default could have serious ramifications.
The destabilizing effect that a U.S. default would have on the global economy would be catastrophic, wiping out an estimated $15 trillion in wealth almost immediately. In addition, this default would project an immediate loss of 6 million jobs and raise the overall unemployment levels of the U.S. to nearly double-digits, a level not seen since the Great Depression.
To compound the problematic state of political affairs in the United States is the continuing global pandemic. The start-stop and continuing saga of the pandemic has many people on edge, moving many transactions and jobs to remote and online. In addition, the current climate’s instability has added volatility to the markets, and as is well-known, markets prefer stability to instability.
A Question of Stability
As you read about more and more people adopting Crypto, it’s essential to understand the difference between crypto and more traditional stock markets. The boom-bust cycle of cryptocurrency does turn off many large investors. Still, smaller investors who aren’t afraid of the risk associated with the volatility of crypto can see huge profits if they’re patient.
So the natural question is: What is the difference between cryptocurrency and traditional stock market trading? Cryptocurrencies are decentralized and largely unregulated. Being decentralized means that the crypto is not tied to any legal tender, gold, or other commodity or nation. Instead, its value is based on the demand for the specific crypto at any given point in time.
A Difference Type of Investing
The difference between the traditional stock market and cryptocurrency is stark. With crypto, there is no anchor to the value, meaning that the purchase price may fluctuate widely depending on the popularity and demand of any particular cryptocurrency. Whereas with traditional stock market investments, on the other hand, the value of any stock is tied to a share of a company.
There are a number of regulations in place to help keep the fluctuation and speculation seen in the crypto market in check. While there are understandably always risks associated with the stock market, there are also some market safeguards in place to eliminate the wildly speculative position crypto takes on with traditional stocks.
For many, entering into the traditional stock market may seem complex and with many impediments in place. Another reason the stock market may not seem as attractive, especially right now, is that it takes a long time and a sizable amount of investment to make decent returns on your money. That said, there are some lower-level stocks to consider that have tremendous upside.
These “penny stocks” can offer serious upside with minimal risk. It just takes some understanding of the long-term company growth and profitability to score a good one. If you have interest in the potential of any “penny stocks,” compiling a list of stocks under $2 that has excellent growth potential and return on investment should include these key indicators:
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An economic moat (a long-term competitive advantage in the marketplace)
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Low debt
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Strong distribution network
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An ability to generate long-term funds
The primary difference between cryptocurrency and the traditional stock market is the anchor of value between the commodities. These differences are between the potential “illusion” of the newest darling — none other than crypto itself — as well as the already well-known and established investment opportunities of the traditional stock market.
