Stock Market vs. Spot Crypto Market: Which is the Ultimate Financial Frontier?
Assalamu Alaikum. How are you? I hope you are doing well.
By looking at the title, you have probably already understood today's topic. Yes, today we will talk about the Stock Market vs the Spot Crypto Market.
Through today's discussion, I hope many of the debates you have had for a long time will finally come to an end. You will also learn which one may be the better choice from a future perspective.
So, let's dive into the discussion.
Stock Market
First, let's talk about the stock market. Many of you are already familiar with it. It is basically a share market. Those who buy shares of different companies understand it better.
However, because most people are used to buying and selling shares in the traditional way, they know little or nothing about the digital share market, which we call trading.
So, let me first explain the idea of how the candles on a chart move up and down and how shares are bought.
Look, when you are trading by looking at a chart and doing Buy and Sell, you are basically buying shares in the stock market.
For example, suppose you are analyzing the chart of BMW shares. Now you notice that because BMW has launched a new model, the demand in the market is very high and it is selling a lot.
At that moment, you will see that the candles on your chart start moving upward from where they currently are.
To explain it simply, imagine that the average selling price of previous models was moving within a certain zone, around 70,000–80,000 dollars. But after the new model was released, the company started selling it at a higher profit after covering all costs. As a result, the average price started moving upward.
Because of this, the price slowly moved above the 70,000–80,000 dollar zone.
Since you already knew that the new model would have high demand and would sell a lot after entering the market, you bought (Buy) in that 70,000–80,000 dollar zone to become a part of that profit.
And when you bought it, you became a shareholder and investor of that new model.
That means you invested and took responsibility for a certain portion of the costs required until that car entered the market.
Later, when demand for that model decreased and sales also dropped, you noticed that the market was no longer moving upward, so you exited.
As a result, you left the stock market.
To explain it more simply, you entered at the 70,000–80,000 dollar zone and exited at the 100,000–200,000 dollar zone.
The company earned profit by selling the model between these two zones, and from that profit, your share of the profit was given to you.
This is basically how people buy and sell shares online/digitally through trading and make profits or losses.
The Negative Sides of the Stock Market
So far, we have learned about how the stock market system works. Now let's learn about how much risk or loss a shareholder may face when they buy shares in the stock market.
1. Company Fraud
One of the biggest problems in today's stock market is company fraud.
There are many fake or self-interested companies that create excitement among people by claiming they are bringing something new or launching a new product.
They attract people with sweet and attractive words like: the price has increased, the company will grow a lot by tomorrow, and many other similar promises.
Besides that, there are also many attractive and tempting advertisements.
Because of these traps, small investors around the world invest their hard-earned money, and then some companies take that money and disappear.
Now you may say that instead of investing in these small fake companies, people can invest in big companies like Tesla or BMW.
Yes, naturally and temporarily, that can be safer.
However, according to this view, we should also remember that these companies are also under the influence of powerful groups.
So, if you oppose them in any way, they may stop you from buying their shares or may not provide you with the expected profit.
Also, they are not always perfect either.
Like whales in the Bitcoin market, they can also sometimes do small-scale pump and dump activities, meaning they may intentionally reduce or stop selling to take advantage of small investors.
Although this happens only sometimes.
Now you may ask: what benefit do they get from this?
To understand this, you can read my other article, "The Architectural Mechanics of Financial Markets And Whale's Mindset."
2. Sudden Accidents
Suppose you bought shares of a company. After some time, a country or government puts sanctions on that company.
As a result, the company suffers a huge loss, and because of that, you exit from the share market with a complete loss.
There are also other risks that a shareholder needs to consider, such as hacking issues, fire accidents that can cause losses worth billions of dollars, or natural disasters.
For example, cargo ships may sink, or goods worth millions or billions of dollars may be lost in the sea.
All of these situations can create both mental and physical pressure for a shareholder.
3. Loss of Time
The biggest and most important problem of the stock market is that it takes a lot of time.
Normally, when a company starts making profits, it cannot become successful in one or two days. It has to grow slowly over time.
It may take at least 10–12 years.
Although this is not exactly a negative side, and it can be good for long-term investment, a small investor cannot depend on it as a short-term income source or as the main way to support daily life.
You may think that taking more time is actually good.
Yes, that is true.
However, the stock market often takes a very long time, which may not be very helpful for small investors.
Decrease in a Company's Business Area
When temporary tensions and international restrictions are created because of war, the business range of companies can decrease.
Besides that, if the company you invested in does something that people do not support, it can cause a big loss for the company.
Or if the government of the country where your company is based goes against its own people or the global community, the problem can become even bigger.
For example, a few months ago, when the country called Israel attacked and carried out actions against Palestine, many people around the world protested by stopping the purchase of Israeli products such as Pepsi, 7up, Coca-Cola, and others.
This had an impact on the stock market.
Even though the headquarters of many of these products are in America, they are connected with Israeli interests and companies controlled by Israel's government.
Other Competitive Risks for Companies
When you buy shares in a specific company, you must always remember that your company is not alone in the market.
There are many other companies like yours.
They compete with your company and use different strategies to grow their own business.
One of the main strategies is finding weaknesses or gaps in your company.
For example, suppose your company cannot create something that could actually be created.
(It could be that your company's product quality is not improved enough, or the product has some physical or technical problems.)
Now, if another company brings a similar product and improves both the quality and solves those problems, then that company can move far ahead of yours.
For example, according to this argument, the India-Pakistan conflict from a few months ago shows a similar situation.
After that conflict, China's fighter aircraft manufacturing company gained attention because its J-10C aircraft performed very well and became more competitive compared to Europe's Rafale.
As a result, in the international market and stock market, more investment started moving toward Chinese companies and industries related to fighter aircraft.
Other countries also began showing more interest in J-10C instead of Rafale.
The Influence of Famous People
In our society, there are many celebrities and famous personalities who have a large number of followers.
Now, if your company does something against them or does something they do not support, they can spread negative opinions about your company.
A real example of this is Ronaldo.
You may remember an incident from a few years ago.
One day, when Ronaldo went for an interview, there was a Pepsi bottle placed on the table where he was sitting for the interview.
He moved the bottle away.
After that, many people and organizations started losing interest in investing in Pepsi, from small investors to large institutions.
As a result, the stock market faced a major drop.
So, from the discussion above, we learned that investing in the share/stock market requires a lot of attention and thinking. There are many risks involved.
However, according to this view, these kinds of problems do not exist in the Spot Crypto Market.
There you can simply buy and sell Bitcoin and Ethereum.
Since BTC is considered a type of digital gold, the possibility of it becoming completely worthless like a bankrupt company is almost 0.000%.
Also, because it is decentralized, there is no specific company behind it like in the stock market. As a result, no one can easily put restrictions on it or take full control of it.
The nodes and miners are the main reasons behind its decentralized system.
And as long as these nodes and miners continue to exist, even if all other transactions stop, these nodes and miners can still continue transactions among themselves.
In simple words, as long as even one chocolate can be bought in exchange for one Bitcoin, its value will not become zero.
According to this view, the Spot Crypto Market can free you from the doubts and mental pressure about a company's future and stability.
Besides that, if there is a correction or market drop, it does not take too long to recover.
After a few months of May, BTC is preparing to break its ATH again.
According to this argument, BTC may take around 5–7 years to fully recover and break its previous ATH, while stocks may take around 10–12 years.
In the crypto spot market, long-term holding usually means 5–7 years, which is a shorter period compared to the stock market.
Compared to the stock market, it can be both safer and more time-efficient.
Besides that, if you want to earn for short-term needs and make short-term investments, Ethereum can be a good option.
It can provide both the safety of long-term investment and short-term opportunities.
You can also buy BTC and keep it for the future instead of selling it, becoming a long-term holder.
As a result, you can build large wealth over time.
However, the Spot Crypto Market also has some risks.
Lack of Patience
One of the biggest problems in the crypto market is a lack of patience.
The 4–5 year waiting period causes many retail traders to lose patience.
As a result, they try to make bigger profits in a shorter time and move into futures, leverage-based, interest-based, and gambling-like trading.
Because of this, they harm themselves.
Now you may say that the stock market also takes a long time. So doesn't the same thing happen there?
Theoretically, that may be true, but the real situation is different.
In reality, there are fewer small investors in the stock market.
But in the crypto market, because it sometimes takes less time compared to stocks, more small investors are involved.
Fake News and Whale Traps
This happens in both the stock market and the crypto market.
However, according to this view, it happens more in the crypto market.
As I mentioned earlier, small investors often lose patience and move from the spot market to other markets.
There they do short-term trading.
Taking advantage of this, large investors, known as whales, temporarily sell large amounts of their assets and create small pump-and-dump movements.
As a result, retail traders sell their assets to protect themselves from liquidation hunting, causing the price to fall.
Then the whales buy back their sold assets and collect more BTC at lower prices.
(For more details, you can read my other article, "The Whale's Mindset.")
In Short
Both the stock market and crypto market have problems.
However, according to this view, the problems in the crypto market mostly depend on your own actions.
Meaning, the more patient and intelligent you are, the fewer problems you will face.
This is not the same in the stock market because many risks there are outside your control.
Those risks can create problems for you.
So, I believe that the crypto market is better than the stock market.
You can freely share your opinion in the comments.
That's all for today.
