Arif Efendi, an experienced businessman, and investor, realized that cryptocurrencies had become a legitimate investment asset. In this article he shares his lessons and insights
Arif Efendi Explains the difference between Crypto vs. Stocks
Knowing the difference between cryptocurrency and stock is crucial if you are an investor like me. Cryptocurrencies and stocks share some similarities though they are not the same.
Cryptocurrency is a digital asset or currency whose transactions are recorded and verified through a decentralized system via cryptography instead of a centralized authority. On the other hand, stocks, also called equity, are securities that depict ownership of a part of a company.
People buy both stocks and crypto with capital appreciation in mind, especially when the asset held rises in prices.
Why Do People Buy Stocks and Cryptocurrencies
For stocks, people buy stocks to vote and influence company decisions. They also invest in stocks for dividend payments that the company distributes to their shareholders.
It is quite easy to invest digitally in crypto and stocks right now with the next-generation marketplace and different mobile investment apps.
In contrast, the process may look the same, but there are still some notable differences. For instance, while the Securities and Exchange Commission regulates stocks, you can trade crypto any time of the day directly from your phone or smart device.
You can also trade crypto with other crypto trading pairs or fiats.
Trading Crypto vs. Swing Trading
Now you may wonder why it is more profitable to trade crypto despite the volatility.
You can see a 5% to 10% swing on crypto with a large market cap, while smaller cryptocurrencies can achieve 10x in a particular day.
The truth is that this is quite rare in stocks.
For instance, if you had invested $1000 in Solana on January 1, 2021, at $1.837, your investment would have been worth $182,000 right now at the trading price of $182.
Crypto investment can be that rewarding if you are not a weak hand. A noob may ask where the money is coming from. No central institution regulates cryptocurrency.
Thus, their value comes from the cost of production, supply, demand, adoption and availability on exchanges and utility.
Understanding the Supply and Demand in Cryptocurrency
From our economics textbook, we can recall that if the demand for an asset goes up faster than the supply, the price of that asset will go up.
For instance, if there is an earthquake in a location, the price of water will increase if the demand is static. This same economic principle applies to cryptocurrencies.
We are getting to the mass adoption phase, and we are seeing institutional investors such as MicroStrategy and a country like Ecuador betting big on cryptocurrencies. What a great time to be alive!
It’s Important to Recognize the Risks of Volatility
The value of cryptocurrency goes up and down just like the stock market. A lot of people want to get into crypto and reap 100x profit.
While there is no utmost certainty that an asset will continue to be profitable, it is always important to know when to buy an asset and sell or take profit.
In the words of Warren Buffet, “Be fearful when others are greedy and be greedy when others are fearful.”
Most people in the crypto space are fearful. The best time to buy cryptocurrency is during the bear market. When the asset is going down. When every Tom, Dick and Harry is panic-selling.
When people are fearful and worried, they might lose their holdings. Have a list of cryptocurrencies you would like to invest in and wait for the red candles to show up.
Another great time to buy is during the weekend when most institutional investors are closing their trades for the week.
Right now, we are seeing a massive shift from the traditional ways of investing, where you need a broker, to a modern way, where you can purchase crypto from the comfort of your room.
Which Cryptocurrency Should I Buy?
There are several cryptocurrencies to choose from if you check coinmarketcap.com.
My top pick has always been Solana (SOL), followed by AVAX, POLIS and ATLAS.
It is even easier now to monitor and track your favorite coins. With an app like Tabtrader, you check each swing and know when to buy more or take profits.
If you are holding your cryptocurrency for a long time, you can take it and collect airdrops or move them to wallets like Trustwallet, Imtoken or Myetherwallet and use secure passwords to protect them.
It is also important to keep your 12-word phrase so you can restore your asset in case your host device gets missing or stolen.
With all this information, you are your bank, and you can transact at any time and anywhere you find yourself in the world.
And who knows, maybe you can even make enough ROI to donate to your favorite charities.
You can follow Arif Efendi on Twitter here: https://twitter.com/arifouo