Stocks have been a popular investment for decades and represent ownership shares in companies.
Bitcoin is digital money created in 2009 that operates independently of any company or government.
But how does owning shares in a company differ from owning digital money like Bitcoin? Let's take a look at the differences between two forms of investment: Bitcoin & Stocks.
Direct ownership
Shares in a company
When you own Bitcoin, you have direct ownership of the asset itself. When you own stocks, you own a share of a company, which means your investment depends on the company's performance, management decisions, and business success.
Fixed supply of 21M BTC
Dilutable supply
Bitcoin has a hard cap of 21 million BTC that will ever exist. Companies can issue new shares at any time, diluting existing shareholders' ownership percentage. This means your slice of the company gets smaller when new shares are created.
This is less than fiat inflation, but still dilution. With Bitcoin, your slice of the pie never shrinks.
Decentralized network
Key person risk
Bitcoin operates on a decentralized network with no single point of failure. Stock investments are subject to key person risk - if the CEO or other critical leaders leave, get sick, or make poor decisions, your investment can suffer significantly. Companies depend heavily on their leadership teams.
Market-driven price
P/E ratio valuations
Bitcoin's price is determined purely by market supply and demand. Stock prices are often evaluated using P/E ratios (Price-to-Earnings), which show how much investors pay for each dollar of company earnings. High P/E ratios can indicate overvalued stocks, making it harder to determine fair value.
24/7 trading
Market hours only
Bitcoin trades 24 hours a day, 7 days a week on global exchanges. Bitcoin is decentralized and never sleeps. Stock markets are only open during business hours on weekdays, limiting when you can buy or sell your investments.
Self-custody possible
Counterparty risk
With Bitcoin, you can take self-custody of your coins, meaning you truly own them without depending on any third party. Self-custody is as simple as downloading an app.
Stocks require a brokerage account and you're subject to counterparty risk - if the company goes bankrupt or the brokerage fails, you could lose your investment.
You never truly own the stock certificates directly.
Fixed supply asset
Variable inflation hedge
Bitcoin is a fixed supply asset with a hard cap of 21 million Bitcoin that will ever exist. This makes it a great inflation hedge. Stocks have variable performance against inflation - some companies do well during inflationary periods while others struggle. There's no guarantee that any particular stock will protect against inflation.