OPINION | Stocks and Crypto: Why people invest despite profit uncertainty?
- Katrina Portillo
- Feb 23, 2022
- 5 min read
Have you ever wondered why stocks and cryptocurrency are still prevalent despite the uncertainty of profit?
Stocks and cryptocurrencies are becoming more prevalent nowadays as they turn into people's side hustle especially during the pandemic when earning money becomes harder as a large number of people have lost their jobs.
Investing is a pivotal process that a lot of people are interested in trying as they hope to earn more money. Stocks and cryptocurrency are some of the popular investment types nowadays that are known because a lot of people have been exposed to these investments. But what really are stocks? What is cryptocurrency? And why do people still invest in stocks and cryptocurrency despite the uncertainty of profit?
Since the pandemic outbreak began, numerous people have struggled with earning money as they needed to earn more income to fulfill their needs. Since they needed extra income, different ways to earn money began to prevail and became more popular just like cryptocurrency. People needed to continue earning, and this served as a driving force for some people to invest in stocks and cryptocurrency for extra income.
A stock is a security that indicates your portion of ownership in a company. If you buy stocks, you're basically buying a small fraction of a company. Cryptocurrency, on the other hand, refers to the currency that virtually exists and secure transactions through cryptography.
Why do people invest despite the uncertainty of profit?
A lot of people have exposed themselves to stocks and cryptocurrency because they believe that investing in these types of investments can lead them into financial stability.
Companies are selling their stocks to raise capital, to expand themselves, to fund the new product they are going to offer or even to conduct research and development. On the other hand, despite the uncertainty of profit, people continue to invest in stocks for a variety of reasons such as capital appreciation, dividend payments and a wish to have an influence on a company.
Investors can earn if a company gives dividends to its shareholders.
Investors can also incur either a gain or a loss depending on the volatility of the market, and this is where risk comes in. The price of stocks can change anytime so there is no certainty that an investor will earn a profit. If the price of stocks rises, then it will be a gain; otherwise, it will be a loss for the investor to sell the stocks at a lower price. If the stocks demand is higher than the supply, price stock increases, but if the supply is higher than the demand, price stock decreases. Additionally, the price of stocks also depends on how the company manages to grow its profits in the long run.
Cryptocurrency is similar to stocks in many ways such as in terms of risks, uncertainty of profit, and market volatility. Just like stocks, the market in the crypto world is highly volatile, which means the value of cryptocurrency can change anytime depending on the demand and supply of crypto.
As of February 2022, the top 10 cryptocurrencies according to their market capitalization are Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Binance Coin (BNB), U.S Dollar Coin (USDC), Cardano (ADA), Solana (SOL), XRP, Terra (LUNA), and Polkadot (DOT).
Crypto users tend to invest in cryptocurrency given the risks and uncertainty of returns because of the possible higher gains they can get. The higher the investment, the higher the possible returns, but a higher reward corresponds to a higher risk of losing your entire investment.
Since the value of the cryptocurrency may vary from time to time, users should always take note of the new crypto value so that they will be aware of the fluctuations of cryptocurrency. To successfully earn money, users should follow the key concept in the crypto world which is "buy when it's low, sell when it's high." Meaning to say, one should buy crypto while its value is still low and wait for its value to increase before selling it. Basically, to earn a profit, a crypto's selling price should be higher than its value when purchased.
As stocks and cryptocurrency continue to evolve, more people are becoming interested in these types of investments. However good investing may be, investing in stocks or in cryptocurrency also has its pros and cons.
Stocks are widely known and many people continue to invest even though it is risky. Just like investing in any other investments, investing in stocks also has its pros and cons. Some of the benefits of investing in stocks are the large returns and its accessibility. Depending on the company's performance, the value of stocks can increase, which can lead to a higher profit. In terms of accessibility, it is easier to have a broker nowadays as one can also be found online if you are interested. But investing in stocks has a major con— market volatility which describes the ongoing changes of stock price.
Investing in cryptocurrency allows crypto users to have financial growth as they can gain a large profit in their investments. This has been one of the reasons why most people are curious and want to try investing in cryptocurrencies. But take note that the higher the reward, the higher the risk for their money.
Moreover, one of its benefits is that cryptocurrencies are not controlled by the government, which means they could be excluded from the inflation rate.
These pros may be beneficial enough for investors; however, it has also its cons. Some of its cons are its volatility and risk in cybersecurity. Cryptocurrencies are very volatile, which means the value of crypto changes every time; it can go from low to high or high to low.
In terms of cybersecurity, cryptocurrency is using blockchain technology, which serves as the digital ledger that records a history of all transactions. It is using blockchain for its security as it is difficult to change or to hack. However, there are records of some cryptocurrencies being hacked. Cryptocurrency.com, an international crypto exchange, announced in January 2022 that they had been hacked. The hacker managed to steal from 483 users’ cryptocurrency worth $30 million in total.
Given these pros and cons of two investment types, people who are interested in delving into stocks and cryptocurrencies should consider further researching about these so they will understand better how these investments actually work.
As stocks and cryptocurrency become more prevalent, people have been more and more curious as to how they work and how they are going to earn money through these types of investments. Despite the risks and the uncertainty of profit, people continue to invest in stocks and cryptocurrency as they hope to acquire some extra income.
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