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Crypto, NFTs, Stocks or Forex? Which investment type works for you?

Perhaps there are 4 major digital trading fields for the general user. With NFTs still booming many financial opportunity seekers are replacing or at least expanding their stock portfolio and forex trades with crypto related investments. Now, they don’t all fit everyone. Therefore, let’s see which investment type works for you.

Liquidity

Liquidity basically describes the ability to convert assets into cash. The more liquid the asset, the easier to get your hands on cash. An asset with high supply and demand has high liquidity.

At this point, out of the four, NFTs are the least liquid assets. A large portion of them are not listed for sale, collectors often just collect rather than re-sale and monetize. For example, half of Cryptopunks (one of the most popular NFT collection) have only been sold once. Third place is taken by Cryptocurrencies, since they posses lower trading volumes than Stocks and Forex, but higher than NFTs. Now, regarding Stocks and Forex, investors usually hold the latter for much shorter times, making Forex far more volatile and liquid than Stocks.

Accessibility

Accessibility refers to the quality of being easy to obtain or use. The general digital user can trade Stocks and Forex with online brokerages. Cryptocurrencies can be mined and purchased through online platforms, while NFTs can be minted and purchased (with cryptocurrencies) on other platforms. Since owning NFTs takes double effort over owing Cryptocurrencies, NFTs are the least accessible out of the four, but still pretty accessible. Regarding Cryptocurrencies, Stocks and Forex, it’s more or less a three way tie.

Trading Hours:

Forex can be traded in different parts of the world 24 hours a day, from 5 P.M. EST Sunday to 5 P.M. EST Friday. Trading Stocks on the other hand is limited to exchange hours, generally from 9:30 A.M. to 4 P.M. Though After Hours Trading is an option, it comes with risks such as uncertain prices, less liquidity, more volatility and more.

Cryptocurrencies and NFTs can be traded 24 hours a day, 7 days a week.

Volatility

This is the spot where Cryptocurrencies shine. They are far more volatile than Stocks and Forex, which also means that they come bearing greater risks. Depending on the Cryptocurrency, in some cases their volatility can be barely noticeable, while in other cases they can make a holder a millionaire in a few day’s time, or broke of course. Now NFTs’ volatility depends more or less on the boom surrounding them and personal tastes. More on that in an upcoming article. While NFTs seem to be more volatile than actual Cryptocurrencies, liquidity is an issue, making them a more riskier investment than the other three.

Forex is the next in this category. On its market, many investors choose day trading, as opposed to long term holding in case of Stocks. Large number of trades on the Forex market can cause price changes extremely quickly. Stocks on the other hand, offer a more steady growth or loss, which makes investments less risky and more manageable.

Diversity

There are 130 currency pairs that Forex brokers offer, but EUR/USD trades are accounting for almost a quarter of all Forex trades. The 3 largest stock exchanges by market cap, the NYSE, Nasdaq, and Shanghai Stock Exchange, have ~7000, ~4000 and ~2000 tradable names. Sources vary.

As for Cryptocurrencies, there are approximately 8000 as of January 2022. The two most popular exchange platforms, Binance and Coinbase, offer ~500 and ~100 tradable currencies, respectively. And finally but not least, millions of NFTs are already out there, though a large portion of them are computer generated collections of 1000 – 10000 pieces.

Rewards

In case of Stocks, some companies allow you to collect dividends, a distribution of profits by a corporation to its shareholders. Now with Forex you cannot earn dividends in the traditional sense. Forex traders can benefit from the difference in interest rates of short and long positions by choosing currencies wisely.

With Cryptocurrencies and NFTs, earning extra income requires a minimal extra effort, staking. This locks up the asset for a certain period, depending on the Cryptocurrency or the NFT and the platform, for various community and network uses, and yields profit either regularly or when the staking period is over.

Bottom Line

Stocks, Forex, Cryptocurrencies and NFTs can all be extremely profitable channels, and just as risky. Having Insight into the markets is crucial when deciding upon investments. Hopefully, this article is able to make interested people understand a little better these four investment opportunities.

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