Cryptocurrency vs The Stock Market – Which is More Volatile?

In just one week in late March, we saw the Dow Jones Industrial Average fall by more than 700 points one day, and by more than 400 the next. That’s after nine years of a near stairstep pattern higher. Is the sudden volatility telling us something?

The world seems to be a lot less stable now than it was just a year or two ago. There are international tensions brewing in the Persian Gulf and the South China Sea, and the constant threat of war involving North Korea. There’s also the prospect of a trade war with China, that threatens to upset the calm of the past decade.

At the same time, we’ve seen cryptocurrencies exploding value, plunging to sudden depths, then staging remarkable recoveries.

That begs the question: Cryptocurrency vs. the stock market – which is more volatile?

Up to this point, cryptocurrency certainly takes the prize. But with the stock market looking more wobbly in 2018 than it has at any time since 2009, we could have a changing of the guard. The stock market, which has performed so reliably for nearly nine years, may be ready to enter a very different and more tumultuous future.


Here’s what we’ve seen in the stock market since 2009. Based on the S&P 500, the performance of the index has looked like this:

  • 2009: up 25.94%
  • 2010: up 14.82%
  • 2011: up 2.10%
  • 2012: up 15.89%
  • 2013: up 32.15%
  • 2014: up 13.52%
  • 2015: up 1.38%
  • 2016: up 11.77%
  • 2017: up 21.64%

That’s nine years of consistent gains, without a single losing year. In fact, since 2009 the stock market has behaved more like a bank account than an equity market. It’s a market that’s gone straight and reliably up, each and every year.

This is the performance investors have come to expect. Will it continue?

History suggests it won’t. After such a long run of stability, the market will likely sink into a much more volatile performance. The stock market, after all, thrives on stability. Once that stability is threatened, as it is now, stocks can come unglued.

All it takes is a couple of big hits in a short space of time, and confidence in the elevator ride up can fall apart quickly.

This isn’t a prediction of something that’s never happened. In fact, it happened with the bust and the Financial Meltdown, two bear markets that cost investors trillions of dollars since 2000. Since then, many bailed out of the market for many years.


When financial markets take a big hit, a lot of money disappears. But a big chunk of it also finds its way into other markets. Cryptocurrencies could be one of those markets that experiences a major upturn on the heels of a stock market crash. If it does, the gains in that market can be spectacular.

It’s worth noting that “stability” is usually interpreted as a steadily rising market. That hasn’t happened with cryptocurrencies yet. But that may be a function of the limited interest in them up to this point.

So far, that market has been dominated by early adapters – people who are willing to take a chance on something new, and want to get in on the “ground floor”. But it often makes for volatile price swings.

Once cryptocurrencies begin to gain greater acceptance, both as an investment and as a medium of exchange, that market is more likely to see the kind of steady price gains we’ve seen in the stock market over the past nine years.

It’ll take a changing of the guard, but that’s exactly what might be working out right now.


What can’t be ignored is that cryptocurrencies are something brand-new. Bitcoin is the first cryptocurrency, and it only came into existence in 2009. The crypto was largely ignored for the first few years, and only began taking off in price in 2016. Today Bitcoin trades at upwards of $8,000 each.

What seems clear is that at least a small number of early adapters have piled into this crypto, and run the price up to a more than credible level.

But investments only stay new for so long. Once a critical mass of people have it, and the price of the asset shows resilience over several years, the larger masses begin to move in. They do so because their trust in the asset increases. As it does, the asset tends to behave in more predictable price patterns.

Once that happens, Bitcoin and other cryptocurrencies could rapidly become preferred investments, similar to stocks, bonds and real estate.

This is where it’s important to recognize that the Internet is literally changing the world. People trade over the web every day, and much of the activity crosses international borders. Cryptocurrencies are made to order for this kind of commerce.

The Built-in Cryptocurrency Advantage

There’s one other factor, one that’s at least as important – and that’s security.

Cryptocurrencies offer anonymous transactions. A person can make a purchase from a small business in a distant country, and not have to be concerned with identity theft. The customer does not have to release any personal information to the vendor. Since the identity is not revealed, it can’t be compromised.

It can also be a preferred method of payment for business vendors. Unlike credit cards, which routinely offer chargebacks in favor of the customer, cryptocurrency transactions are final.

It’s likely some kind of rating service will develop, that will certify the integrity of each participant in the cryptocurrency blockchain. That will reduce apprehension about dealing with new and obscure vendors and customers.

One of the big advantages on the Internet is that new innovations develop very quickly in response to business and customer needs. The Internet will eventually sort out the security concerns surrounding cryptocurrencies, but in a much quicker and more efficient way than has been the case for traditional government-issued currencies.


Cryptocurrency is obviously a new concept. It will likely be warmly embraced by the younger generations. This includes, first and foremost, the rising Millennial Generation. Cryptocurrencies could in fact be catching the millennial “wave” at the exact opportune moment.

A recent study by Bank of America found that 16% of millennials have at least $100,000 in savings. This is in stark contrast to other studies and popular opinions that the generation is struggling, and saving little.

But there’s one other fact the survey revealed that may not be positive for the stock market. Millennials are holding more money in savings accounts, rather than investing in the stock market.

It seems the experience of their parents during the Financial Meltdown has made a major impact. They remember their parents losing 50% or more in their investment portfolios, at the same time many lost their homes to foreclosure.

The experiences of youth tend to stay with us throughout our lives. That experience by millennials a decade ago is still affecting their investment decisions.

But if millennials are adverse to stocks now, a condition which will only be made more serious in the next stock market downturn, where will they invest their money?


Cryptocurrencies hold a lot of promise here. They’re something new, and they don’t have the stigma of losing money the way stocks do.

There’s another point as well, and it’s critically important. Also as a result of the Financial Meltdown, millennials seem to have a more practical view of money. The emphasis on savings accounts is just one example. It’s an opportunity to accumulate money, but also to have it readily available for emergencies and other major spending situations.

In the same way, millennials may view cryptocurrencies as a more practical type of investment. On the one hand, there’s an opportunity to hold cryptocurrencies for price appreciation. But on the other, there’s the potential to use it for its primary purpose, as a currency.

Though the financial world seems to be focusing on cryptocurrencies mainly for the investment potential, the primary function is as an independent currency. That may be the biggest attraction for millennials. And when they do finally begin buying into cryptocurrencies, it could begin looking like a stampede.

At that point, we may see a self-fulfilling prophecy. Even though people are moving into cryptocurrencies for their exchange utility, they may turn out to be the best investment of the next decade.


Intuit – the company behind TurboTax – estimates the gig economy at 34% of the workforce. Furthermore, they predict it will grow to 43% by 2020. That seems to be a reasonable estimate.

More people than ever are working contract or freelance, particularly since the last recession. The next recession promises to accelerate the pace. It could well be that working in the gig economy becomes the dominant employment method early in the 20th century.

That may have a profound impact on cryptocurrencies.

Gig workers are often employed by small businesses. And in an increasingly global economy, it’s even likely that more gig assignments will be overseas, or at least sponsored by foreign-based employers. That being the case, there will be an increased need for a universal currency, one that can be easily dispersed and received, and even move seamlessly across international borders.

Cryptocurrencies are well-suited to filling that role. Once they catch on in the gig economy, the growth may be explosive. As the gig economy becomes the predominant form of employment, it’s even possible cryptocurrencies will become the preferred means of payment for services rendered.

Once cryptocurrencies move into the employment realm, there’s no limit to where they can go. They can quickly become the primary means of receiving and disbursing money by millions of people. From there, they might even overtake traditional currencies, like the dollar and the euro.

At that point, the price of cryptocurrencies is likely to stabilize in a major way. They may continue to rise in value compared to paper currencies, but that rise may be more steady and stable than the stock market, and many other traditional investments.

Could Bitcoin be the future equivalent of today’s Apple stock? Don’t bet against it.