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What is Cryptocurrency Trading at a Glance
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Crypto vs. Stocks – The Difference Between Stocks and Cryptos

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on March 19, 2023 | 6 min
Updated on Jan 16, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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Contrary to what you might believe, there are surprising similarities between trading stocks vs. crypto. They both offer excellent trading opportunities and if you’re thinking about which one to trade, then this is the article you need to read.

 Cryptocurrencies vs. stocks is a popular debate so this article offers a side by side comparison looking at which is better, how each is structured, which one is more volatile, storage options, and how trading them differs.

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What is Cryptocurrency Trading at a Glance

Cryptocurrencies are digital currencies that have no physical form. These virtual assets are secured cryptographically using blockchain technology. Cryptocurrencies can be bought and sold via a crypto exchange. However, this requires you to hold the coin in a wallet. While all this may sound technical, crypto trading does not require you to be highly tech-savvy. Cryptocurrency trading can be simplified by using derivatives like CFDs.

What is Stock Trading at a Glance

A share represents a unit of ownership of a company, and stock trading refers to buying and selling these shares in the stock market. These shares are listed on stock exchanges and can be bought and sold with a trading account. The NYSE (New York Stock Exchange) is the world’s largest stock exchange, with a market capitalization of more than $22.1 trillion as of October 2022. The stock market, which is also known as the equity market, can give you exposure to some of the leading companies in the world from diverse industries, like Microsoft, Apple, Tesla, Royal Dutch Shell, and AstraZeneca. Equities can be traded directly or in the form of futures, options, and indices.

8 Main Differences Between Crypto and Stocks

Cryptocurrency and stock trading require some understanding of the market dynamics of each asset. Dive right into this section if you have been wondering about the differences between cryptos and stocks.

1. Ownership

Ownership of cryptocurrencies is anonymous, while that of stocks is not. This is because investors register on stock exchanges with their public IDs. This keeps stock ownership safe from fraud or identity theft.

On the other hand, crypto investors register with their wallets and all transactions are addressed to wallet IDs. The safety of the wallets and their keys is the sole responsibility of the owner.

2. Exchanges

Stocks are traded on the floor or electronically on stock exchanges. The stock of a company may be listed on a single or multiple exchanges, the latter being known as cross-listing. There are more than 2,500 companies listed on the world’s largest stock exchange, the New York Stock Exchange (NYSE). Known as Euronext Amsterdam after the merger with Euronext NV, the Amsterdam Stock Exchange is the world’s oldest.

Crypto exchanges are new, coming into existence in the 21st century. Listing a cryptocurrency on any exchange is simpler and involves fewer guidelines. Binance is the world’s largest crypto exchange. It was founded in 2017 and registered a daily trading volume of $76 billion in August 2022 with over 350 listed cryptocurrencies.

3. Volatility

The cryptocurrency market tends to experience massive price movements. These can happen within hours or even minutes. The stock market is more stable, but there can be significant price swings in the shares of certain companies. The longer-term profit potential of a crypto lies in the underlying blockchain technology, while that of a stock is closely linked to the growth prospects of the company.

Dogecoin, also known as ‘the world’s most expensive joke,’ gained a whopping 20,000% in 2021. Among stocks, the 3,787% surge in Netflix’s shares between 2010 and 2018, was one of the most dramatic moves of recent years.

4. Trading Costs

Trading fees for cryptocurrencies tend to be higher than for stocks. The actual trading fees will depend on the broker or exchange where you trade the asset. Since stock markets are regulated, so are the trading fees. This is not the case for crypto markets. Share prices also tend to have lower spreads than cryptocurrency prices.

5. Trading Hours

Stock trading is limited to fixed business hours, usually 7 hours a day, from Monday to Friday. The timings of each stock exchange align with the working hours of the country it belongs to.

Cryptocurrency trading is continuous. Cryptocurrency is traded 24/7, which can mean more opportunities for traders.

6. Regulation

Every stock market is regulated by a central authority of the country to which it belongs. It must comply with all the guidelines set by the designated authority.

Crypto exchanges are decentralized, meaning the ownership and governance are in the hands of the people. However, certain countries do regulate them. It is the responsibility of the individuals to maintain the sanctity and integrity of the project. Governments are trying to impose tighter regulation on cryptocurrencies, but arguably, have had little success so far, although that could change.

7. Strategic Complements

Many investors believe they can rotate between the crypto and stock markets, expecting that each sector will tend to perform differentially. However, this belief is very questionable, as the evidence of recent years has shown a high positive correlation between the stock and cryptocurrency markets, meaning that they both tend to go up and down at the same time.

8. Diversification

Stocks can offer a way to diversify into different sectors. For example, an investment portfolio may include some stocks from growth sectors like tech, some from defensive sectors like energy, some large businesses like Microsoft and Apple, and some small-cap ones like Rocket Pharmaceuticals and Chart Industries. Traders can also gain exposure to multiple stocks by trading stock indices. Yet, stocks remain co-related to the economy and are impacted by inflation, political events, central bank interest rates, and the state of the labour market.

Cryptocurrencies, on the other hand, do not offer wide portfolio diversification. Although investors consider the underlying project, the team, tokenomics, and other factors to determine the value of a coin, the crypto market is overweighted by Bitcoin movements.

Investing in Cryptos vs. Stocks

The cryptocurrencies vs. stocks debate has no definite conclusion. While stocks have a long history of strong returns and can represent intrinsic value, cryptocurrencies have demonstrated the potential for massive gains. Both markets are risky, although the higher potential for price appreciation in the crypto market comes with higher risks.

Stocks are most preferred by investors with a longer-term horizon, while cryptos tend to attract traders who wish to take advantage of dramatic price movements over the short term. There are good reasons to consider trading both cryptos and stocks within a well-diversified portfolio.

Pros and Cons of Cryptocurrencies

Pros

  • Cryptocurrencies provide an opportunity for massive gains because of their inherent volatility. However, do remember that the associated risk is high too.
  • Cryptos may be a hedge against fiat
  • The crypto market gives you exposure to exciting and innovative technology.
  • New coins can start at prices less than a thousandth of a US dollar.
  • Cryptocurrency trading is possible 24/7.

Cons

  • The cryptocurrency market is nascent and unregulated.
  • New coins may quickly lose value, which makes fundamental analysis extremely important.
  • Crypto trading typically involves incurring higher trading fees.

Pros and Cons of Stocks

Pros

  • The stock market is mature and regulated.
  • Stocks may provide returns via dividends as well as price changes.
  • Stock markets typically have lower trading costs. Some brokerages even provide commission-free trading.
  • With stock trading, you can gain exposure to diverse industries and economies.

Cons

  • Stocks are generally less volatile than cryptocurrencies.
  • During economic downturns or political upheavals, the share prices of various companies may decline together.
  • Stocks cannot be traded 24×7, as the markets are open for predefined hours on weekdays.

What Does the Future Hold for Cryptos and Stocks?

While the stock market has matured and has a set way of functioning, the crypto market is still evolving. Regulatory bodies across the globe are working to integrate crypto into the financial fabric, but decentralized governance seems to sit with crypto enthusiasts. One thing is for sure, cryptos are here to stay. The crypto market has paved the way for DeFi (decentralized finance), NFTs (non-fungible tokens), and the metaverse.

Bottom Line

Trading either cryptocurrencies or stocks requires knowledge and education. Risk management is important for trading any asset class. Traders should do their due diligence and understand the asset class and what moves its market before committing their capital to it. In both markets, it is vital to limit risk by trading position sizes appropriate to the account size, and by using hard-stop losses.

FAQ

  • Is it better to invest in cryptos or stocks?
    Both cryptos and stocks can offer good investment instruments. Investing in either asset class requires an understanding of the market and appropriate risk analysis. If you’re trying to decide between cryptos and stocks, the choice would depend on your trading style, financial goals and risk appetite.
  • Stocks or cryptocurrency – which is safer?
    The stock market is regulated by central authorities, while cryptos have yet to receive widespread acceptance. Investing in cryptos requires you to secure the wallet where you store your coins. Stocks are generally less volatile than cryptos. So generally, stocks are safer than cryptocurrencies.
  • Which is easier – stocks or cryptos?
    Trading is about understanding the underlying asset and analysing the market conditions to speculate price movements. The one you understand better and practise at trading is going to be the easier asset class to trade or invest in.
  • Should I invest in crypto as a beginner?
    Investing in crypto as a beginner is OK as long as you believe in the investment and only risk money which you can truly afford to lose. Believing in the investment means either believing in the future of the coin you are buying, or in a bullish technical analysis of its historic price movements, or both.
  • How can crypto markets impact stock markets?
    Crypto markets and stock markets have shown a positive correlation, but it is not clear that one leads the other. Instead, it is likely that strong gains in one market will have an effect of also inflating gains in the other as profits from one might be reinvested somewhere.
  • Does crypto have a future?
    Yes, crypto has a strong future, as the world is rapidly growing a digital ecosystem. Therefore, digital assets are poised to become more valuable. However, each cryptocurrency may have a different future, depending on their varying degrees of global acceptance and the strengths or weakness inherent to their designs.
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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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