You might already be familiar with stock trading, but cryptocurrency trading is becoming increasingly popular for investors and traders. How does crypto trading differ from stock trading?
Today, we will look at 3 core differences between stock trading and cryptocurrency trading:
Firstly, the assets that you trade are different in stock and crypto trading. In stock trading, you buy shares of specific companies, but in crypto trading, you trade digital currencies with a subjective value representing projects (sometimes actual companies as well).
When you buy a stock, you start owning a small percentage of the company. Because of your ownership rights, you will have certain rights, such as voting rights, receiving dividends from revenue. In contrast, cryptocurrencies vary widely regarding how they are used and what they represent.
The ownership implications of cryptocurrency vary widely depending on the type of project. Many cryptocurrencies fluctuate significantly in value. Moreover, many cryptos do not represent a legal stake in any company or organization. However, a few crypto security tokens act like stocks. That kind of digital token represents an equity stake in an issuing company, and they have the exact regulatory requirements as securities.
Another significant difference is the volatility between stock trading and cryptocurrency trading.
The stock market is much less volatile compared to crypto. The market is more stable because of the large trade volumes and less prone to the movements of big traders.
However, the crypto market has much higher volatility. The market is very vulnerable to the trade movements of big traders. (traders who own a large portion of the market). For instance, because of news that said Elon Musk invested a 1,5billion in bitcoin in January 2021, the price of bitcoin skyrocketed by 17% to a new record. This rapid growth is rarely seen in the stock market but can often happen in the crypto market. Of course, the higher the risk, the quicker the profit will be, but very conservative investors may want to avoid high-risk trading options.
The cryptocurrency market differs from traditional markets in many ways – from ownership to regulation, fees, and volatility. It offers an excellent opportunity to increase diversity in your or your clients’ portfolio. The whole industry still has enormous growth potential, as payment giants like PayPal, MasterCard, Visa, and more join the cryptocurrency space.
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