The biggest difference between trading cryptocurrencies and stock exchanges is that they are so different that it is not even possible to compare them. But on the other hand, the methods used are similar, because trading is simply that – tracking prices and investing or selling when we deem it a good time to do so.
In some aspects, you will find similarities, because both assets are already starting to follow each other’s example, but their basic idea is different.
This is not a reason for people to give up trading, on the contrary, they do it more than ever. That’s why there is a need for things to be clearly defined. In this article, we will try to make it as clear as possible for you, but also for any reader who is trying to find himself in this market.
First of all, you should know about cryptocurrencies, and especially Bitcoin, that it offers many innovative ways to pay, trade, and invest, and much more on this topic can be read at mdzol.com and find out everything that interests you.
When we talk about stocks, they are actually assets that represent shares and parts of companies that have multiple owners. Everyone owns a different number of stocks in their share and can decide to sell some of them either in full to associates or to offer them on the stock exchange.
As you can see, the basic definition and purpose are quite different, knowing that cryptocurrencies actually represent a virtual currency with variable value, but are also part of different markets. However, they use ideas and ways of trading that are similar to stocks, due to the practicality and the well-known approach.
What are the key differences between the two types of trading?
We will immediately say that crucial in understanding why these two assets are so different is in legal rights, regulation, and the possibility of real possession.
One unit of stocks means part of a company, and cryptocurrency is an approximation of the idea of virtual money that will make shopping online much easier, decentralized, and fast.
If we had to answer the question of what kind of trading is simpler, then it would probably be cryptocurrencies, because it is enough to have your own account on a trading platform and transfer them to your virtual wallet. But for company shares, no matter how much money you spend on it, you have to get a certificate or proof of ownership and it all goes through third parties. Finally, you must have a paper document proving your ownership.
An interesting point in this whole story is that cryptocurrencies in much of the world are not legally regulated and are defined as financial assets.
On the other hand, buying part of a company is completely legal, as long as you have the money to buy it and fulfill your rights and obligations as a shareholder.
Possession of both forms of assets has advantages and disadvantages, but if you look at the legal aspects, then the shares carry a much greater responsibility before the law.
When it comes to cryptocurrencies, it is very easy to buy and own them, but they are not yet subject to legal regulations. This would mean that if you have ever been the victim of a hacker attack, you do not really have the legal means to prove your ownership of cryptocurrencies and you could actually lose a lot of money in the process. Market volatility is also a problem to consider, as many ignore it when embarking on an adventure in the crypto world.
How to decide what to invest in?
You need to be aware of all the pros and cons to make a decision. Weigh the risks, keep up to date with what is happening, and even learn the news as lessons for school. People who invest without knowing the markets are actually gambling and that is, to say the least, a huge risk to take, even if you have an unlimited supply of money that you can spend this way.
The price of stocks can rise and fall, and it depends on how the company progresses in the market, or there is a downturn. Usually, the old owners sell them when the value falls and they think there is no chance for recovery, or they want to get rid of part of the responsibility. Changes are possible, but they are not as dynamic as cryptocurrencies.
The volatility of cryptocurrencies, on the other hand, is sometimes so drastic that many people who invest in them do not really know what they are doing and are always taking big risks.
Of course, each has its advantages and disadvantages.
For example, cryptocurrencies…
- May have competitive value against fiat currencies
- They have huge potential for big earnings
- The number of coins increases and you can find your favorites
- The general interest is constantly growing, so their acceptance is expected
- Risks include instability, insecurity, and regulatory issues
Also for stocks…
- The legal regulations are very clear and you always know what you are up to
- They can bring you a huge stable profit
- Changes in value are smaller than in cryptocurrencies
- They are more accessible and easier to invest
- The potential for extreme profits is very small
The growth of cryptocurrencies will not stifle stock trading, and neither will the opposite – at least not in the near future. Some cryptocurrencies have experienced tremendous growth and popularity in recent years, and some we have already forgotten. Every type of investment and trading comes with many risks, but also with the potential for great returns.
The user just needs to decide what is of interest and dedicate himself to what he wants to do. Whatever you choose, do it smartly and wisely, to protect yourself from big money losses. Plan all your actions in advance, and establish a strategy, that will help you get most of your actions, but also prevent huge money loss.