Difference Between Stocks and Crypto Trading
Sep 16, 2021
In today’s modern world of apps and technology, many inexperienced traders come to numerous platforms and think that trading a stock is the same as trading a cryptocurrency. Traditional stock markets like the NY, London, Hong Kong, or NASDAQ stock exchanges, have been around for a while, while cryptocurrency is considerably younger, with Bitcoin only being invented in 2008, and available on public, digital exchanges from around 2011.
For those that are new to trading online, let’s have a look at the primary differences:
Stock markets are highly regulated while cryptocurrency is still finding its place in the financial universe.
Because stock markets have been around since the 1700s with the Dutch East India stock market, they have had centuries for regulators to conjure up helpful laws to make sure everyone keeps the industry fair. But cryptocurrency is an entirely new “animal”, and regulators are still trying to consider exactly how they fit into the modern world.
Stock markets have opening and closing times, while cryptocurrency markets are open 24/7, 365!
While some apps offer pre and post market trading, in essence, those are derivatives and futures, which is not the actual market - this means the prices can jump considerably at “market open”. But cryptocurrency is live, with real volumes and real assets trading hands around the clock, meaning such jumps don’t happen.
Cryptocurrency is based on a “perceived value” of “digital tokens” that don’t exist in the real world, while stocks represent actual shares in real world businesses.
Owning a stock is having a share in an actual business. This means that the business’s performance can impact its price movements. While cryptocurrencies are just that: currencies for the exchange of value, and are only driven by supply and demand. While they are indeed real, they are “intangible”, and so can’t necessarily be impacted as considerably by outside influences and real world events - only by the narrative the public places on them!
Cryptocurrency is “fungible” - it can be exchanged between wallets to any person or entity worldwide, while stocks are not, and need to remain in the owner’s possession, or sold back to the exchange that they were bought from.
You can transfer the Bitcoin you bought on MEX Digital to your Hardware Wallet today if you wanted to. Alternatively, you could transfer it to anyone’s wallet anywhere in the world. You can’t do that with stock trades. There are no wallets, there are no addresses, and there is no sending and withdrawing. When you buy a stock, your value will stay within the platform where you bought it, unless you want to redeem that stock for a tangible paper contract. That brings about all kinds of regulatory and legal bureaucracy that will give you quite the headache!
Stocks are influenced by a few people making specific decisions, while cryptocurrencies are primarily driven by market sentiment.
As mentioned in point 3, if the owner of a business announces a new product, that business’s stock price could go up considerably - or alternatively go down if the product is not what the market expected. With cryptocurrency, this can’t really happen, because cryptocurrencies don’t have “earnings”, or “product lines” or even CEOs and CFOs announcing decisions - they only have their developer communities building and improving the code to make their efficiency better.
These are the primary differences between stocks and crypto. While there are a number of others, these are the pivotal ones you as a trader need to understand. We’re here to assist you at MEX Digital, and if you require any further info, visit our FAQ section, or browse our blog. Alternatively send us an inquiry through our Contact Us form.
Remember to keep that in mind; the same rules for trading traditional stocks that many of our MultiBank customers have employed also apply to cryptocurrency.
Remember, proper diligence and sound judgement should be used in evaluating the risks associated with these activities. Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material.