Crypto Market Vs Stock Market — What’s the Difference?
The crypto market is being increasingly adopted as a more profitable alternative to traditional stock markets. Why? Because the returns of the crypto market in the past years have been phenomenal. At the same time, it enables traders to make high returns in a very short period. But, there are other things too that you must know about the crypto market, including how it is different from the stock market before you start trading cryptocurrencies. Let’s get started.
Crypto Market — What is it all about?
Just like any regular market where you can buy/sell goods like groceries, vegetables, etc., in a crypto market, you can buy and sell cryptocurrencies.
Cryptocurrencies are digital currencies that use cryptography to provide high-level security for digital data and transactions. Cryptocurrencies are designed such that they can act as a digital store of value and can be used for the transfer of value including money. Lately, cryptocurrencies are being seen and used as a cost-effective and more efficient alternative to traditional currencies and payments.
Unlike traditional markets, however, crypto markets have no physical presence. They exist virtually on the internet and can be accessed from anywhere in the world.
Crypto markets that are based on blockchain are called decentralized trading markets. These types of trading markets are not administered or controlled by centralized authorities such as banks or the government. Rather, they are managed by distributed computers called nodes and controlled and run by their users.
Crypto markets or cryptocurrency exchanges essentially provide the facility to buy and sell cryptocurrencies. In other words, they connect users looking to trade their cryptocurrencies like Bitcoin, ETH, Libra coin, and many others. They provide an interface where crypto buyers and sellers can find and connect with each other to seamlessly exchange coins. In addition to the interface, they also offer the support required for new users to start their crypto trading journey. All crypto trading (exchange) transactions are verified through and securely stored on the associated blockchain.
Good cryptocurrencies like the Libra Coin (LC) have a high potential to grow because the coin has real use cases that gives it a high demand in the market.
What is the Stock Market and how is it different from the Crypto Market?
The Stock Market is where you trade stocks of the listed companies. For example, if you want to buy the stock (shares) of the Apple company, you would go to the NASDAQ exchange/market where the stock is listed. Stock exchanges have a physical presence and can also be used online via dedicated apps/platforms.
The biggest difference between the crypto market and the stock market is in terms of assets they allow to trade. While stocks are real physical assets backed by legitimate companies and have real values, cryptocurrencies are not generally backed by any real assets and their values are entirely subjective. This not only makes them a riskier asset type but also makes it difficult to predict the price trend or movement of digital currencies.
Crypto markets or exchanges are either fully decentralized or partially decentralized, while stock markets are under centralised control. This means all crypto trades are transparent and publicly available, unlike stock trading records, which are private to specific investors.
Crypto markets are generally more volatile than stock markets, which can be a good thing for traders looking to make quick profits through day trading.
Unlike traditional markets that are affected by a number of things, including current happenings, politics, news, and more, crypto markets are often above all these and are completely regulated by the user sentiment.