Cryptocurrency is certainly the newest frontier for investments and has even been able to grab the attention of Wall Street. People are making blockchain investments, including crypto to their portfolios, and even discussing the next big ICOs.
Despite its several ups and downs, crypto shows no signs of stopping or even slowing down. In fact, one can safely call cryptocurrency a fairly mainstream phenomenon. Unsurprisingly, a lot of renowned investment firms such as Merrill Lynch are rolling out funds involving Ethereum and Bitcoins.
Cryptocurrency was created with the vision that it would one day be as commonly accepted as credit and cash. A lot of people make associations between crypto and stocks, although the two are entirely different – and in this blog, we will be exploring some of those differences in greater detail.
Difference 1 – Ownership:
Purchasing crypto means that you are the owner of a certain amount of digital currency. Perhaps in the future, we will be able to see crypto being used in transactions, but until then, it is primarily a store of value that you can either sell or hold on to. On the other hand, stocks reflect a certain share that you own in a particular company.
Difference 2 – Value:
Another major difference between stocks and crypto is in the manner in which each is valued.
Stocks are shares issued by legitimate companies that one expects to generate profits. Physical assets are part of such companies’ valuations, and you can use math to determine if a stock has been accurately valued on the market price.
Meanwhile, cryptocurrencies are hardly ever backed by a company. The value for crypto is primarily based on the hype that surrounds it (although a few types of crypto do experience increases in valuation on the basis of functionality). Owing to the greater subjectivity involved in crypto valuation, one cannot always easily determine if a particular currency is being sold at the right price or not. For more details regarding bitcoin trading, you can login to your account.
Difference 3 – Volatility:
Both stocks and crypto can have changing values, so there is a certain degree of risk associated with buying either one. However, crypto has a reputation for outrageous volatility. The value of stocks, meanwhile, is linked to how well the company is performing; companies are required to share their performance-related data along with a host of other information that investors can use to predict the value of their stocks to a certain degree and make well-informed decisions.
This means that, during volatile times, stock owners can confidently hold on to their stocks, knowing that the situation will eventually smoothen out. Since crypto is wildly unpredictable, investors are not always comfortable holding on to it during times of crisis. This means that panic-selling is far more common – and even recommended – in the world of crypto.
Difference 4 – Governance:
The stock market is regulated by federal agencies, such as the SEC (Securities and Exchange Commission), which ensures that fair trade is maintained. On the other hand, currently, no central authority is responsible for the regulation of the crypto markets. For every kind of crypto, governance is the responsibility of the parties involved with the growth and maintenance of its technology.
Difference 5 – Operational hours:
The crypto market never halts – it is operational 365 days a year and 24 hours a day. You will be able to witness fluctuations in crypto prices even on Christmas or New Year’s Eve. In contrast, the stock market is fully operational during the weekdays (Monday to Friday) but is shut down during nights, weekends, and on any designated holidays.
To conclude, these are just some of the differences that make crypto and stocks so different from each other. To learn more about the two investment forms and determine which one is the right fit for you, please feel free to reach out to us.
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