Crypto Trading vs. Trading on Stock Markets: Find the Difference

The cryptocurrency market has been the focus of attention lately. Thousands of people searching for fame and fortune rushed to test the new assets and did not hesitate to share their experience with others, so probably I won’t be telling anything new in this article. Still, it’s always useful to sum up all the facts to see the things in a clearer way.

So is there a big difference between trading on the stock market and cryptocurrency market? The answer most of traders could give to that question is — “Yes, there is, but how much different is one from the other — that is the question”. So let’s try to find it out.

Cryptocurrency market is much much much more about speculation and gambling, at least nowadays

Cryptocurrency trading has almost no history compared to traditional stock exchanges. Just think of it: the first stock exchange in London was officially launched in 1773, while unofficial security trading dates back to the 14th century. Hence, trading is very often done by trial and error. With lack of available data and proven methods, crypto traders have to devise their own strategies and learn from their own mistakes. The crypto market is the place to quickly gain profits, but it is also the place to loose everything in the blink of an eye.

Cryptocurrency market never sleeps

Unlike traditional stock markets, show must go on here non-stop day and night. On the one hand, you can trade as much as you want and keep making profit (hopefully not a loss). On the other hand, you never know what will happen while you are sleeping, another spike or another collapse. Uncertainty and unpredictability — these two words describe the crypto market best.

Cryptocurrency market has a lower entry barrier

Cryptocurrencies and the cryptocurrency market do not fall under clear regulatory guidelines at the moment, so there are plenty of opportunities to start for anyone. It is sufficient to register, sometimes even without any authentication procedures, to start trading, no huge amount of funds is required. But it is not as simple as that in fact: crypto exchanges are very often not as reliable as they should be, so they get hacked, collapse, or their owners may simply shut them down and run away with your money. As the industry evolves, this is changing for the better, but it is better to choose trading platforms cautiously anyway.

Cryptocurrency trading is P2P, no broker is needed

Cryptocurrency trading is attractive to many as it requires no intermediary, you can make transactions on your account without anyone’s help and be your own fund manager. Advantages of this fact are quite obvious — crypto markets are extremely volatile, and the best decision is sometimes the decision made within a second. You simply cannot afford waiting.

You can never be sure what will happen to your trading platform tomorrow

As I have previously mentioned, crypto exchanges are often set up in jurisdictions with no firm business regulations, which means no one can guarantee the safety of your assets. Besides, the stability of a traditional stock exchange is also not guaranteed: you may fail to get an answer to your data request or you may be kicked out of an active session due to technical problems. The round-trip time to send a request and get back a response is higher and delays experienced while executing orders are more frequent compared to what professional traders are used to.

You can never be sure what strategy and trading tool work

Let’s be honest: no one can say for sure what factors impact the cryptocurrency market. Cryptos tend to fall considerably after the announcement of prohibitive regulatory measures or hacks, but it is next to impossible to predict such developments. In addition, while trading on traditional stock markets requires certain skills and experience, lots of people who trade crypto have no prior trading experience at all. This only adds to the unpredictable nature of the cryptocurrency market.

Many crypto traders use technical analysis and say it works, and it is true. But relying on technical analysis alone means a trader can miss out on opportunities, such as to purchase a crypto when it is undervalued. So it is much more efficient to use technical analysis tools in combination with fundamental analysis, for instance.

You can never be sure about the future of your assets

Barry Silbert, a crypto magnate, believes that most cryptocurrencies will disappear in the long run, as “most of these tokens don’t have real utility, and most of them are not differentiated from others.” This projection is expected to come true only in at least 20 years. Anyway, you should be ready to see your crypto investment simply disappear one day.

As governments and institutions tend to show more interest in cryptocurrencies, the industry becomes more regulated and stable, so I guess I may soon have to revise at least some of the above-mentioned points.

Crypto Trading vs. Trading on Stock Markets: Find the Difference was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.