Unless you are living under a rock or on the moon, you would have noticed the explosive gains enjoyed by Bitcoin and its peers. The cryptocurrency market has been on fire for a while now, and there is no denying its power to make money for committed investors. Sure, there are rapid cycles of big crashes and booms, but the value arrow points firmly north.
The global cryptocurrency market cap is currently $2.63 trillion, and It is but natural that all this value creation has piqued the interest of many amateur and professional investors and pushed them to diversify their portfolios to include crypto coins.
However, despite its obvious gains, cryptocurrency investment still raises eyebrows, and many cautious investors are hesitant to jump in – Warren Buffet is famously cautious in the crypto scene.
This reticence is not surprising; after all crypto market is uncharted territory – and a wild one at that. Notoriously volatile, crypto coin trading needs careful handling, but making money on trading is as easy and safe as stock trading – if approached with the right knowledge and some smart practices.
Let’s first look at how crypto compares with stock market.
As the world – and trading – moves online, stock trading has shifted to online methods.
The old fashioned ways of stock traders on the exchange floor are now part of Hollywood folklore; stocks are now traded through digital exchange, brokerage account, mobile applications, or other online platforms.
Cryptocurrency is a native in the digital realm, and crypto markets have borrowed similar transactional structural base and user experiences from the stock market.
Most crypto and stock exchange platforms have similar layouts, market data visualizations, order-book-based liquidity mechanisms, and trading options, making it familiar and easy for investors to migrate from one to the other.
Shadowing traditional retail trading platforms, centralized crypto exchanges offer access to all basic trading order types such as market, limit, and stop (or stop-loss). Decentralized crypto exchanges (DEXs) usually offer market orders only.
This is where the similarities end!
While the exchanges might want to keep the experience similar, crypto and stocks are two very different asset classes: digital assets and traditional financial assets.
Crypto and stocks are both types of investment opportunities, but there are some fundamental differences between the two asset classes.
The most fundamental difference is what the money buys you!
Stocks represent a percentage of ownership (or equity) in a company. when you buy stocks on the stock market, you own a bit of the traded company. This naturally gives you certain rights, such as voting rights.
On the other hand, when you buy a cryptocurrency, you only own the token and the value of the digital assets. It will not give you ownership rights to the crypto coin company. However, there are thousands of crypto coins, and each is designed to fulfil a specific need – some like Bitcoin is now a digital commodity much like gold, many others are designed to be used for certain operations.
It is recommended to do a basic layer of research to understand the ecosystem before you pick coins to invest in.
In stocks, the value is based on the physical company, and the profits or value of stocks depend on the performance and growth of the company whose stocks you hold. The price of the stock rises and falls based on the future success forecast of the company.
Cryptocurrency is not backed by any hard assets, as a digital asset its value is governed by its demand and supply and the market sentiment.
Stocks are traded on official stock market exchanges and online applications or portals. This usually restricts trading to a specific time of the day, for example, between 9:30 am to 4:30 pm. Crypto markets, by their very nature, work 24×7. There are no holidays and no closures – crypto trading happens in real-time without any geographical and time zone restrictions.
As most loyal crypto investors and fans would attest, one of the key reasons for their involvement is the open and transparent structure of the crypto world. Anyone can become a miner or invest in crypto, and unlike the stock market, only pure market forces drive value. There are no regulations and no external control exerted.
Crypto coins come with a limit cap. For example, Bitcoin’s supply is capped at 21 million. That means there can only ever be 21 million BTCs mined. Most coins come with a limit set by the issuing organization’s internal policies or the blockchain protocol code. In fact, the value of the crypto coins stems mainly from their unalterable and transparent hard caps.
Stocks issuance can be changed and affected by a company’s internal regulations and local laws.
While stock trading is an established field with generations of best practices, cryptocurrency investment is relatively new. Hence, in this article, we leave aside stocks (there are thousands of excellent resources available online) and explain what an investor can gain from crypto trading.
The first thing any investor will tell you about crypto trading is its instability and volatility. We say it doesn’t have to be a problem; this volatility is what makes crypto trading so exciting and profitable. With the right risk management strategy, you can make substantial profits quite quickly.
The lack of regulations and policies means one can start trading almost immediately. All you need to do is open an account on any crypto exchange and put some money in it and start. It is also always on; no matter where you are in the world and what currency you trade in, exchanges always remain open for trading.
Trading on cryptocurrency prices allows you to take advantage of markets when they rise as well as when they fall. So you can make money by buying low and selling high on either side of the market boom and bust. Naturally, to get this right, one needs a good knowledge of crypto market trends.
For novices in the crypto market, a good way to ease into trading is by
To start small, invest in companies with a financial stake in blockchain technology or with substantial holdings in cryptos such as Tesla or Microstrategy or in diversified index funds or ETFs. To reduce your exposure and risk, even more, you can invest in an index or mutual funds that include crypto holdings as part of its overall portfolio mix.
The easiest way to dip your toes into crypto trading is by starting small. You can allocate a small portion of your overall investment into crypto without exposing your money to the vagaries of the market. If the market takes off, it will boost your profits by a vast amount while keeping your risk to the minimum.
Cryptocurrencies are a great investment for both the long term and very short term investment periods. You can either trade for a short time by making money on price fluctuations or stick with it for the long haul and wait for a big payout.
Ignore crypto at your own risk!
It is undeniably a big part of the future financial market, and staying out of the crypto world is not really a smart move – or for that matter, even an option – for anyone interested in trading for profit.
Our advice would be to start experimenting and diversifying your traditional portfolio TODAY! A quick way to dabble in crypto coin would be through our exchange CoinCasso. One you log in, don’t forget to check out our how-to guides to get some in-depth information on various crypto coins and our investment advice.
Well, it depends on which crypto coin you invest in! Bitcoins, Ethereum and the top coins are fairly stable and have a great trajectory predicted for them. So if you invest in the right coin – both in the short and the long term – your chances of seeing massive gains would be pretty high.
Trading has an element of risk, whether in stocks or crypto. Apart from the inherent risk of betting your money on external sources, the leading risk factor remains a lack of knowledge that can lead to missteps and letting emotions or sentiments enter your transactions.
If you can manage these two factors, you will be able to keep your risk manageable. Remember the golden rule: never invest more than what you can afford to lose.
When it comes to trading, stocks and crypt are completely two different asset types. Stocks represent ownership of the business/company and is a regulated and established field, whereas the crypto market thrives on decentralized and open structure. Its value is not backed by an asset.
Which is better? The answer is individual and depends on your interests, risk appetitive and future earnings.
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