Cryptocurrency and stocks are two terms that are common among investors and traders in the world of business. Here is a quick summary for those who might not be familiar with the meaning of these terms.
Cryptocurrency is a digital asset that does not exist in a physical form like our paper money and is not issued or distributed by a central bank or principal financial authority. In simple terms, it is known as electronic or digital cash. Stocks are shares of a company or corporation.
Now that you have gotten an idea of their meaning, these two terms have some things in common and many differences that you need to know before you decide on which is better for you to invest in or trade.Let’s take a look at some of the similarities between Cryptocurrency and stocks.
Similarities Between Cryptocurrency Market And Stocks Market
Some similarities between the cryptocurrency market and the stock market include the following:
- The values of both markets are usually in fiat currencies.
- The level of demand and supply determines the price of stocks and Cryptocurrency. The higher the number of people requesting a stock or Cryptocurrency, the higher their price and value.
- They both involve risks (price falling drastically, and you might end up losing a lot of money).
What Are The Differences Between Them?
The differences between the crypto market and stock market include the following:
- OWNERSHIP: Cryptocurrencies are easier to own than stocks. Stocks are owned by companies and can only be traded by them. Before you can buy stocks, a lot of legal procedure is required before the shares can be considered legitimate. In contrast, cryptocurrencies can easily be bought from any cryptocurrency exchange. When you buy stocks or shares of a company, you practically become a part-owner of the company. That means you share the organization’s loss and profit, but the same is not the case with cryptocurrencies.
- VOLATILITY: The crypto market is more volatile than the stock market. This means that while the crypto and stocks can rise or fall in value, cryptocurrencies are known to experience a drastic and sudden increase or decrease in price and value with any notice. In contrast, in stocks, since companies or corporations own them, a pattern can be studied and used to predict their rise and fall in value. These patterns include past and present decisions made by the companies, which are made public to shareholders.
- CENTRALITY: Cryptocurrencies are decentralized, which means any particular person does not control it while stocks are centralized and governed by regulatory agencies like the Securities and Exchange Commission (SEC) that help to monitor the market and trade. Anyone can make their blockchain ledger and create a cryptocurrency as long as you have the available resources, but there is a process in the case of stocks. A publicly-traded company has to be audited and approved by regulators before it can be listed and traded on the Stock exchange market.
- The stock markets like the Nigerian Stock Exchange usually work regular working hours Mondays-Fridays while the cryptocurrency market is always available 24/7 throughout the year.
- The stock market is also more secure from fraud and hacking compared to Cryptocurrency.
While there are lots of risks involved in investing and trading cryptocurrencies, it can be enriching if you play your cards right. Note that this article is only to provide information and in no way is meant as a form of financial advice.
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