How does Cryptocurrency Trading differ from Stock Trading?
Cryptocurrency Trading is a relatively new investment concept and it is easy to understand it based on how it compares with older forms of investment such as stock trading.
Both Cryptocurrency Trading and Stock Trading are largely dependent on demand and the idea behind them play a big part in how popular they are amongst investors.
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Some might see the volatility as a negative however it could also be seen as one of the reasons Traders are interested. Big swings in the market can mean opportunity. Some traders (especially those focused on short term trading) may be able to get in and out of their positions fairly quickly taking small bits of profit each time, over the long term these small amounts can add up to much more significant gains!
There are however some big differences between the two markets. Even though they are both volatile, cryptocurrency still stands to be much more unstable than the stock market. This is due to huge swings in the supply and demand and other external factors such as pressure from regulatory bodies. Cryptocurrency markets are also considered easier to manipulate by its investors than it is with the stock market.
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The introduction of a new cryptocurrency could quickly crash the market of another in minutes despite its difference in ideas, such drastic effects are not often witnessed in the stock market.
Since 2014, the Internal Revenue Service issued that cryptocurrency be viewed as acquired assets which makes them taxable. However, the anonymity clause in operation of cryptocurrency makes this a tasky rule to follow up. Saying that it is of course always advised to pay up taxes before the IRS gets to you! When you are paying for goods with cryptocurrency, taxes are applied. Much the same as stocks tax will be due on capital gains.
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In conclusion anyone planning to invest in cryptocurrency is doing so at their own risk as with any investment frankly the same as any other investment.
Here are a few points to consider first before investing in either Stocks or Cryptocurrency.
- Seek advice from those that have experience (positive experience).
- Long term investment often yield better results that short term.
- Only invest if you fully understand it (Research, Research then Research some more!)
- Only invest with extra money (don't invest with money for bills or rent, this is a big NO)
- Don't put all of your eggs in one basket (even if you think its a sure thing one of the keys to successful investing can be to diversify.)
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