Similarities And Differences Between Crypto And Stock Trading

There are many differences between crypto and stock trading, but there are also lots of similarities. Let’s take a look at stock v crypto trading.

Last Updated March 13th 2023
10 Min Read

The crypto market is relatively new, and as such, might not compare one-to-one with the stock market. However, as you will find out, these two markets are pretty much similar to each other when it comes to trading.

There are lots of people who have applied stock trading techniques to the crypto market and won big time.

That’s because the underlying structure of the market is pretty much the same. For instance, the trading signals that a crypto trade generates are likely to be the same as those of a stock trade.

Similarly, it is a well-known fact that long-term traders tend to win more, be it in stocks or crypto.

This explains why it is very easy for a seasoned stock trader to easily port to crypto trading without requiring any extra lessons on the crypto market.

That said, these two markets have their differences. This article takes an in-depth analysis of the similarities and differences between stock trading and crypto trading.

Crypto Trading vs Stock Trading

The main point of confluence between crypto and stock trading is that both involve the buying and selling of an underlying asset. It can be either the trading of the actual asset itself or a derivative.

For instance, in stock trading, one can buy or sell stock directly, or invest in stocks derivatives. Similarly, when trading in cryptocurrencies, one can buy or sell the crypto itself, or invest in a derivative version of it. The key difference between them is that when trading stocks, one has to do it through intermediaries. One cannot trade in stocks without having to go through regulated brokers.

This is not the case with crypto trading. It is possible to buy and sell cryptocurrencies without having to go through an intermediary. That’s not to say that intermediaries don’t have a role in crypto. Centralized exchanges have made it easy for people to trade in cryptocurrencies.

Market liquidity is another major area where stock and crypto trading differ. Most stocks, especially in the major indices such as the FTSE 100 and the FTSE 250, are highly liquid. By contrast, most cryptos outside of the large-cap ones are illiquid.

The two markets also differ in terms of security. Since the stock market is highly regulated, you can always be sure that the stock they are buying into is legit. On the other hand, due to the unregulated nature of the cryptocurrency market, it is very easy for one to buy into scam projects.

This article is very useful for someone new to trading and would like to try either of the two.

It dives deep into both stock and crypto trading before doing a comparative analysis of the two.

Cryptocurrency Trading

Cryptocurrencies are a relatively new entry in the financial world. While people have been trading in stocks for over 100 years, crypto trading is only 10-years old. Bitcoin came into existence in 2009, and the altcoins followed shortly after.

In the decade they have been in existence, fortunes have been made and lost in equal measure. That’s because of the market volatility, and the fact that there are lots of scams in this market.  While the market has gone through many changes over the years, Bitcoin retains its position as the most dominant cryptocurrency both by market capitalization and adoption.

The role of cryptocurrencies as digital assets is to act as peer-to-peer means of transactions. This has made them very attractive to people who want to trade in assets that are not under government control. The peer-to-peer nature of cryptocurrencies has helped this market grow from the dark-web economy to one that is now attracting institutional investors.

The exponential growth of the crypto market is evident in the number of new crypto wallets created since Bitcoin came into existence in 2009. Data shows that since 2009, more than 40 million new crypto wallets have been created.

Crypto market growth is also evident in the number of cryptocurrencies created over the last decade. Today, there are more than 6000 new cryptocurrencies in the market. Out of these, more than 4000 of them were created between 2017 and early 2021. This goes to show the growing popularity of the crypto market as an asset class.

Besides the explosion of new crypto wallets and projects, adoption has grown quite steadily too. For instance, the number of companies that accept cryptocurrencies as payments is consistently going up. Recently, El Salvador made history as the first country to accept Bitcoin as legal tender.

Based on current market dynamics, Bitcoin remains the largest and most important cryptocurrency out there. However, many other projects are doing amazing things.

For instance, Ethereum-based smart contracts have made it possible to cut the middleman in everything from lending to passive income investing. Others like Dash have made it possible to send money anonymously in a decentralized environment. Many others are doing amazing things out there.

Ultimately, the cryptocurrency that one chooses to trade varies from person to person.

A Look At The Differences Between Cryptocurrencies Investing And Trading

Cryptocurrency investing is less speculative. One buys a digital coin at a particular price in time and holds it for years, benefiting as its adoption grows. Factors that might prevent this growth in the short term do not matter, as long as the investors believe in the underlying technology.

Crypto traders are more or less like stock day traders. They buy and sell cryptocurrencies earning profits from the margins. These transactions can be hourly, daily, or at most two days transactions. Such investors are not concerned with the technology behind cryptocurrencies since they are focused on making short-term profits. Keep in mind that one can also make a loss since digital currencies are extremely volatile.

Digital currencies are, to some extent, independent of many factors that affect prices in other industries. The industry is relatively new; thus it has limited connections with other markets. Thanks to their decentralized feature, factors such as government controls, data releases, and political changes rarely affect them.

Common factors that affect digital coins include security flaws resulting from hackers’ attacks, countries barring the use of these coins, and internal quarrels regarding upgrades and technology changes.

Another important aspect in this industry is that each particular digital coin has a varying degree of volatility. The market as a whole is highly volatile, so big price swings are common. You should make sure to understand both the market and the particular cryptocurrency that you want to invest or trade-in.

Check Out: Cryptocurrency Investing vs Trading: What's the Difference?

Factors That Affect Cryptocurrencies Prices Include:

  • Security issues, which may lead to loss of funds
  • Crypto prices are highly volatile and easily moved by the news.

You also need to understand that while cryptos are overall volatile, they are not all made equal. In most cases, small-cap cryptocurrencies tend to fluctuate more than the larger-cap ones.

That’s because small-cap cryptocurrencies have little backing them up besides speculation.

Based on this understanding of how crypto works, it’s clear that knowledge is important before engaging in trading. In specifics, a good understanding of risk management, and a solid trading strategy is essential.

Stock Trading Landscape

The stock market is one of the most important markets in the world. So important that anytime there is a correction in this market, the entire economy feels it.

One of the things that draw investors to the stock market is the ease of access. Most exchanges allow investors to buy and sell stocks through their phones. They also offer investors a wide array of trading tools that help enhance the trading experience.

That said, there are many factors that play a role in stock price movements. They include company reports, economic data news, political events, and central bank monetary policies.

So, how does the stock market work? The idea is simple, and pretty much applies to all other markets. If you expect that a stock will go up, you buy, also known as going “long.” On the other hand, if you expect a stock to go down, you sell it, also known as going “short.”

There are plenty of stocks to buy and sell at any given time and push up the odds of success.

Read Also: Learn How to Trade the Stock Market in 5 Steps

Crypto vs Stock Trading

Below is a tabulation of the key similarities between stock trading and crypto trading.

Definition of Cryptocurrency Trading

Definition of Stock Trading

Cryptocurrency trading is the exchange of cryptocurrencies for other cryptos or for fiat. Bitcoin is one of the most traded cryptos in the market today.

Stock trading is the exchange of stocks for fiat.

To trade in crypto, one needs to have a wallet that supports atomic swaps or open an account with an exchange.

To trade in stocks, you need to open an account with a broker, and there are lots of them in the market today.

Similarities between Crypto Trading and Stock Trading

•  In both, you need to understand the market properly.

•  In both, factors of demand and supply are key value drivers.

•  So long as you have the platform, trading is instant in both.

•  Both are volatile depending on the prevailing market news.

•  In both, the risk of loss is always present, and you need to have the mental fortitude to handle it.

•  Both are available on digital platforms. 

Differences of Crypto

Differences of Stocks

The crypto market runs 24/7.

The stock market operates from Monday to Friday and is not open on public holidays.

Volatility is high because it’s a new market.

The volatility is lower since it’s a highly regulated market.

There are no guarantees but the potential profits are very high.

Since stocks pay dividends, it acts as a cushion to investors.

Crypto trading is dependent on the location. In some countries, crypto trading is banned.

Stocks trading is universal as pretty much all countries have a stock exchange.

In crypto, the key sources of profits are staking, trading, micro-tasking, and mining.

In the stock markets, the key sources of profits are trading and dividends.


Reasons To Support Crypto Trading:

  • Low trading fees
  • Easy market entry and exit
  • The potential for returns is high
  • High volatility makes it perfect for traders

Reasons To Support Stock Trading:

  • It is stable and there is a low risk of loss due to high volatility.
  • It is regulated, which lowers the risk of buying into scams
  • You can earn a passive income through dividends.

Which One To Choose?

Both crypto and stock assets carry risks, so there really is none that is better than the other. What matters is the level of education you have and the risk tolerance.

Both markets are pretty similar in that they allow electronic trading, and are easily available via mobile. All one needs is a good internet connection.

The high liquidity of the stock market and the volatility of the crypto market mean that both are perfect for experienced traders.

There are many stock traders who have dived into crypto trading and made fortunes.

Hopefully, this article will help you make informed trading decisions going into the future.

It is also important to take time and do some research on these two markets before choosing any of them.

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