Crypto Trading vs. Stock Trading: Differences and Similarities

Apr 15, 2022
3 min read

Investment was always the key to success, but it is also the test of intelligence to increase your worth of money in today's world.

Any intelligent investor knows exactly where to invest and grab good returns; if the investor doesn't have such information and the calculation, it's not an investment; instead, it's guessing and gambling.

The two main leads for today's investment plans are that are the talk of the town are stocks and cryptocurrency.

Crypto is the new storm in the corporate world. According to Bloomberg, the total value of these digital currencies is about $2 trillion. Bitcoin has built its own place in most portfolios.

What are Stocks?

Stocks are the bundle of shares (both equity and preference) that provides equity in any business; the stockholder gets the company's fractional ownership backed by the assets and cash flow of the business. The well the company performs, the higher the chances of success of investment in stocks.

How Does the Stock Market Work?

Even after being in the traditional investment market, many individuals still do not use the stock market because they fear losing their hard-earned money. The stock market is regulated by government agencies and is backed by a claim of assets in the company. The investment made in stocks is either made directly by the individual or through a stockbroker. The individual person either creates a demat account and invests in the company's stocks directly by understanding the chart or pays the stockbroker to invest his money in the company through their knowledge and expertise.

The broker buys the listed company's share from the stock market for the investor and trades it accordingly, treating the investor as a beneficiary. Then, returns from the stock are paid to the investor after deducting a certain percentage of commission.

What is Crypto?

Crypto is the new market for investors to invest in digital money through Bitcoins, Ethereum and other similar digital coins. Generally, it is not backed by any hard assets and is a little risky.

How Does Cryptocurrency Work?

The government authority does not regulate the crypto market and thus is decentralized. Direct investment in crypto can be made digitally through the internet, through different modes.

Crypto runs on blockchain technology, which simply means a digital ledger of transactions. It is not controlled by any single system, but rather through decentralization. The investor can buy and sell the crypto coins via exchanges and store them in wallets. The transparency of such transactions increases investors' trust in the crypto market.

Similarities and Differences

Stocks and crypto work in a similar manner as they offer a return on the investment made but with a certain percentage of risk, yet with a lot of differences.

Form of Investment

Stocks are the traditional way of investment, but crypto is the new digital form of investment through digital crypto coins.

Ownership

The main point of difference is ownership; the investor of stock will get fractional ownership in the company, whereas the investor of crypto will not get any kind of ownership in the business. The only form of success by investing in crypto is if they get returns.

Access

Stock market allows a fixed time for investors to trade, whereas the crypto market is never closed. An investor can even trade-in crypto even during holidays.

Transaction Fee

While trading in stocks, the investor is bound to pay a transaction fee, no matter the investment amount. The exchange fees are comparatively low in crypto, although it is based on the crypto exchange rate one opts for.

Regulations

Government agencies and boards widely regulate the stock market. Stock regulators always have yearly audits, and assurance of no fraud is scrutinized. Whereas, crypto trading is unregulated and prone to fraud.

Pros of Stock Trading

• Solid returns
• Accessible
• Defined regulation

Cons of Stock trading

• Less returns
• Market can crash due to inflation

Pros of Crypto Trading

• Wide market capture
• Portability
• Higher returns

Cons of Crypto Trading

• High Risk
• Regulatory risk
• No backed Assets

Conclusion

Both the stock and crypto markets have their own terms of investment and come with their advantages and disadvantages. It's the decision of the investor to choose whether to invest in stocks or cryptocurrency, based on his willingness and choices. Cryptocurrency is definitely the new era of investment lead, but stock is safer. An investor can decide which one to choose, based on some factors: risk, amount of investment, information about the market, the inflation rate, etc. Instead of rushing to invest, the investor needs to make a decision and understand the market carefully. Any investor's portfolio can have both cryptocurrency and stock, but it is important to understand the market before gambling your hard-earned money.