SHOULD I TRADE CRYPTO OR STOCKS?
Four (4) key differences that’ll help you understand what Satoshi did for you!
As at the time of writing, the current market cap of all cryptocurrencies sits just under $300 billion, with over 5000 cryptocurrencies being traded in the market. The crypto market cap is still a far cry from other traditional asset classes. However, the rapid rate of infrastructural development and adoption brings prediction to over a trillion dollars in the near future.
So far, crypto-trading has attracted a lot of new entrants into the money markets - thanks to the ease of entry. If you’ve ever thought of getting into stock trading or crypto-trading, understanding some key differences between them will help you make decisions on which is best for you.
Today, we’ll talk about some of these key differences.
Paper-work involved
Starting on stock exchanges comes with a lot of challenges that involve a substantial amount of paperwork and other costs. All of these must come even before you place your first trade. Even after that, making profits could be a long-term process, adding to the margin and trading fees you have to pay on these exchanges.
In addition, you are required to look out for news, business models, local and global political and economic trends that affect the price of stocks – not forgetting technical indicators. Everyone could tell the impact of the trade-wars between major economic powers, and most recently the COVID-19 pandemic news on global assets.
While analysis is equally required to trade cryptocurrencies, you can dive in with as little as $100, with almost zero paperwork and expense required aside your trading capital.
Ease of Entry
The fact that the traditional investment world is highly regulated raises the bar on the entry requirements, which makes it usually unattainable for the common man. For example, the requirements needed to be deemed an “accredited investor”, the difficulty and cost in getting a broker who often demands large deposits, as well as the time-consuming procedures.
Currently, the crypto market is still highly unregulated. Although some countries have requirements, there are no global practices as of now, which means less cost, ease of entry, and less capital needed to make profits.
The trade-off to this lack of regulation is the risk involved, with news of cryptocurrency exchanges getting hacked over and over, even with outrightly fraudulent crypto-exchanges popping up. However, a lot of crypto exchanges have beefed up security measures and provided insurance funds to make sure that traders do not lose their funds. Cases of hacks seem to have decreased a lot.
Trade 24/7
Unlike the traditional stock exchanges which stay open from 9.30 am – 4 pm, crypto exchanges run 24 hours, 7 days of the week. This means you can trade and make profits in the middle of the night, even if you’re a busy 9-5er.
Most stock traders prefer not to hold open positions overnight because if an economy-impacting event occurs outside the trading timeframes, it’s going to reflect on the prices when the trading session opens. This means they can be caught on the wrong side of open trade.
Meanwhile, with cryptocurrencies, you can trade the news immediately it happens. This requires you to stay alert most of the time which can be stressful and time-consuming. That’s about the only way you can capitalize quickly on the news.
Volatility
You may have already heard that cryptocurrencies are highly volatile, unlike traditional assets. However, volatile is like a two-edged sword. It’s the volatility that presents an opportunity for skilled traders to make quick and substantial profits from the markets. Being on the wrong side of it means you get to lose proportionately.
Nevertheless, as a skilled trader, there are tools that help you minimize your losses should you be on the wrong side of a trade.
It’s not surprising that the number of registered users on crypto-exchanges keeps increasing by the day, owing to the trading barriers that have been completely erased. Thanks to decentralization and lack of regulation!
If you ever choose to trade cryptocurrencies, learning the rudiments involved will be a great way to begin your journey.