Do you like the idea of being able to trade stock shares and cryptocurrency in the same account? Many people like to add variety to their trading by including these two very different kinds of assets. In some ways, they’re as unalike as you can imagine, but at the same time there are some core similarities. Corporate stock and crypto come with varying degrees of risk, volatility, inherent value, payout methods, and susceptibility to fraud. Those are the five main ways in which they differ. What do they have in common?
Both are valuable asset classes that both individuals and institutions buy, sell, and hold every minute of every day. People use both as a way to earn a profit on their portfolios. And, just as in all other kinds of trading, some investors use short-term techniques while others employ swing, medium-term, or buy-and-hold approaches. Here’s a closer look at the differences, from a traders’ perspective, between cryptocurrency and stock shares.
Much like stocks, you will need to put down a certain amount of money to buy a crypto token. Both can be purchased using multiple currencies on different trading platforms. But what distinguishes the two is the process. For stocks, you can purchase stocks in round figures with a legal tender currency through direct bank transfer or other similar methods. But with crypto, you can use your cash from your bank account to purchase tokens, which you could use again to buy other cryptocurrencies. Say, you’re a resident of Nigeria, you would have to convert bitcoin to naira or vice versa and maintain a balance through which you can transact in crypto tokens. In addition, you can purchase crypto tokens in decimal values at any given time, which makes it more flexible than stock trading and investing.
Risk and Volatility
There’s risk in every kind of financial market, but some carry more than others. This is especially true when comparing corporate stocks and cryptocurrency. Along with the swings is the risk that a particular coin will bottom out and cease to exist. This rarely happens with listed securities on the major exchanges. Perhaps the most striking difference between these two tradable assets is volatility. You only need to spend five minutes looking a bitcoin and ethereum charts in order to notice how wild a ride crypto coin dealing can be. Not only are the price swings huge, but they’re often quite sudden.
For example, if you use one of the better-known online brokers, like easyMarkets it’s simple to watch prices of stocks and cryptos in real time. Rarely, if ever, will shares rise or fall as quickly or by as much as any of the major cryptocurrencies. Even on a relatively volatile day for a corporation, its share price might move just a few percent in one direction or another. Cryptos, conversely, can see double digit percentage changes in a matter of minutes, first in one direction and then another, all in a single day. The entire securities market fluctuates from day to day, and a few companies experience wild rises and falls in share value. But, there’s no comparison with the dizzying price changes that take place in the crypto space.
Value and Fraud
Company shares represent ownership and carry an inherent value, namely a small percentage of the total worth of the corporation. Crypto has no inherent value even though it does often have an immediate exchange price for the purposes of buying or selling goods and services. The securities markets are so regulated that fraudulent sales and scams are rare. However, some alt coins have experienced hacks and other kinds of financial scams that have left investors with no assets in their accounts.
If you want quarterly dividends, paid regularly by a reputable company, opt for shares of stock. When it comes to payouts, some crypto coins do pay a type of interest, known as staking, if you leave your assets in a digital wallet and don’t withdraw them. Coin issuers are currently working on more ways to offer financial incentives for people to acquire their cryptocurrency.