Have you ever heard of the stock market? Well, we hope you have since it looks like you’re also interested in investing in crypto. As it turns out, there are numerous inherent differences between how the two function. From the way that their exchanges operate to how volatile each asset is, these markets have key differences and similarities that are important for every investor to completely understand. So, let’s see who comes out on top between stocks versus coins.

This is not financial investment advice.

This article touch upon key aspects of the differences between the stock and crypto market.

In this article

Stock Market

Most people started their investing careers off trading in the stock market, which has consistently been one of the most popular forms of increasing your wealth. The two largest stock exchanges, the NASDAQ & NYSE, operate from 9:30 AM to 4:00 PM New York time. Outside of these hours, traders have the ability to be methodical and devise intricate trading strategies for the following day.

Another key characteristic of the stock market that everyone should understand is that when you invest in an asset, you are actually gaining a share of a tangible corporation. Investing in the stock market means that for each share that you purchase, you receive a piece of ownership for that company. There are countless companies listed on the top exchanges, each of which have gone through an IPO. This is is the very first sale of stock issued by a company to the public. Prior to an IPO the company is considered private, with a relatively small number of shareholders made up primarily of early investors (such as the founders, their families and friends) and professional investors (such as venture capitalists or angel investors).

Similar to any other asset that you’re investing in, shares bought during a company’s IPO help to determine the price that it starts trading at. As it continues to trade on an exchange, its value is determined by a variety of factors including internal financial statistics, fundamental supply and demand, and basic investor psychology. The company gets the keep the money raised as part of the IPO, while the shares continue to trade on the exchange.

The stock market trades direct shares of a company which starts with its IPO. Investors can gain actual ownership when purchasing shares of a particular stock, as well as profit from selling the share at a higher price than they bought it at.

Block Market

On the other hand, we have the cryptocurrency market with exchanges that function in completely different ways than those of the stock market. When you invest in a cryptocurrency, you’re really investing in its specific technology and network capabilities. Purchasing a coin does not give you ownership of the company or network, but it does give you a digital asset which can be used to make payments and even trade for other currencies.

Cryptocurrency exchanges are always trading, 24 hours a day 7 days a week. That’s right, cryptocurrency exchanges are always trading which means that there can be price movements late into the night after you sleep, potentially leaving you with more or less value in your portfolio when you wake up. As such, the cryptocurrency market is known to be highly volatile, due to the fact that is trades in a free and seemingly never-ending market. Purchasing and owning cryptocurrency is a bit more complicated than going on a stock exchange and purchasing shares of a stock, since you’ll need a wallet to store your digital assets in.

You can also invest in the cryptocurrency market by placing capital towards an ICO, which is is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Investors wanting to participate in the ICO can place investments in the project via popular cryptocurrencies or sometimes through regular currencies, hoping to gain a large return on their investment if the new cryptocurrency takes off.

The cryptocurrency market is trading at all times and can be accessed via popular crypto exchanges. Investing in a cryptocurrency gives you a digital asset which can be used to hold value or even pay for things.

Key Differences

So how do these two markets compare? Well, other than the fact that the cryptocurrency “hub” is San Francisco and the financial center with all things having to do with stocks is in New York, there are key differences between how each market functions. The most apparent difference has to be how the actual investing works, as stocks give you direct equity of the company through tradable shares while cryptocurrencies give you digital assets. When you trade in the stock market, you’re investing in a tangible company. The same cannot be said about the crypto market.

Another major difference is how long both markets are active each day. As we stated above, the stock market only operates for a specific amount of time each day excluding weekends. Conversely, the cryptocurrency market is always trading and exchanges are always functioning at all times, which also leads to another difference between the two: price volatility. The crypto market is famous for having extremely volatile assets which could jump or drop in price at any time. Conversely, the stock market moves much slower since it only trades for hours a day.

Another concept to take note of is the difference in how each asset class is viewed across the world. The stock market has always been a reliable and viable way to invest and grow your money, while the same cannot be (completely) said about the crypto market. Blockchain technology is still very new and has a lot of room to grow and innovate in the long run, which is why many people don’t really trust it in the first place. Consumer sentiment towards digital assets is quickly shifting, though, as only time can further legitimize and popularize cryptocurrency.

Although there are many differences between the two markets, some of the most important and apparent differentiators include price volatility, trading hours, and consumer sentiment.

Conclusion

So there you have it, the main differences when it comes to investing in the stock and crypto markets. If you’ve invested for some time now, then you probably already have experience trading in both markets and might even hold both kinds of assets. You may be wondering why this all matters in the first place, since investing in the crypto market differs significantly from that of any other tradeable asset class. If you want to be the best investor that you can possibly be, then it’s absolutely imperative that you have knowledge of how other markets function, further building up your own knowledge of how to effectively trade. As always, happy investing!