If you’ve ever had any experience trading in the stock and cryptocurrency market, then you’ll know that there are several key differences between them. In fact, many cryptocurrency traders actually accumulated most of their experience from trading assets like stocks, but not without noticing some key differences. From basic things like when the exchanges operate to how volatile each asset is, trading in each of these markets requires completely different strategies. Further analysis will show that there are even more crypto traders who have never gained any exposure to trading stocks. Whether you’re a trading pro or you’ve just begun your investing career with crypto, it’s extremely valuable to understand the key differences between trading in each market, respectively.

This is not financial investment advice.

This article will touch upon key differences between trading in the stock and cryptocurrency markets.

In this article

Crypto Never Sleeps

The most apparent difference when it comes to trading in the stock and crypto market, is that the latter never stops trading. In case you aren’t aware, cryptocurrencies are peer to peer assets which mean that they can be traded at any time of the day. That’s right, you can buy or sell crypto 24/7/365. Although that may seem like nothing but a huge convenience for anyone who plans on trading cryptocurrencies, you have to also be aware of what that means for the price value fluctuations.

With an exception for maintenance breaks, crypto exchanges function around the clock and monitor the changes in price which take place every second. As a result, every second counts when trading cryptocurrencies but the same cannot be said about stocks. The stock market — the two most popular exchanges being NASDAQ & NYSE — operates 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. Thus, when it comes to cryptocurrency, one one hand traders must be aware of the price of a coin as each second passes which could significantly change their trading behavior. On the other hand, stock traders can stick to their trading plans and be less cautious of quick price fluctuations.

The cryptocurrency market is trading 24 hours 7 days a week, while the stock market trades on weekdays only from 9:30 AM EST to 4:00 PM EST. As such, there are more price fluctuations in the crypto market than there are in the stock market.

Stock Are Stable

Although trading stocks presents a much more stable and safe option when it comes to making investments, they aren’t completely risk free. Remember, every investment that you make is in itself a risk. However, it’s also fair to say that investing in cryptocurrencies is much riskier given how much the prices fluctuate throughout the day. Afterall, the crypto market never sleeps, so you could technically go to sleep and wake up with two completely different portfolio values. As such, the increased volatility that is found when investing in the crypto market is grounds to discuss the inherent differences in trading strategies.

Crypto graphs and charts are always showing fluctuating price values, and even though there are plenty of volatile stocks in the stock market, there’s much more fluctuation taking place in the crypto market. You have to adjust and adapt your trading strategies on a daily basis in the crypto market, but the stock market offers much more safety in terms of volatility. However, any experienced investor knows and understands that market volatility is just part of the game and that there are specific ways to ride upswings or avoid buying before the dip.

The problem with the cryptocurrency market is that because it is trading all the time, these price swings and movements happen much quicker and sooner than even some of the most experienced investors can prepare for. Additionally, any new trader who is still a beginner can easily get sucked into FOMO and lose all of their original investments in just a matter of time. One of the biggest mistakes that inexperienced traders can make, is to use the same trading strategies for both markets, when in reality you should take two separate approaches to each. Further analysis will show that there are different investing strategies to handle the volatility of each market, respectively.

The cryptocurrency market is naturally much more volatile than the traditional stock market. Cryptocurrency is always being traded and the price value is always fluctuating, while stock market price movements happen much slower.

Differing Trading Strategies & Valuations

As we mentioned before, trading in the crypto and stock markets requires completely separate investment strategies. This is largely in part also due to the fact that valuing coins and businesses is completely different for several reasons. When it comes to stocks, you are investing in a share of an actual company that is reporting its quarterly earnings, revenue, and profit as indicators of company success. This gives a trader a good indication of what that entails for future price movements of that stock and where they are heading.

On the other hand, when you invest in a new cryptocurrency, you are simply hoping that the company can perform at the levels which you expect or were promised. This leads us to ICOs, which have been relatively controversial over the past year following the lopsided number of new blockchain startups that have failed and ruined the investments made by hopeful investors. With pre-sales, however, there is no real mechanism for holding the company accountable to fulfilling its promises to investors. The company can theoretically shut down shop one day without any warning and keep the funds it raised, but this type of fundraising would not have been viable in the public markets which have much higher requirements for entry.

Essentially, the key difference between stocks and cryptos here is the fact that cryptocurrency values tend to move based upon community sentiment while stock prices fluctuate based on various tangible information including revenue, profit, EBIDTA, and more. As such, there have been many trading strategies that have taken these factors into account when valuing the price of a stock while the same cannot be said about cryptocurrency. A vast majority of crypto trading strategies and valuations depend on factors outside of business information, thus discouraging many traders who can’t get passed the fact that investing in crypto does not give the a direct stake in an operating corporation.

When investing in stocks, you receive a share of a tangible company which reports revenue, profit, quarterly earnings, etc. However, The same cannot be said of all cryptocurrencies and tokens, since most of them have been created out of thin air over the past year.

Conclusion

Many people might find that trading in the cryptocurrency market is similar to trading in traditional stock markets. However, this is classic misconception which has led to many stock trading pros running out of luck as soon as they translate their strategies to the crypto market. In reality, it is quite clear that there are many inherent differences between the two markets that should be known by anyone who claims to be a crypto expert. Irrespective of where you are on the spectrum of trading experience, you should most definitely be aware of what sets cryptocurrency apart from other assets like stocks. As always, happy investing!