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John Martin 23 Aug 2023 ◦ 10 min read

Cryptocurrency and the Stock Market: Pros/Cons and What are the Differences Between Them

Cryptocurrency and the Stock Market: Pros/Cons and What are the Differences Between Them

Crypto assets can utilize all investment strategies in the stock market, from dividends to balancing assets between growth and value stocks and IPO analogs:ryptocurrency trading and trading in stock and financial markets at first glance may seem identical.

But there are differences in these industries that cannot be ignored since they make their adjustments and can affect the success of trading.

In this text, we will try to understand these differences and compare the cryptocurrency and stock markets.

With the advent of Bitcoin in 2009, the world first met with digital currency and blockchain technology. Initially, large investors considered cryptocurrencies just a fad. Since then, a lot of time has passed and cryptocurrency markets have grown like yeast.

However, this revolutionary technology was not without drama. While some experts expect the cryptocurrency market to be a useful addition to traditional financial markets, others fear that cryptocurrencies may collapse and pull the rest of the market down.

One way or another, the impact of digital currencies on financial markets is undeniable. The main purpose of cryptocurrency trading is similar to the purpose of trading traditional stocks: both are used for earnings. Therefore, more and more investors are adding cryptocurrencies to their portfolios. According to a CNBC study, currently, 1 in 10 Americans invests in cryptocurrency.

With digital assets, investing becomes easier than ever. High volatility creates greater income potential. And if you add to this the possibility of round-the-clock trading, a high credit shoulder, low fees, and thresholds for transactions, then it will soon become clear why so many novice investors and experienced exchange traders are starting to switch to cryptocurrency. In this article, we will analyze the similarities and differences, as well as the pros and cons of trading in cryptocurrencies and stocks.

Is the Purchase of Cryptocurrency Similar to the Purchase of Shares?

Yes. After all, buyers exchange funds with sellers of digital assets, and the price of these assets is determined by demand and supply. Transactions are carried out online, and both types of these investments entail certain risks.

Cryptocurrencies and stocks behave similarly. If you traded on the stock market or forex, then you will have absolutely no problems with the interface of any cryptocurrency exchange. But it is worth noting, although the fundamental analysis (fundamental analysis is the approach used by investors to determine the internal value of a cryptocurrency...) of a cryptocurrency or token is slightly different from the analysis of shares, the basic trading mechanism, and general technical analytics are almost identical.

For example, similar types of orders are available in both markets. Market orders are either bought or sold at the current market price. Limit orders have a set price at which the trader wants to buy or sell the asset. A stop-loss order works on the same principle as a market order: it is carried out only after reaching a certain value of the price.

Moreover, intraday stock trading is very similar to spot cryptocurrency trading. In intra-day trading on the stock market, the trader speculates on the securities exchange rate for one trading day. The same short-term trading strategies apply to cryptocurrencies, with the only difference being that cryptocurrency markets never close.

Cryptocurrencies apply such day trading strategies as swing trading, range trading, scalping, and arbitration transactions. The cryptocurrency market is characterized by volatility and deep liquidity, but these are the most important conditions for profitable intraday transactions.

Main Differences Between Cryptocurrencies and Stocks

The growth of the crypto portfolio by more than 1000% in a matter of weeks is not usual in the crypto market, but still, this happens. The ability to generate significant profits in a short time and a low barrier to entry attract more and more investors. The threshold for entering the cryptocurrency market is quite low because you can trade them in tenths and hundredths. However, the higher the potential for substantial earnings, the higher the risk.

Cryptocurrency prices (to put it mildly) are not stable, many experts consider cryptocurrency trading a gamble rather than a real investment. Stock markets, by the way, are also volatile, although not so significant.

The main differences between cryptocurrencies and stocks are best noticed when considering the following characteristics.


Liquidity reflects the ability to quickly and freely buy or sell an asset on the market. Crypto markets are inferior to stock markets in this indicator, since stock markets have higher trading volumes, and, as a result, higher liquidity. In the crypto market, there are significantly fewer active traders, respectively, and liquidity is less.

But cryptocurrency is different. Bitcoin, for example, is the most liquid digital currency, it is traded by most traders.

The low market capitalization of coins, tokens, and small crypto exchanges often creates liquidity problems and makes these assets unfavorable for investment. But when trading shares, similar problems arise. For example, when investing in OTC small stocks or working with brokerage companies with micro capitalization.


Buying stock on the stock market makes the investor a shareholder and awards him a share in the company. The shareholder has the right to various privileges, such as capital gains or losses, dividends on profits, as well as the right to vote in solving various issues of the company. However, if the purchase passes through a brokerage company, then technically this means that the broker owns the shares and not the real buyer. Very few investors own shares on their behalf.

If you buy cryptocurrency, then you become the sole owner of the purchased coin or token. Usually, cryptocurrencies are traded and stored on exchanges. However, cryptocurrency can also be transferred to a separate electronic device (cold storage), which, as a rule, is safer than an online wallet. And if the secret keys to your wallet are kept safe, then you can not worry about theft.

Stock Markets Fluctuate Only During the Trading Day

Cryptocurrency markets, in turn, never close and are influenced by other digital assets, events in the crypto space, and changes in world stock markets.

Because of this wide range of variables that affect the market around the clock, cryptocurrencies are more volatile compared to stocks. High volatility means less price stability, which can stop corporate investors from investing in cryptocurrencies. It also means that traders have more opportunities to enter and exit trades and make high profits.

Non-Stop Trading

The work of cryptocurrency exchanges without breaks and weekends gives wide freedom to the trader. If a trader is profiting from short-term speculation, he can plan his time regardless of location, time zone, and schedule, and at any time connect to the market to find interesting transactions.

At the same time, it is important to understand what time the bulk of crypto traders of a particular region wakes up and take into account that with the arrival of a large number of new players from a certain region, the price can sharply move in one direction or another. At the same time, the availability of the market 24 hours a day does not indicate that it is necessary to monitor cryptocurrency quotes around the clock

High Volatility

With the appearance of cryptocurrencies, for the first time in human history, private investors had the opportunity earlier than institutional investors to gain access to a new promising class of assets.

Cryptocurrencies are the first market where there is practically no institutional capital, and this, in turn, generates volatility.

Volatility creates several factors: private investors have a higher rate of return on capital, the timing of capital placement is shorter, and the competence of participants is lower.

Free Cryptocurrency Market

Stock markets are regulated by law, and margin requirements are quite strict.

Trading derivatives in the cryptocurrency market is much more affordable than margin trading in the stock market. On the leading derivatives exchange, the minimum deposit is only one US dollar. In the stock markets and the memory, they would not hear about such figures. The size of the credit shoulder on leading exchanges of digital assets varies from 2 × up to 100 × (or even more).


In digital assets, the price is formed according to the classic model of the balance of supply and demand, since the amount of a particular currency is limited and, by regulating the number of those coins in circulation, it is possible to form a price.

The price in traditional markets consists of many factors: forecasts of analytical agencies, financial indicators of companies, ratings, government regulation, news background, and other dependencies. Crypto exchanges are often accused of inflating volumes to get a higher rating and attract more traders.

So far, there are parallel ratings of exchanges and trade volumes showing very different results, but soon indexes will begin to form the current leaders of the traditional market, and they can be more trusted.

Protection and Insurance

Due to low volatility, investment portfolio insurance is practiced in traditional markets. This financial instrument benefits both insurers and investors, as it helps protect investments in force majeure.

This is not practiced in cryptocurrency markets, since movements can be so strong that insurers simply do not have enough funds to cover losses if chaos begins in the market. The insurance market in the field of digital currencies is just beginning to form, and derivatives are already appearing, such as options for Bitcoin and Ethereum.

If we talk about the DeFi strategy, then insurance projects appear that take on the function of an insurance agent, that is, they will reimburse funds in the event of unplanned losses, such as protocol hacks, and loss of assets by a smart contract that invests them in the interests of the user.


The goal of diversification is to hold assets that manifest themselves differently in different markets. Stocks have fewer options for diversification, because all stock markets, as a rule, are influenced by the global economy. Stocks and bonds are affected by inflation and monetary and economic policies.

The low dependence of Bitcoin and Ethereum on securities and stock market assets makes investing in cryptocurrency an attractive portfolio diversification strategy. Cryptocurrency prices largely depend on the prices of the largest coins, for example, BTC and ETH. Stocks and bonds depend on a variety of economic factors, individual indicators of companies and sectors, as well as on demand and supply within the corresponding indices, industries, and services.

Cryptocurrencies or Stocks: What is Better for Short-Term Investments?

Cryptocurrency is a promising short-term investment with the potential for both rapid high profits and equally rapid losses. The average yield on the stock market is about 10% per year, but the yield on Bitcoin, which became the most profitable asset of the decade, is 230%.

Keep in mind that digital assets can grow greatly in a few hours or collapse in a matter of minutes, as happens when executing the "pump and reset" scheme. Not all transactions bring stable and guaranteed profit. However, the volatile state of cryptocurrency markets makes them an ideal tool for traders who want to make quick money.

Cryptocurrencies or Stocks: What is Best for Long-Term Investments?

The stability of stock markets attracts many long-term investors. To illustrate traditional market timeframes, the S&P 500 has been watching the performance of the five hundred largest US companies for 46 years, 10 of which were unprofitable according to the index. However, in the long run, portfolios still grew.

In addition to the constant risk associated with high volatility, crypto markets also face the influence of authorities, slow implementation in the rest of the world, and cybersecurity threats. Despite these risks, the cryptocurrency market can become a useful tool if you study how it works and act carefully.

Regardless of whether you invest in cryptocurrency or stocks, the right way is to play for the long term. If you are not an intraday trader, then it is better to avoid speculation on short-term volatility.

In Conclusion

When choosing an asset for trading, it is worth building on your experience, trading strategy, and the amount you are going to invest. Stocks are better suited for those looking for predictable, limited investment growth in the long run in the face of low volatility. Cryptocurrencies are better suited for those who want to diversify their portfolio and insure it against inflation and factors that negatively affect financial markets.

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