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The stock market and the cryptocurrency market operate according to the same laws, but they have many differences. Features should be considered when choosing a place to earn money and a strategy of behavior. Traders’ analytics are changing; different methods and principles of risk management are used, based on the differences between the stock and cryptocurrency markets. That is why it is important to understand the differences in markets.
Cryptocurrency market: what is it, what features does it haveThe cryptocurrency market is the youngest financial market in existence. It appeared a little over ten years ago, and is still developing. The market is unstable despite the high liquidity of the crypt, so the beginner needs utmost attention and caution.
In simple words the cryptocurrency market is an online space, where people buy and sell cryptocurrencies. It is decentralized, but not controlled or supported by the government and other central bodies.
The market works through a large computer network; users can buy and sell cryptocurrency on exchanges, P2P platforms, online exchangers and other platforms.
The biggest difference between crypto and stocks is the value generation. Stocks are backed by real-life companies that produce some kind of product, for the sale of which they receive a profit. Cryptocurrency is generally not backed by assets. Its price is formed on the basis of the hype around the coin; some cryptocurrencies are also evaluated depending on the functionality.
High crypto volatility
The volatility of the cryptocurrency market today is one of the highest. The price of a coin can often change significantly in any direction during one day. This is also possible in the stock market, but only in relation to the shares of companies with a small capitalization.
Volatility means high risks because a trader’s capital can become halved in just a day or even a few hours. But this feature is one of the advantages of the crypt: by competently observing the principles of risk management, traders manage to earn quickly.
Profits earned in the stock market or cryptocurrencies are taxed. But cryptocurrency is more accessible to the common man due to decentralization. The stock market is closely related to specific exchanges that affect the liquidity of assets. Rules for access to stock markets are controlled by financial institutions associated with them; they are open, as a rule, to qualified investors. The cryptocurrency market does not have such strict rules now, it is open to a wide range, and everyone can get into it with a small starting capital if desired.
What factors control profits in the stock and cryptocurrency markets?
The principle of supply and demand works in both markets. But there are key factors that affect supply and demand. In the stock market, for example, these are changes in policy, news about companies that own shares, all kinds of natural disasters.
The cryptocurrency market works differently; prices depend on the hype created here. The reasons for changing the value of a crypt sometimes seem absurd. For example, in 2021, Elon Musk posted a tweet consisting of the word Bitcoin and a broken heart emoji. As a result, the value of the coin fell by 5.5% per day.
The value of the crypt is also influenced by the interest of users in a particular coin, the emergence of new startups associated with blockchain technology, increased interest in the coin from large companies, serious technical failures in the operation of popular exchanges, changes in the regulation of the circulation of cryptocurrency assets by government agencies.
The cryptocurrency market for beginners is a lot of incomprehensible terms and the risks of losing initial capital when choosing the wrong strategy. How to become more confident and be in the subject? Gain knowledge; communicate with experienced traders, share insights with like-minded people! A good solution for a beginner is to join the crypto community.
You will get structured information, professional traders’ advice and real experience in our Crypto Crew community.