Understanding Crypto Market and Determining How It’s Different from Stock Market

Key points

  • Understanding What Crypto Market is?
  • Stock Market vs. Crypto Market

The current trends have shown that cryptocurrency is the new talk of the town. Promising returns in cryptocurrency has attracted the attention of many people. The market of the cryptocurrency industry is highly unpredictable and therefore gets compared to stock markets by many. Often people tend to get confused between the two.

Understanding What Crypto Market is?

In common man language, Crypto Market is a place where trading of crypto currency is carried out. But, in the crypto market there is no physical presence and are available in digital form. They are present on our screens and are operated over blockchain.

Crypto networks are not governed or administered by any government as they are decentralized. They operate over a network of computers and trading in cryptocurrency can be done via cryptocurrency exchanges. Wallets can be used to store cryptocurrencies.

Mining is used to create new cryptocurrency tokens and to approve a transaction. Until a transaction hasn’t been finally approved through mining it isn’t considered complete. When coins are sent from one user to another they are sent and received through these digital wallets. All the records of ownership of cryptocurrency are stored on blockchain.

Since the term blockchain has been used many times, it is essential to understand what blockchain is?

Blockchain are nothing more than blocks of data, which contain information about transactions.

From its status of being a currency of criminals and money launderers, crypto has come a long way and in future it is expected to revolutionize the media, gaming and health care industry.

In comparison to the stock market, the crypto market is very different. A stock market veteran may find it difficult to work in the crypto market. The biggest difference between the two is physical presence; stock markets are evaluated on the basis of physical assets and are backed by legitimate companies.

On the other hand cryptocurrencies are evaluated on the basis of hype and generally have no physical assets. In the case of crypto the valuation is more subjective.

Stock Market vs. Crypto Market

Apart from the difference in valuation there are few other differences between the two.

  • Centralized and Decentralized Exchange

As mentioned earlier cryptocurrencies are decentralized, whereas stocks are under centralized structure. Decentralized means that there is no regulating authority to control crypto operations. This provides users with great control and transparency of their cryptocurrencies.

The biggest drawback of this is that the crypto market is always prone to frauds, which is not the case with stock markets as they are regulated and controlled by the government.

  • Volatility

Crypto market is covered with lots of risks, thus it is considered to be a lucrative market. This makes the crypto market a source of getting high and quick returns and also makes it unpredictable. Whereas, stock markets on the other hand are highly stable, and the returns on investment are easier to predict in the stock market.

  • Factors Controlling Profit  

In both the markets the regulating factor is demand and supply. But the key regulators of this demand and supply in both markets are different. In the stock market, key regulators are political decisions, natural disasters, any news about any organization to which stock belongs, etc.

In case of crypto it is regulated on the basis of the hype that it creates. At times the value of a cryptocurrency is dependent on its functionality.

Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.

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