Cryptocurrency and stock trading are elementally different from each other in many ways. They are two different methods of gaining profit from the financial markets. The primary goal of investing is to build wealth gradually over an extended period of time. Trading involves frequent buying and selling of stock with the aim of generating returns in the short term.
In conventional stock trading, the investors often create a diverse equity portfolio in various companies and trade stakes in public corporations. On the contrary, cryptocurrency trading is concerned with investing in cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and DeepOnion with the aim of benefiting from an increase in market value in the long term.
Some cryptocurrencies have been around the market for some time while other recent altcoins such as DeepOnion seek to outsmart the competition. The entire cryptocurrency market is depending on a large group of speculative investors who seek to receive future gains from their investment in cryptocurrencies. It is seen as a safe haven asset, a currency, a digital gold and a long-term investment.
The stock market is totally different from cryptocurrency market in the sense that most of them make good use of high-performance trading platforms to trade daily and gain profits from movements within a short period of time. Furthermore, investors can either invest through stockbrokers or become accredited investors to be able to trade public stocks.
It is one of the riskiest ways of earning profits unlike the former. Anyone can invest comfortably in cryptocurrencies without any restrictions or boundaries seen in stock trading. There are many reasons why I believe masses of stock traders will soon join cryptocurrency. Read further to understand why most investors prefer cryptocurrency trading and the grave dangers associated with the stock trading market.
Dow Jones: Was This a Market Crash? What Is a Crash?
A stock market crash happens when a stock index drops more than 10% in a day or two. It is caused by frightened traders as a result of an unexpected economic event that causes panic.
Dow Jones makes a good example of the world’s leading stock exchange market that suffered the worst day ever in over six years following a plunge in the global stock markets. What really happened? The Dow dropped by about 4.6% causing investors to turn to other options amidst fears of skyrocketing interest rates – ‘This was volatility unleashed’. The Federal Reserve indicated that it had higher expectations of an increase in inflation pressures through the year.
Bullishness, complacency, and optimism were at an all-time high in the middle of last month and it sent financial shockwaves to the stock traders. Robert Kaplan, a member of the Fed’s main interest-rate setting committee predicted an increase in rates by more than 0.75% points if the wages continue to rise strongly and the economy maintains its fast growth rate.
The likelihood of defaults was increased by was increased by the recent declines in values. Far eastern markets fell overnight and Nikkei was the worst affected with a plunge of about 2.5% to 22,682. The reason why most stock traders are throwing a hissy-fit at Dow Jones is that the economies around the world are improving.
This implies that there will be less stimulus from central banks and thus higher interest rates making it unfavorable for the stock traders. Since they have been long-time profit seekers, what is their next plan? Others have already joined the cryptocurrency market and I expect to see more of them in the subsequent years. Unlike stock trading, cryptocurrencies always come back stronger whenever they experience a short plunge. Traders want the security that their investment is safe and a short turn of events can send some packing.
Why The Stock Market Takes Long to Recover
Wall Street has taken a considerable amount of time to recover from crashes and investors have lacked confidence in what they called a profitable short-term investment. It might take them some time to decide whether it is safe to invest all their money in the stocks once again. Perhaps their best option will be to join cryptocurrencies as a safer long-term investment. To understand why the stock market takes a longer time to recover, we can long at its history of recovering from the best-known crashes. This analysis will also cover the amount of cash it needs to recover following the latest plunge.
Dow Jones Industrial Average was sent down 508 points when the market crashed on 19th Oct 1987. The blue chips had lost 36.1% (938) points reaching a close of 2,722.42 on 25th August 1987. It took more than 15 months for the Dow to resume its pre-crash level and another 2 years to reach a new closing high of 2, 734.64 on 24th August 1989. It is really a long period of time for a crypto-investor the fact that cryptocurrencies take a shorter time to bounce park to the norm.
The Dow has realized a large percentage drop to regain this time around. The average had fallen by 40.3% a year earlier from its record of 14,165.43. It fell by 26% most recently from its close before sending the stock plunging and the freeze-up in the credit markets. The primary reason why the stock market takes a long time to bounce back is that traders lack trust in the price trends of the stocks and wouldn’t want to suffer the risk for the second time.
So, what does this mean? Those paying attention might wonder: Should I sell my stocks and purchase DeepOnion like my friend keeps saying? Essentially, are these signals to buy or sell? It feels like a smart question since momentum traders would make good money by getting deeper into trends. Value investors will take a different approach on the same to scoop up undervalued assets.
Truth be told, investing in stock trading comes with higher costs and risks compared to cryptocurrency trading. This does not mean that people who trade in cryptocurrencies don’t face risks, of course, they do. But what makes them profitable in the long run? Simple question, they take advantage of the price movements and short plunges as a market correction and that the prices bounce back stronger than they used to be.
Furthermore, they take a shorter time to come back up unlike stock trading which helps maintain the trust of the investors. There are many questions you need to ask yourself when thinking of investing in stocks or in cryptocurrencies. Am I taking too much risk on this stuff? The bigger picture that we should focus on is the fact that the economy, the stock market, and your financial fate are intertwined but also separate. At the end of the day, your investment decision lies on what returns you seek from your short-term or long-term investment.
Similarities Between Cryptocurrency and Stock Trading
It is important to say that both of these financial markets function in almost a similar manner. The price of cryptocurrency and stock markets are determined by demand. This means the sum of money investors are willing to stake for a share or a currency. When someone decides to pay more than the initial person then the price will definitely go up. When no one is willing to pay a certain amount of money for a specific period of time, and another investor is willing to release their ownership for less, then the price goes down.
Another similarity between currency and the stock market is that they can be valued based on the idea behind the two. A currency market is based on the idea while a stock market is based on the business behind it but the value in both to some extent lies behind the idea. Both stock and cryptocurrency market are far valued in the traditional fiat currencies. This concept is likely to change when cryptocurrencies achieve their dream but we will stick with this for now.
Why Most Investors Prefer Cryptocurrency to Stock Trading
Each cryptocurrency market is unique in its own way. Bitcoin is known to have high volatility and its price fluctuates with the ‘perceived’ value. Its perceptions also change rapidly. Ethereum on the has a semi-tangible value and can be considered as a fuel for computations. It can be used to run applications on a blockchain.
DeepOnion offers 100% anonymity, privacy, and security while allowing faster and untraceable transactions. DeepOnion is now integrated with OBSF4 and Meek making it usable even in blocked countries. Today it was announced that they will also be releasing a "Stealth Address" update which will put them ahead of many others in regards to privacy. Other cryptocurrencies such as Ripple, Litecoin, Dogecoin, and Rash have something unique to talk about and that’s what makes them the best long-term investments for crypto-investors.
The stock market is totally different from the cryptocurrencies. The stocks represent ownership in the company and they have extremely tangible value. The value of the company is likely to fluctuate but traders hold on to the fact that the company still has some value such as assets, income etc. In the stock market, a trader invests in the company while in the cryptocurrency market, people invest in the currency or the technology.
Unlike stock trading, you never get to own any part of the company in cryptocurrency trading even if the price of the currency is affected by the business of the company. Let us look at a comparative study that will help you determine why the cryptocurrency market is highly favored compared to the stock market.
- Profit-Making Capacity
It requires a lot of patience to invest in the stock markets. Realizing a considerable amount of profit on investment seems to be a low process and takes longer – a few years to be precise. Cryptocurrency can be predicted easily on what future trends they are likely to follow.
A new investor who stakes some amount of money in a new cryptocurrency such as DeepOnion is likely to get higher returns on investment in a few months while taking advantage of a movement in prices in the crypto-market.
The volatile nature of Bitcoin has been popular because of massive swings in its value in a very small time period. Choosing to purchase DeepOnion or any other cryptocurrency with a similar amount of risk taken when investing in stock markets, could prove to be a better alternative in terms of the capacity to make profits.
- Global Reach
Cryptocurrencies have no borders and they are accepted in several countries worldwide. Anyone can choose to trade in cryptocurrencies at any time as long as they can access the internet. Every transaction is done digitally and involves a lot of privacy and security.
Cryptocurrencies are global in nature and can be transferred easily with incredibly lower transaction fees. On the contrary, a variety of traditional investments are limited to qualified institutional buyers and they require formal accreditations. Furthermore, they invite high trading fees which turn out to be costly in the long term.
The quality of DeepOnion and other cryptocurrencies is addressing the concerns of several retail investors and large institutions while inviting them onboard. It lacks restrictions and boundaries like in stock trading where you have to seek a broker.
- Supply
It is a fact that Bitcoin can never be created beyond the capped 21 million number. Each other cryptocurrency has a total amount of supplied coins that are circulating to show trust to the investors that they have the potential to realize profits. The rise in demand for cryptocurrencies is influenced by the large influx of merchants who continue to use Bitcoin and other altcoins.
The limited supply factor is of much importance to the community as it ensures the demand is always higher than the supply. This concept makes it sensible to invest in the cryptocurrencies compared to stock trading where you assume part of the ownership of a company. In addition, such limitation on supply is not imposed in the stock market. This creates a trend that is predictable between demand and supply.
- Risk Factor
The volatile nature of the Bitcoin system gave raised some huge concerns to the investors the fact that it is based on demand and supply. However, the risk is of a similar weight when compared to the stock market.
The primary distinguishing factor between the two is that the stock market is backed up by the government while Bitcoin and other cryptocurrencies belong to a decentralized network.
Despite the discrepancies on the risk factor associated with the two financial markets, there are many investors who have trusted the crypto-network over a long period of time. This is because they have realized substantial profits that range in millions of dollars ever since they started investing in cryptocurrencies.
There is more advantage to cryptocurrencies being decentralized as there is no government interference. No one can look into your personal property since the payments are made secure and untraceable.
Cryptocurrencies work on the principle of providing privacy to crypto-investors and they become profitable over time with the changes in price movements.
- Ease of Trade
A considerable amount of investment is taken away by the stock markets as charges, taxes, brokerage charges and much more. One has to go through the hassle of looking for a registered broker to start trading on the stock market. As if that is not enough, the registered broker is the one to create a demat account for you and you will further have to lose brokerage charges as a considerable part of the investment.
On the contrary, purchasing cryptocurrencies such as DeepOnion is lucrative as it involves minimal transaction fees. It facilitates clean and safe transactions that are transparent, untraceable and non-reversible. All you need to do is to pick an ONION wallet and ensure you provide the right wallet address while trading. Cryptocurrencies are generally accepted in most countries around the world as they have become a global phenomenon. They stand to remain independent regardless of fluctuations in value.
Cryptocurrencies are not affected by government policies or financial institutions. Transactions made through Bitcoin are cheaper and incorporate lower transaction fees.
- Cryptocurrencies Trades 24/7
The crypto-exchanges usually operate around the clock contrary to the stock markets that have limited opening hours during the day and shuts down for the most part of the weekends. Although most of the crypto-exchanges maintain the same price range, they come with occasional arbitrage opportunities. Unlike stock trading, cryptocurrencies will never disappoint when it comes to delivering shivers that are exhilarating down your spine. You can always spend the whole day tracking changes in prices, different exchanges, and various predictions if you want to.
- Volatility
Bitcoin is famous for its frequent and rapid price movements that can even happen throughout the day. It is one of the major drawbacks for buyers and investors but traders always have another exciting opportunity to accumulate quick profits. Bitcoin went up by almost $2000 in a span of two weeks reaching an all-time high. This shift only confirmed the capricious nature of a cryptocurrency and the difficulty in price prediction. At the same time, this change is what makes cryptocurrency trading more fun and interesting compared to stock trading.
What Causes Stock Prices to Change?
Market forces usually influence the prices in the stock market every single day. This implies that the major cause of a change in share prices is as a result of demand and supply. If more people want to purchase a stock (demand) compared to selling (supply) then it will lead to an increase in prices. Alternatively, if more people prefer selling the stock instead of buying it then it will lead to a fall in prices because the supply would be greater than the demand.
It is very simple to understand the nature of demand and supply if you have been an investor for some time. What most people find it difficult to comprehend is what makes people prefer a particular stock and turn their backs on other stocks. This concept stems down to determining the positive and negative news of the company. This problem has many solutions and any investor you ask this question will have their own ideas and strategies for solving the issue.
The principal theory behind the change in prices is that the price movement of a particular stock shows the attitude of investors towards a company’s worth. The company’s value should not be equated to the stock price.
The value of a company is usually its market capitalization and can be determined when the stock price is multiplied by the number of outstanding shares. Not only does the stock price reflect the current value of a company but also reflects the growth expected by investors in the near future.
The earnings of a company are the most significant factor that affects its value. Earnings are the substantial profit made by the company and no company can survive without them in the long run. This can only make sense when you think about it. A company that doesn’t make money or earns profits from their investment will definitely not stay in business.
Public companies usually report their earnings once each quarter (four times a year). The rabid attention is watched at these times by the Wall Street which are known as earnings seasons. The primary reason behind this is that the future value of a company is based by on their earnings projection by analysts. If the results of a company are better than expected, then the price shoots up and the price falls when the company’s results are worse than expected.
The sentiment towards a stock cannot be changed only by the earnings which in turn changes the prices. Dozens of internet companies during the dot-com bubble rose to have market capitalizations based on billions of dollars and they never made even the smallest profit. We are all aware that the variations did not hold and almost every other Internet company visualized their values shrinking to a fraction of their highs.
It still remains a fact that prices moved that much implies that stocks can be influenced by factors other than the current earnings of a company. Hundreds of variables, indicators, and ratios have been literally developed by investors. You might have heard of the P/E ratio and other obscure and extremely complicated names such as the Moving Average Convergence Divergence (MACD).
Therefore, what is the main cause of a change in stock prices? The short answer is that no one is certain since different investors give varying opinions about the same. Some believe that it is not easy to predict the trend in which stocks will change in price while others think that they can determine when to buy and sell by drawing charts and looking at the movements in price.
The only thing that is clear is that the stocks are known to be volatile and can also change in price just at almost the same level as cryptocurrencies.
The main points to grasp from this discussion point of view are the following;
- The stock price is determined by the nature of demand and supply at the most fundamental level
- Theoretically, the investors’ valuation of a company is affected by the earnings but there are other indicators that are used by investors to predict the stock price. The stock prices are ultimately affected by the attitudes, expectations, and sentiments of the investors
- Market capitalization is the value of a company and it is determined when the stock price is multiplied by the number of outstanding shares. It is meaningless to compare only the share prices of two companies.
- There are a variety of theories that try to elaborate the movement of stock price and how they occur. It is very unfortunate that no single theory can explain everything in detail based on the complications associated with the stock market.
What Causes Price Fluctuations in Cryptocurrencies?
Most of you might be wondering what influences the price of cryptocurrencies, especially Bitcoin to go up and down so frequently. Are they similar factors that affect the change in stock prices? Naturally, the change is brought about by the rapid buying and selling of the currency. However, there are a few factors that push crypto-investors to do so. These include;
- Demand and Supply
All cryptocurrencies are set to have a limited amount of coin supply. Bitcoin, for example, has its currency availability capped at 21 million. This implies that the demand will keep increasing while there will be a decrease in supply. Despite the nature of demand and supply affecting prices, it is believed that their value will keep growing even more as a result of a limited supply.
- Government regulations
The price of cryptocurrencies is usually affected every time a government releases a statement about the cryptocurrency legislation. Cyprus acts as a good example where the spike in price was not caused by the economic crisis per se but by people purchasing Bitcoins. It is said to be a domino effect and it is driven by the citizens and not by the central governments.
- Changes in technology
The blockchain is the backbone of Bitcoin and other cryptocurrencies such as Ethereum, Ripple, DeepOnion, Dogecoin, and Litecoin. It is a technology advancement behind the cryptocurrencies that can benefit the network by bringing it much closer to the people. A blockchain is a continuously growing list of records that are secured and linked by a cryptography. DeepOnion has been able to improve its situation through the introduction of PoS, larger block sizes and faster block times.
Bitcoin and Ethereum have a maximum throughput of 3 and 7 transactions per second respectively. DeepOnion’s block size is 1.5 MB and boasts an average transaction size of 500 bytes. Cryptocurrencies Blockchains as an effective solution to numerous problems facing the existing financial systems.
- Stability of the cryptocurrency network
The price of a cryptocurrency is likely to drop whenever there is a security breach or hacker’s attack on the network. People naturally lose their trust and would want to secure the funds that have not yet been affected by the price fluctuations.
Bitcoin and other cryptocurrencies do not have the same backup compared to the Dollars, Euros or any other fiat currency. Therefore, it cannot be compared to the local banks and regulatory institutions. The trust of a cryptocurrency lies in the open public ledger in whichever investor has an access to.
Why Cryptocurrencies Do Bounce Back Stronger After a Short Plunge
The value of Bitcoin suffered a plunge last month as a result of fear of the regulations imposed by governments in different states. This caused price fluctuations in all other altcoins before they started stabilizing. It bounces back at a higher rate compared to the stock exchange markets such as the Dow. Bitcoin is so volatile and many expect its value to increase unpredictably.
Last year, it experienced a rise in prices which caused increasing amounts of interests in other digital currencies such as Ripple, Litecoin, and DeepOnion. Most people now seek to join digital currencies and DeepOnion might have caught the interest of many following its high reputation since its inception. Numerous crypto-investors opt for huge potential gains in future and prefer to start small before going large.
Predicting the current trends of new cryptocurrencies such as DeepOnion, early investors are likely to benefit much from price movements in a few months to come. Other leading cryptocurrencies such as Bitcoin and Ethereum seem to set the pace for other altcoins and many investors prefer the potential gains associated with cryptocurrencies compared to stock trading.
Another reason is that the cryptocurrency market acts ten times faster than stock market affecting everything within its scope. This means that the prices go up faster and prices change at larger magnitudes than expected.
Conclusion
As we come to the end of this topic, you may be wondering whether to invest in cryptocurrencies or the stock market. The answer lies in our previous discussion based on the amount of risk placed on the stocks compared to cryptocurrencies. The duration stocks take to bounce back from a plunge is too long for an investor who wants to gain substantial profits over a small period.
Other stock traders have chosen their fate by joining leading cryptocurrencies such as Bitcoin and Ethereum. Some prefer joining and growing up with new cryptocurrencies such as DeepOnion. It is one of the cryptocurrencies that has attracted several investors because of the high speculation in price movement. If you never learned a lesson during the early stages of Bitcoin, then you might fail to realize the potential of DeepOnion, the hidden goldmine. What are you waiting for? Visit deeponion.org to be part of a community with a greater vision.
You officially owned it Mr DogLover.
Amazing article! As always. :) Still a little too short for my tastes. lol kidding
A Master class ... Thank you very much for sharing your knowledge.
Imagine the increased volume should stock traders enter the cryptocurrency markets ...
Wonderful article, even though it was longer one I enjoyed reading it. :)
Upvoted from me.