Crypto trading vs Stock trading: Which is more profitable in 2021?
By Peter Jack on The Capital
Since the start of 2020, the crypto market cap has increased from $218.4 billion to $303.1 billion, a 65.92% increase. Approximately 5,600 cryptocurrencies are being traded right now. This growth has attracted traders worldwide but cryptocurrency trading works in a different format compared to traditional processes like Stock trading. We will talk about the difference & what should be your choice if you plan to invest in 2020 and what to expect.
- It is Easy to Start Crypto Trading
As mentioned earlier, you are required to do some paperwork to get started using fiat exchange as traditional finance is regulated industry all over the world. Companies that offer trading services require a great amount of information and sometimes even declaration like “professional investor” which again adds to cost & time required to start trading.
In the meantime, it is far easier to start trading crypto, not only because you will need less capital to have a chance at seeing some profits, but because the paperwork to start trading is often simpler and less time consuming with no requirements for intermediaries such as brokers.
- Making Profits
With the stock exchange, it is difficult to trade. It comes with hurdles with a good amount of paperwork and costs even before the first trade can be executed and even after this work making a profit is a long term process and requires initial capital for things like margin & trading fee. Also, efforts are required to analyze the news and business models, local & world economies, and other indicators like signs of recession which according to experts can hit anytime due to impact because of COVID-19 & trade wars between major economies of the world.
In comparison, you can jump into crypto trading with as little as $100 worth of cryptocurrencies which allow you to take advantage of the market is much more volatile compared to traditional one but that allows you the opportunity to earn a greater profit. Volatility is the two-sided coin of the crypto market, offering the potential for profits and losses in equal measure.
- Insider Trading is Real
Every asset in the market is prone to inside trading. In stocks, insider information such as financial statements could be used unfairly by insiders such as company executives. The same things apply to cryptocurrency, where large holders and issuing companies are some of the insiders. Since they are unfairly attached to the latest information, insiders may decide to sell or buy based on whether they look forward to selloffs or rallies.
Another important difference between these two is their availability for trading. As most of the traditional exchanges have their sessions, due to which there is no trading on weekends or even on public holidays. Hence, events happening in real life outside these days won’t have an instant impact on the same due to which it might affect your last trade before closure due to trend change.
On the other hand, the crypto exchange works 24/7 and instantly react to any event occurred outside, so, acting fast can help you in making profits.
- Risk Involved
It’s important to remember that Bitcoin pricing tends to be more volatile than stocks. In 2015, Bitcoin’s price fluctuated between $200 and $500 per coin. However, during 2017, the price suddenly rose, reaching a high of $19,891 in December, before dropping below $3,500 in December 2018. In 2020 alone, Bitcoin’s price has bounced between $3,858 on March 12 and $9,074 on July 5.
Similarly, we have seen companies going bankrupt & stocks collapsing overnight recently happened with Thomas Cook (One of the largest touring company in the world).
As the crypto market offers some valuable opportunities to traders and there are tools which can be used to lower the risks when it comes to volatile factor and can always be advised to make crypto trading part of your diversified investment portfolio.