Differences Between The Stock Markets And Crypto Markets
- Owing to its old age, the stock market is more stable and less volatile. The crypto market, on the other hand, is accustomed to wild price swings. It is pretty normal to see double-digit percentage swings in a matter of hours.
- . Age is a significant factor in trading. The stock market has been around for a long time, while the crypto market is only about a decade old. This means that market value and trade volume in the former is much larger compared to the latter. The younger age also contributes to the wild volatility experienced in the crypto market.
- . In the stock market, you invest in the publicly listed company shares by buying their stocks. In the crypto market, you invest in the idea, the technology, or the currency , but not the company behind the currency.
- Regulations. Since the stock market has been around for ages, regulators have had enough time to develop and implement rules and regulations governing the markets conduct. This contributes to the minimal volatility we highlighted earlier. In the cryptocurrency market, this is not the case. The regulators are still grappling with understanding the emerging asset class, and this lack of regulations are part of the reason for the markets wild nature.
Advantages And Disadvantages Of Cryptocurrency
Using cryptocurrency has several big advantages over traditional finance. They are:
- Speed. A cryptocurrency transaction can take as little as a few minutes to confirm. Once confirmed, the receiving party is able to spend the funds however they see fit. In traditional finance, it takes at least a day for a transfer to clear.
- Lower fees. In many cases, the cost of using cryptocurrency is substantially lower than using traditional financial institutions. There’s no fee for storing cryptocurrency, for example, whereas many banks charge a monthly fee. The cost to send money to someone internationally is extremely low compared to traditional international remittance services.
- No barriers to entry. Unlike traditional finance, there’s no need to have a valid ID or go into a bank to use bitcoin. There’s no credit check. There’s no know-your-customer information you need to provide. That can be extremely attractive for the millions of unbanked people around the world.
- Security. Cryptocurrency is much more secure than holding cash or using a debit card for transactions on the internet. A hacker would need your private key to steal the bitcoin held in your wallet. Furthermore, cryptocurrency transactions are generally anonymous.
There are also some disadvantages to holding cryptocurrency. They include:
Choose A Broker Or Cryptocurrency Exchange
If you’re interested in buying and selling cryptocurrency, the first step is choosing a platform to do so. Generally, you can choose from a traditional broker or dedicated cryptocurrency exchange.
- Traditional brokers: There are a few online brokers that offer ways to buy and sell cryptocurrency, in addition to other assets like stocks, bonds, and ETFs. These platforms tend to offer lower trading costs but fewer crypto features.
- Cryptocurrency exchanges: You’ll have many cryptocurrency exchanges to choose from, each with varying offerings of cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.
As you’re comparing different platforms, it’s wise to consider things like supported cryptocurrencies, security features, fees, storage and withdrawal options, and educational resources.
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Two: Connect Your Exchange To A Payment Option
After you have chosen an exchange, you will need to gather your personal documents. Depending on the exchange, these may include pictures of a driver’s license or Social Security number, as well as information about your employer and source of funds. The information you may need can depend on the region you live in and the laws within it. The process is largely the same as setting up a typical brokerage account.
After the exchange has ensured your identity and legitimacy, you will then be able to connect a payment option. At most exchanges, you can connect your bank account directly or you can connect a debit or credit card. Though you can use a credit card to purchase cryptocurrency, it is generally something that should be avoided due to the volatility that cryptocurrencies can experience.
Though Bitcoin is legal in the United States, some banks do not take too kindly to the idea and may question or even stop deposits to crypto-related sites or exchanges. It is a good idea to check to make sure that your bank allows deposits at your chosen exchange.
There are varying fees for deposits via a bank account, debit, or credit card. Coinbase is a solid exchange for beginners and has a 1.49% fee for bank accounts, with a 3.99% fee for debit and credit cards. It is important to research the fees associated with each payment option to help choose an exchange or to choose which payment option works best for you.
Cryptocurrency Or Crypto Is A Digital Currency Designed To Work As A Medium Of Exchange For Purchasing Goods And Services
Just about everyone has heard of cryptocurrency by now, but most people still don’t really understand what it is. More than just a form of digital cash, cryptocurrency and the technology underlying it have the potential to transform the financial sector and many other industries as well. Therefore, it’s worth taking your time to learn a bit about cryptocurrency.
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How To Invest In Bitcoin: Different Methods
There are several different ways to invest in Bitcoin, both directly and indirectly.
First, you can invest in a company that utilizes Bitcoin technology. Although Bitcoin is a risky investment, plenty of companies sell successful products that incorporate Bitcoin and blockchain technologies. You can find several exchange-traded funds that include shares from various blockchain-related companies, like the Amplify Transformational Data Sharing ETF . Youre not directly investing in cryptocurrency but in corporate stocks of companies that utilize Bitcoin. Its safer, and most ETFs in this category outperform the market.
Second, you can participate in Bitcoin mining. Bitcoin mining is simply allowing your computer to be used as a node for the public ledger. Its a topic worthy of its own blog post, but you should know that Bitcoin miners are rewarded with actual Bitcoin for their contributions. You could receive free Bitcoin without actually ever purchasing it.
Outside of what was just discussed, lets take a look at some of the most popular ways people are investing in Bitcoin today and what they mean for investors.
Long Positions On Bitcoin
Some investors want a more immediate return by purchasing Bitcoin and selling it at the end of a price rally. There are several ways to do this, including relying on the cryptocurrency’s volatility for a high rate of return, should the market move in your favor. Several bitcoin trading sites also now exist that provide leveraged trading, in which the trading site effectively lends you money to hopefully increase your return.
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Solana: Built With A Purpose
Solana was created by Anatoly Yakovenko, a former lead developer of operating systems for the chipmaker Qualcomm. Drawing on that engineering expertise, Yakovenko designed Solana as a developer platform for fast, scalable applications.
Specifically, Solana is a programmable blockchain, meaning it supports smart contracts. That’s a fancy term for self-executing computer programs that allow transactions to take place without third-party oversight. To that end, smart contracts form the core of decentralized finance applications, tools that allow consumers to lend, borrow, or trade cryptocurrency without going through a bank. And by eliminating the intermediary, DeFi applications promise to cut costs and improve access to financial services.
Currently, the value of Solana that is locked in DeFi applications sits at $14.2 billion, making it the third largest DeFi ecosystem behind Ethereum and Binance. However, Solana has an edge that could eventually propel it to the top of the list. Specifically, it’s currently the best performing blockchain in the world, offering throughput of 50,000 transactions per second and near-instant finalization times. To put that in perspective, Ethereum currently handles just 30 TPS, and it takes five minutes for those transactions to be finalized .
Cryptocurrency Vs Crypto Stocks
When most people think of investing in cryptocurrency, they think of investing directly in the currency itself. But it’s possible to invest in crypto without actually investing in crypto.
A crypto stock is a company that is involved in cryptocurrency in some way. That could mean the company offers crypto as a form of payment, it may have invested in crypto, or maybe it builds the technology behind digital currencies.
Take Tesla, for example. The company announced this year that it made a $1.5 billion investment in Bitcoin, and it also accepts Bitcoin as a form of payment.
NVIDIA is another example of a crypto stock. The tech company designs and builds graphics processing units , which are often used in the creation of cryptocurrency.
If you were to invest in Tesla or NVIDIA, you wouldn’t be investing in cryptocurrency directly. However, if crypto does become mainstream and is adopted as a standard form of currency, these companies could benefit from it. As a result, your investments could thrive.
Crypto stocks are generally safer than investing in cryptocurrency directly. This is because crypto is only a portion of these companies’ businesses. If digital currencies fail to see long-term success, the companies themselves likely won’t crash along with them.
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Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our investing reporters and editors focus on the points consumers care about most how to get started, the best brokers, types of investment accounts, how to choose investments and more so you can feel confident when investing your money.
Which Fintech Stock Is A More Balanced Cryptocurrency Investment
- Coinbase is the largest cryptocurrency exchange in America.
- Squares crypto and seller ecosystems are also rapidly expanding.
- One of these stocks is clearly a safer long-term investment.
Back in April, I highlighted Coinbase and Square as two potential ways to invest in the cryptocurrency market. Coinbase operates the largest cryptocurrency exchange in the U.S., and Square’s Cash App lets its users easily buy and sell Bitcoin.
At the time, I claimed that Square’s more diversified business made it a better investment than Coinbase. But since I made that call, Square’s stock has declined about 8% as Coinbase’s stock rallied nearly 18%. Let’s take a fresh look at both fintech stocks and see if my earlier thesis still makes sense.
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How To Mine Cryptocurrency
Mining cryptocurrency is the process of using your computing power to verify transactions on the blockchain. When you verify a block, you receive a reward and collect some fees from the transacting parties.
In order to get started mining cryptocurrency, you’ll need to have a computer you can dedicate to the process. You’ll need a computer with energy-efficient processors in order to make sure you don’t spend more on electricity than you earn from mining.
There are really only two viable processor options to mine most cryptocurrencies: GPUs or ASICs. A GPU is a graphics processing unit typically found in gaming PCs or high-end PCs used for graphics rendering. ASIC stands for application-specific integrated circuit. It’s a chip designed specifically for one task — mining a certain cryptocurrency.
The advantage of ASICs is that they’re far more efficient. The disadvantage is that they’re much less flexible at what you can mine using them, and they’re more expensive than GPUs.
Once you have the hardware, it’s just a matter of setting up a cryptocurrency wallet and some mining software. Be sure to store your mining computer in a cool and well-ventilated part of your house since it will generate a lot of heat. And make sure you keep it connected to the internet in order to mine all day.
Once everything is set up, it’s a pretty hands-off process. However, you need to keep an eye on the cryptocurrencies you mine. A sharp drop in price could make the operation unprofitable.
Greyscales Bitcoin Investment Trust
Founded in 2013, Greyscales Bitcoin Investment Trust has become a leader in the cryptocurrency industry. In becoming a trusted name in a rapidly growing sector, Greyscale emphasized democratizing Bitcoin for the masses. While Bitcoin is already decentralized, Greyscale gives more people more access to the up-and-coming digital currency. More specifically, Greyscale is an investment platform on the capital market that builds transparent, familiar investment vehicles for a growing asset class with unlimited upside.
Greyscale owes its current success to making Bitcoin more accessible to everyone. In fact, Greyscale helped bridge the gap between the informed and the uninformed. To do so, Greyscale made it easier than ever to invest in Bitcoin. For example, Greyscale allows investors to hold Bitcoin in certain IRA, Roth IRA, and other brokerage and investor accounts.
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How To Buy Bitcoin With Paypal
It is also possible to buy Bitcoin through payment processor PayPal. There are two ways to purchase Bitcoin using PayPal. The first and most convenient method is to purchase cryptocurrencies using your PayPal account. The second option is to use the balance of your PayPal account to purchase cryptocurrencies from a third-party provider. This option is not as convenient as the first because very few third-party sites allow users to purchase Bitcoin using the PayPal button.
Four cryptocurrenciesBitcoin, Ethereum, Litecoin, and Bitcoin Cashcan be purchased directly through PayPal. With the exception of those who live in Hawaii, residents of all states can either use their existing PayPal accounts or set up new ones.
To set up a crypto account with PayPal, the following information is required: name, physical address, date of birth, and tax identification number. There are a number of ways in which you can buy Bitcoin through PayPal.
Some of them are:
- The existing balance in your PayPal account
- A debit card linked to your PayPal account
- A bank account linked to your PayPal account
It is not possible to use a credit card to purchase Bitcoin using PayPal. During the purchasing process, PayPal will display a price. However, the inherent volatility of cryptocurrency prices means that those prices are subject to change quickly. You should make sure that you have sufficient funds in your account to make the purchase.
What Are The Types Of Cryptocurrency
Before cryptocurrency investing, it is essential to know the types. There are many different types of cryptocurrency systems that you can invest in. Bitcoin is arguably the grandfather of all crypto. It has been around for over 10 years and its the largest cryptocurrency system in the world, with a market capitalization of about $128 billion. Here are some of the other cryptocurrency you can buy:
Litecoin: Created by a former Google employee, Litecoin is very similar to Bitcoin, but has shorter transaction times and lower fees.
Ethereum: Its a cryptocurrency, but the main focus is on purchasing applications without having to pay a middleman .
Ripple: This is a cryptocurrency that doesnt use blockchain technology. Its mostly used by corporations to move large sums of money.
Cardano: This is a blockchain-based cryptocurrency thats used primarily to store private data.
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Should You Invest In Crypto Stocks
Although crypto stocks may be less risky than investing in cryptocurrency itself, there are still a couple of things to consider before investing.
First, look at the company as a whole to decide whether it’s a solid investment. In other words, don’t invest in a stock only because of the cryptocurrency factor. The best investments are the companies that have solid fundamentals and are likely to remain strong over the long term. If they happen to be invested in crypto as well, that’s an added bonus.
Also, make sure you have a well-diversified portfolio if you decide to invest in crypto stocks. Building a diversified portfolio is a smart move regardless of where you choose to invest, but it can help limit your risk even further if your crypto stocks don’t perform well.
Investing in crypto stocks can be a smart way to diversify into cryptocurrency while limiting your risk. Just be sure you’re choosing your investments wisely and opting for stocks that have strong underlying fundamentals. By investing for the long term, you’re more likely to see success with crypto stocks.
Paper Wallets For Safety
Without a doubt, the safest way to store any cryptocurrency is by using a paper wallet. By following a few pointers below, you can set one up entirely for free. This truly makes you the master of your investment, and if precautions are followed, theres no possibility of your private keys being known by anyone else. Of course, this means that keeping a record of them is even more important. Losing private keys means youll forfeit the entire contents of your paper wallet
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What Makes Cryptocurrencies Different From Fiat Money
Fiat money money like the American or Canadian dollar is issued by the government, meaning theres a central authority that controls its value, interest rates, and supply . Many view this degree of government involvement in the mechanics of the free market as manipulation and as an archaic attempt to manage a vast and complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.
Cryptocurrencies, on the other hand, are decentralized all transactions are done peer-to-peer or through smart contracts and theres no authority overseeing them. Many people consider this a massive advantage over traditional money, because it gives them full control of their assets.