Stocks and cryptocurrency are both popular investment options, but they operate in very different ways. Engaging with stock exchanges is a traditional investment option, while crypto is a relatively new development that has only been around for just over a decade. So, what’s the difference? What makes each unique? What’s perfect for your investment portfolio?
One of the most significant differences between the stock market and crypto is how ownership is defined. When you purchase stock in a company, you are buying a share of that company, which gives you a stake in its future profits and losses. The value of the stock will fluctuate based on the company’s performance, news events, and broader economic trends.
On the other hand, cryptocurrency is a crypto asset that exists only in the form of data. Owning cryptocurrency means you hold a certain amount of that digital asset, which is recorded on a decentralized ledger known as the blockchain. Instead of prices changing based on how well a company does, the way people feel about the crypto space may have a big effect on prices.
Another one of the major differences between traditional assets and digital assets is price volatility. Most people think that stock prices are a less volatile investment than cryptocurrency. However, this can vary depending on the individual stock and the industry it belongs to.
Cryptocurrencies, unlike stocks, are known for their high levels of volatility. On the crypto market, it’s not unusual for the price of a digital currency to change a lot in a single day, sometimes going up or down by several percentage points. Crypto investors tend get used to cryptocurrency prices changing drastically within an hour
Stocks are heavily regulated by government agencies, which oversee the stock market and enforce laws and regulations designed to protect investors. These regulations are in place to ensure that companies provide accurate and transparent information to investors and that trading is conducted fairly and without manipulation.
In contrast, cryptocurrency is relatively unregulated (outside of Canada), with few laws in place to protect investors or govern trading. In Canada, Coinsquare is the only registered crypto IIROC investment dealer and marketplace member. The New Self-Regulatory Organization of Canada (New SRO) is the self-regulatory organization that oversees all investment dealers and trading activity in Canada’s debt and equity markets. This regulatory status means you can count on the same high standards that you have come to expect from your traditional financial institutions.
Buying stocks traditionally requires a brokerage account and a significant amount of capital, making it less accessible to many investors with limited resources.
Cryptocurrency, on the other hand, although also requires a brokerage account, can be purchased with much smaller amounts of capital. Digital currencies can be purchased directly through a cryptocurrency exchange for as little as $10 to start. Portfolio management may be more hands on with crypto investments.
Finally, stocks and crypto differ in terms of storage. Stocks are typically stored electronically in a central database. This means that ownership of stocks is registered and tracked by a centralized authority, such as a securities depository or brokerage firm.
Cryptocurrencies, on the other hand, are typically stored in decentralized digital ledgers called blockchains. A blockchain is a distributed ledger that is maintained by a network of computers around the world. Each computer on the network has a copy of the ledger, which is updated in real-time as transactions occur.
At Coinsquare, all client digital assets are held in cold storage at external, licensed trust companies that are approved, independently regulated digital asset custodians. Coinsquare uses only its own funds to facilitate client withdrawals. Our independently regulated custodial partners, Tetra Trust and Coinbase Custody, alongside our hot wallet provider Fireblocks, offer a combined $470M in insurance for customer assets. Additionally, all fiat funds are held at a regulated Canadian Financial Institution covered by government regulated deposit insurance.
In conclusion, while the stock exchange and crypto markets are fantastic asset classes, they differ significantly in terms of ownership, volatility, regulation, and accessibility. Whether you choose to invest in stocks or cryptocurrency ultimately depends on your individual investment goals, risk tolerance, and financial resources. Before you start building your crypto or stock portfolio, it’s essential to do your research and seek the advice of a financial professional before making any investment decisions or receiving investment advice.