At first glance, cryptocurrency exchanges look quite similar to stock exchanges – they both publish prices and match buyers and sellers. But when scrutinized, striking differences emerge in terms of their general functionality and associated risks.
Both stock and crypto exchanges are platforms for asset trade, but the resemblance ends there. For instance, unlike stock exchanges, a lot the major crypto exchanges not only hold on to investors’ assets but also charge brokerage commissions for the trades conducted their platforms.
However, hybrid crypto exchanges like Xcrypt are changing the script by providing a trading platform that charges zero trading fee and allows you to store 99.5% of your funds offline.
How Different is the Cryptocurrency Market from the Stock Market?
- Assets traded
Type of asset
This is the main difference between stock exchanges and cryptocurrency exchanges. A stock exchange hosts the trading of company shares or stocks, while cryptocurrency exchanges host cryptocurrencies or digital assets.
Shares represent ownership or equity in a company. Conversely, cryptocurrency tokens don’t necessarily represent equity in the company that issued them.
Issuance of assets
Subject to the relevant regulations, a company can raise more capital by issuing shares. Conversely, the number of crypto tokens issued is capped. Consequently, the value of valuable cryptocurrencies is only determined by the forces of demand and supply.
- Maturity of the Market
The stock market has been around for far longer than the cryptocurrency market, and therefore it’s more established. There is a robust legal framework that moderates stock exchanges and they are backed by governments.
With this maturity, the stock market has higher diversity of trade and higher volumes. The established nature of stock markets, however, means that dominant traders have already established themselves, and this can disadvantage upstart investors.
Cryptocurrency exchanges are, conversely, young and are still in the developing.
Volatile markets usually rouse extreme caution. But in reality, while volatile markets present some disadvantages, they also offer some advantages.
Low volatility avails a stable market which, in turn, ensures stable investment. This, however, also means longer waits for financial rewards. That said, given the strong link between stock exchanges and corporations and governments across the world, the stock market is vulnerable to geopolitical shifts.
Conversely, the cryptocurrency market is very volatile. And, because of the far smaller marker depth, cryptocurrency exchanges are vulnerable to the trade activities of the ‘whale’ traders. This means the trade decisions of big investors can impact market prices.
But, because cryptocurrencies aren’t intertwined with governments, they are largely insulated from geopolitical influences.
- Market Reach
Myriad regulations have overtime developed around stock exchanges. If you want to trade stocks, you need first to get a stock broker and then, you need further approvals before you start trading. Stock trading is also restricted to business hours.
Conversely, getting started in the cryptocurrency market is a pretty straight forward process. And, the cryptocurrency market is accessible globally 24/7.
- Fees and Regulations
Stock exchanges are heavily regulated; there are rules in place to maintain a level playing field and to protect investors and traders.
There are also costs and fees that come with navigating the stock market. Brokers charge a commission or fee. Banks charge for payments. And, your gains are taxed.
Conversely, Trading cryptocurrency, especially on hybrid exchanges like xcrypt, incurs almost zero costs. Xcrypt is also registered in Malta, a crypto-friendly state, which means there are no unnecessarily restrictive regulations limiting its operations.
The Future of Cryptocurrency Exchanges
Although stock exchanges and cryptocurrency exchanges are in some ways similar, they are also in many ways different.
For crypto investors and traders, the characteristics of the cryptocurrency market – global reach, freedom from regulation and huge fee, insulation from global geopolitical events, and considerable gains to be made thanks to volatility – provide an incentive for sustained interest and investment.