Crypto and stocks: What’s the difference?

Many investors are starting to buy crypto in addition to stocks (and funds) as a way of diversifying their investments and participating in a new, innovative market. But there are many important differences to consider before buying.

Old school, new school

The ability to buy and sell shares of a company has existed for hundreds of years, but crypto is built on a whole new technology. The first cryptocurrency only launched in 2009, making it a fairly new concept.

And while trading both stocks and crypto has gained popularity recently among new investors, far fewer people own crypto compared to stocks.

Trading hours

The stock market is open for trading Monday through Friday from 9:30AM to 4PM ET. It’s also closed on weekends and most holidays.

But crypto trading never stops. You can trade crypto 24/7 (even when you can’t fall asleep at 2AM).

Volatility: It’s up and it’s down

There has been volatility in both the stock and crypto markets—meaning prices go up and down quickly in a short amount of time. But overall, crypto prices have been significantly more volatile than stock prices.

Both stocks and crypto prices have been influenced by supply and demand, market news, and investor sentiment, but crypto prices have been more sensitive to social media trends and changes in crypto trading regulations around the world.

Fractional buying

You can buy a fraction of a cryptocurrency or stock with as little as $1. The difference is really in what you own.

When you buy a slice of stock, you own a tiny share of a company. You share in that company’s profits and losses through the value of your slice.

On the other hand, crypto isn’t backed by a company’s underlying assets or earnings like stocks are. You own a piece of that crypto, but its value is really driven by supply and demand and potential future value of the coin or token.

Regulation and restriction

Stocks are highly regulated in the US and investing activity is overseen by many institutions that set guidelines and enforce rules to protect investors.

Regulation in the crypto space is still evolving, and at the moment, crypto exchanges are working toward safeguards similar to those of stock exchanges. Some countries (like the US) are creating regulations to protect investors and promote innovation in the growing digital payments space, while cracking down on illegal crypto trading activities. Others, like China and India, have gone so far as restricting or outright banning the ownership and use of cryptocurrencies as payment.

The bottom line

Both stocks and cryptocurrencies are becoming more accessible for new investors to buy and sell. But there are key differences in their value and how they function that you should consider as you get ready to invest.