Trading cryptocurrency and trading in stocks as well as financial markets may seem identical at first glance. But there are differences in these industries that cannot be ignored, as they make their own adjustments and can affect the success of the trades.
For example, American stock exchanges are open from 16:30 to 01:45 Moscow time, while Asian markets are open from 03:00 to 12:00. This does not apply to crypto exchanges.
The work of cryptocurrency exchanges without breaks and weekends gives wide freedom to the trader. If a trader is engaged in extracting profit from short-term speculation, he can plan his time regardless of location, time zone, chart, and at any time connect to the market to find interesting transactions.
At the same time, it is important to understand what time the bulk of crypto traders of a particular region wake up and take into account that with the arrival of a large number of new players from a certain region, the price can sharply move in one direction or another. At the same time, the availability of the market 24 hours a day does not mean that it is necessary to monitor cryptocurrency quotes around the clock.
For the first time in human history, private investors have the opportunity to gain access to a promising new asset class, such as cryptocurrencies, before institutional investors. According to him, cryptocurrencies are the first market where there is practically no institutional capital, and this, in turn, generates volatility.
Volatility is created by several factors: private investors have a higher rate of return on capital, shorter capital allocation periods, and lower competence of participants.
In digital assets, the price is formed according to the classical model of supply and demand balance, since the amount of the same bitcoins is limited and, by adjusting the amount of bitcoins in circulation, the price can be formed. The price in traditional markets is made up of many factors: forecasts of analytical agencies, financial performance of companies, ratings, government regulation, news background and other dependencies.
Crypto exchanges are often accused of inflating volumes in order to get a higher rating and attract more traders. While there are parallel ratings of exchanges and trading volumes, showing very different results, but soon the indices will begin to form the current leaders of the traditional market, and they can be more trusted.
Protection and insurance
Due to the low volatility in traditional markets, investment portfolio insurance is practiced. This financial instrument is beneficial for both insurers and investors, as it helps to protect investments in case of force majeure. This is not practiced in cryptocurrency markets, since movements can be so strong that insurers simply will not have enough funds to cover losses if chaos begins in the market.
The digital currency insurance market is just beginning to emerge. Derivatives are already emerging, such as options on Bitcoin and Ethereum.
If we talk about DeFi strategies, then insurance projects appear that take on the function of an insurance agent, that is, they will reimburse funds in case of unplanned losses, such as hacks, protocol hacks and loss of assets by a smart contract that invests them in the interests of the user.
On the crypto market, there is no definite set value for an asset at a given time, since different quotes are presented on the sites. The traditional stock or currency market is controlled by states and central banks, but crypto exchanges are not, since they are private companies and set the rules for trading on their sites themselves.