Whether or not this is a coincidence, it is noteworthy that the crypto market has become popular following the backlash in the financial market brought about by the housing bubble burst. You may want to know the main differences between the crypto market and the financial market to be able to weigh your options. Learn more about how they are different from each other before you try crypto trading.
Crypto Market
The crypto market emerged following the advent of Bitcoin. It was the brainchild of Mr Satoshi Nakamoto as an equaliser of income opportunities. Since not everyone has access to the mainstream financial system, it was created as an alternative for outliers. This is why it is made more accessible than the typical financial market.
What makes the system unique is that it is decentralised with the use of a peer-to-peer mechanism. An online ledger accounts for the creation and transfer of coins from one account to another. It enables direct accounting of crypto assets online. Thanks to cryptography and blockchain technology that made all these possible.
This market is also made peculiar by its reliance on the concept of laissez-faire. It is free from government intervention, so there are no regulatory measures in place. Most states have maintained a neutral stance when it comes to cryptocurrencies. Market behaviour highly depends on the user base.
Since it has nothing to do with the government, crypto-assets are not backed by any tangible asset. Its value only relies on the trust imposed by the investors. As long as they believe in the system, the market is likely to continuously thrive.
Financial Market
The financial market, on the other hand, came into existence as a product of capitalism where institutions would trade financial securities. These include debt securities such as bonds, notes, and monetary bills, not to mention equity securities like stocks. Since the acquisition of these securities can be costly, it is only available for those who can raise enough capital.
Another stark difference is that the financial market is mostly centralised. The stock exchange, for instance, makes use of one platform where orders are being processed. It makes use of one intermediary that would facilitate the quotation of prices, exchange, and clearing.
Financial markets, particularly those involving stocks and bonds, are highly regulated. In the United States, they are subject to the scrutiny of the Securities and Exchange Commission. They will have to comply with registration and reporting requirements to be able to get a license to operate. Otherwise, they are in hot waters.
The main advantage of the financial market over the crypto market is the guarantee of monetary value for investment units. The securities are backed by their respective monetary value indicated in the instrument. At least investors can hold on to something tangible as a guarantee of ownership. Still, you will never know how much returns you can reap with some crypto trading tips from the Bitcoin Profit App, not to mention the extra caution against risks.
Threats and Risks
The crypto market as well as the financial market, is prone to risks. It is just that the former is more vulnerable than the latter since digital assets can be easily taken away. And scammers can simply hide behind the computer in carrying out their modus operandi.
Although there are also heists against the financial market, it can be observed that the culprit can be identified by the victims due to the series of personal transactions. This is not the case when it comes to crypto scams where attackers can only be identified through digital fingerprints. Nonetheless, this will not stop police authorities from finding the culprits.
With the growing popularity of the crypto market, there is a good chance that it will soon be integrated into the mainstream financial system. It might attain an equal footing with the financial market. Besides, its stakeholders are no longer average individual investors but also corporate ones.
It is important to mention that even banks are taking their chances in the crypto market. They have already invested in the crypto market. Some are even considering the incorporation of crypto trading in their service offerings.
Conclusion
These are the main differences between the crypto market and the financial market. Despite all these, they are likely to cross paths in the financial system one day. There might come a time when crypto investors and financial investors would be regarded as equals.
