Differences between Crypto Trading & Regular Trading
Investing in crypto is often considered a subtype of trading. Many of the same principles are applied to crypto trading as to regular trading, the latter including stocks, commodities, Forex, and so forth. But it’s also different in many small ways. In fact, it might be more prudent to treat these as two separate fields.
Some of these differences are practical in nature – relating to the actual process of investing and trading. Others are more utilitarian – for instance, you can do a lot of different things with cryptocoins themselves that you can’t do with stocks, fiat currencies, and commodities.
You may remember that regular trading uses special trading interfaces, such as MT4 & MT5. They allow for a smooth, diverse trading experience with stocks, futures, options, and many other typical assets. Sometimes these trading platforms offer cryptocurrency trades, but they weren’t designed for them.
Unlike them, dedicated crypto providers have in-built interfaces that only provide orders on crypto. Partly, it’s because MT4, MT5, and other popular trading platforms are just not designed for crypto. Crypto is a decentralized product that doesn’t mix well with solutions such as these.
So, cryptocurrency exchanges would typically have their own interface, packed with relevant tools and solutions for better tracking of coins.
Before you start investing in crypto, you need to establish a special crypto wallet. You can’t hold Bitcoin or Ethereum in the usual payment systems. Crypto wallets are a way to hold your coins and transfer them to other wallets. Exchanges have incorporated wallets, so if you have already bought some crypto and find yourself without a proper wallet, you can hold them on an exchange for a while.
You usually can’t withdraw crypto anywhere else, although there are new technologies that allow storing coins on cards, similar to debit cards.
Many cryptocurrencies can be used for something more than simple investment targets.
Payment is the prime use. Before, cryptocurrencies were used as payment in new decentralized projects or as inner payments in blockchains. Now, you can use Bitcoin, Ethereum, or other high-profile currencies as payment for groceries, online products, and so forth.
Decentralized app development is a more popular field than it might seem at first. A lot of people invest in cryptocurrency (or just buy them) to fund the development of decentralized apps, platforms, and networks. You can’t really fund them with fiat money, but it is possible with cryptocoins.
Investors receive dividends in a slightly different way from regular assets. With regular assets, you are given a share of the company’s profits, thus contributing to a growing business. With crypto, the process is called ‘staking’. Although it works in a similar way, there are important distinctions.
For instance, you can only get staking payouts by buying tokens – a special subclass of cryptocoins that includes currencies, specifically developed by networks for investors to let them invest in the network with ease. Not all networks do that, but many exchanges offer their tokens on sale.
Sometimes, it’s enough to just hold the token. In other cases, there is a special staking mechanism inside the network that you need to activate. This can freeze your tokens, but in exchange, you’ll start receiving regular payouts. They may not be regular or accurately distributed, but it’s a fair way of getting dividends from crypto.