There have been many cases where crypto investors attempt to explain the market using the stock market. Just as the cryptocurrency market, stock investors purchase the assets and store them as they wait for the price to rise. However, there are many features that separate one market from the other.
In the cryptocurrency market, investors stand to lose almost all their investment in case something bad happens. The lack of insurance in the market makes it extremely different from the stock market as the later offer a more investment relief.
Purchasing stocks from US brokers for instance subject one to up to $500,000 insurance by the government. This is mainly because the stock is recognized as a legal security in the country other than Bitcoin which is not.
Apart from few cryptocurrency exchanges that provide this service, the majority of them have nothing like that to ensure that investors are reimbursed in times of deposit wipeout.
Stock market deals with assets that are backed by a company.
Almost all the assets have real backings unlike most of the cryptocurrencies which are created from thin air. However, these cryptocurrencies manage to succeed in price due to the speculations surrounding them.
A research conducted reveals that teams behind cryptocurrencies usually offer presales and other promises with no terms or conditions that make them accountable in case they fail to deliver. This probably explains why the industry has been labeled as very risky considering the fact that a project can vanish without any warning to investors.
On the ground of safety, the stock market also stands out. The truth is that the stock market has nothing like a permanent loss of funds. Maybe it happens, but not of recent memory. In case money is wired by hackers, the transaction can be reversed. However, the cryptocurrency market does not work like that.
A transaction in cryptocurrency cannot be reversed. When investor loses the private keys to a wallet, the person stands a chance of losing everything. Also, hackers have been managing to hack into the various exchange websites and transacting millions of dollars in cryptocurrencies that cannot be reversed.
Despite the above differences, the stock market and the cryptocurrency market agree on a point of price determination. The price of both assets is determined by demand and supply. When the price of each asset is bought above the selling price indicating a high demand for the asset, the price is pushed up. However, when investors decide to let go of their assets at the point when less purchasing powers are after the assets, the price goes down.