Shares and cryptocurrencies. Similarities and differences

Shares and cryptocurrencies. Similarities and differences

Many potential investors, who want to enter the cryptocurrency market, have never encountered such financial instruments before. However, most of them have at least some understanding of the stock market.. Alas, this knowledge will not do them well when trading digital currencies.

Let's take a look at the main differences and similarities between stocks and cryptocurrencies..

The cost:

First of all, stocks and cryptocurrencies are similar to those, what are they worth exactly, how many are willing to pay for them. If the stock / currency is worth $10, and the seller decided to sell it for $100, then the cost will increase to $100, if he is lucky enough to find a buyer. In a sense, the only, что имеет зна­че­ние, Is the price, at which buyers / sellers are willing to buy / sell their asset. Од­на­ко, unlike cryptocurrencies, different methods are used to value shares. Вот самые по­пу­ляр­ные из них.

Net asset value per share

Чи­стая сто­и­мость ак­ти­вов (Net Asset Value, NAV is a measure of company value, calculated using accounting indicators. It is calculated by summing all assets and subtracting liabilities and intangible assets, such as brand value and firm prestige. Дру­ги­ми сло­ва­ми, it's money, which will remain with the shareholders, if tomorrow they decide to sell the company and pay off all debts to creditors. If the share price is lower, than NAV, buying them is profitable, because you acquire company assets for less than their real value.

Discounting cash flows

Мо­дель дис­кон­ти­ро­ва­ния де­неж­ных по­то­ков (Discounted Cash Flow, DCF) немно­го слож­нее. In this case, you predict the total profit of the company for a certain period and express it in money at current rates. The resulting estimate can be compared with the current stock price. If she gets higher, then the shares can be considered attractive. None of the above models work with cryptocurrencies - as they are all based on financial statements and projections of public companies. Alas, cryptocurrency startups are not required to publish their results and predictions. Thus, дан­ные, necessary for such assessments, по­про­сту от­сут­ству­ют (but even if they were available, cryptocurrency does not give its owners any rights to the company's assets). As a result, no one knows the "true" value of digital currencies., and this is a significant risk when investing in cryptocurrencies.

Ownership and voting rights

The big difference between stocks and cryptocurrencies at a conceptual level is, that the latter do not give the right to a share in a startup. If the investor owns 1% Shares, then he rules and 1% ком­па­нии. In the event of bankruptcy, he is entitled to receive 1% from the remaining assets (after payment of priority debts).He also has the right to vote at general meetings of shareholders.. On the other hand, ин­ве­стор, вла­де­ю­щий неко­то­рым объ­е­мом крип­то­ва­лю­ты, has no rights to the assets of the issuing company and does not vote. Впро­чем, неко­то­рые утвер­жда­ют, that ownership and voting do not matter, because investors are primarily interested in return on investment, and not participation in the management of the company or a share in its assets.


Another difference between stocks and cryptocurrencies is, that shares provide an opportunity to receive dividends. Обыч­но успеш­ные ком­па­нии еже­год­но вы­пла­чи­ва­ют ди­ви­ден­ды ак­ци­о­не­рам. As a rule, their value does not exceed a few percent of the value of the shares. The board of directors submits the amount of dividends for discussion at the general meeting of shareholders. In the cryptocurrency world, the concept of dividends does not exist (except for a couple of cases - for example, то­ке­нов плат­фор­мы KuCoin). Сле­ду­ет от­ме­тить, that sometimes the cryptocurrency is divided into two or more varieties. This process is called a "fork" and in some aspects resembles dividends..

Insider trading

Another important difference: shares are tightly regulated. There are many rules and regulations, concerning, what companies and investors in the stock market should and should not do. На­при­мер, the rules prohibit trading on insider information (внут­рен­ней ин­фор­ма­ции, capable of affecting the company's share price). Дру­ги­ми сло­ва­ми, the investor cannot use the information he has to obtain benefits.

Financial Statements

Another important part of regulation is the rules for the periodic distribution of financial statements.. Как уже го­во­ри­лось, public companies are required to publish quarterly and annual reports. Она по­ка­зы­ва­ет, how the company has developed over a certain period and how it will develop in the future as estimated by management. If the company has reason to believe, that the predictions are wrong, she must issue an appropriate revision announcement. Ком­па­нии, вы­пу­стив­шие соб­ствен­ные то­ке­ны, are not required to provide such financial information, publish forecasts and amend them. The lack of regulation and the obligation to provide financial statements poses a serious risk when investing in cryptocurrencies and complicates the process of selecting assets for purchase.

Working hours
The stock market only works during the day. The exchanges are closed at night and on weekends. Investors have enough time, to sit comfortably in a chair and analyze your transactions. In the world of digital currencies, this is impossible.. Cryptocurrency exchanges work around the clock, seven days a week without days off and holidays (even during New Years and Christmas). Дру­ги­ми сло­ва­ми, digital currencies are not suitable for investors, who do not know how to relax during the market.

Trading commissions

Stocks and cryptocurrencies differ in trading fees. In the crypto world, the main costs are associated with the increase / decrease in liquidity and the withdrawal of funds from the account. In the stock market, the main burden on the investor's results is provided by the broker's commissions.

Fees / rewards for decreasing / increasing liquidity are often found in financial markets. The investor pays an additional interest in cases, when his order is immediately matched with an order in the order book. Thus, it reduces market liquidity. Ин­ве­стор по­лу­ча­ет воз­на­граж­де­ние, if his order increases market liquidity (entered in the order book, but not executed immediately).

There are no fees / rewards on the stock market for decreasing / increasing liquidity, however, both parties to the transaction pay a brokerage fee. Its size depends on the specific broker and the type of investment account. Currently, the typical levy for liquidity decline is 0.2-0.25%. The commission for brokerage services varies depending on the country, but on average its level is quite low. On the other hand, some cryptocurrency exchanges offer commission-free trading (Cobinhood, ZB.​with, Indodax, Coincheck), and some even reward investors (usually this is a payment for increasing liquidity). Дру­ги­ми сло­ва­ми, you get paid for it, what are you trading (the most famous such exchanges are BitMEX and HitBTC). There is simply no such thing in the stock world..

Another difference between stocks and digital currencies is, that many cryptocurrency exchanges charge a withdrawal fee. There is no such thing in the world of stocks (however, brokers charge a similar fee).


From all of the above, a simple conclusion can be drawn.: investing in cryptocurrencies is more dangerous, than in the stock (but there are much more profits here). The share price is more accurately set by the market, since the company periodically publishes reports on its activities, serving as the basis for various valuation models.

On the other hand, the cryptocurrency market has more flexibility (it is active around the clock and allows more operations). Besides, there is much higher profit potential in the crypto world (mainly due to volatility).

A source:

Author: Trader

Personal blog of a professional trader on the US stock exchange (NYSE, NASDAQ, AMEX ) Dmitry Gavrilov. Started his career at NYSE (New York Stock Exchange) in 2008 years in prop company . With 2009 of the year became a senior trader of the largest prop in Russia and began to train traders of the company. With 2011 of the year was a trader of GT Capital Group with the support of SMB Capital (USA).