The euphoria over the cryptocurrency continues to fascinate investors. Bitcoin and Ethereum continue to be favourite among the Indian crypto lovers. Despite being complex, the crypto market is evolving constantly, and is seen as a maturing industry with large investors parking their money in them. Some people often confuse the crypto market with the stock market. So let’s try and understand some basic difference between the two. Centralised The stock exchange market in India works under centralised regulation. It is regulated by the Reserve Bank Of India (RBI) and the Securities and Exchange Board of India (SEBI)
Cryptocurrencies are decentralised, which means that crypto operations and transactions are not controlled by any central bank. “The FTX saga has created an urgent need to regulate crypto companies to safeguard user funds. European central bank president stated in favour of crypto regulations by calling it an ‘absolute necessity. As we move forward, the contagion risk related to FTX collapse appears to be within the limits and can be solved with time,” said Shivam Thakral, CEO of BuyUcoin. Fraud The regulator protects all participants, especially investors through special measures to safeguard them in case of stock markets but cryptos are more prone to fraud. “In India stock markets are well regulated, participants, companies, brokers etc have to undergo rigorous monitoring and training and have to comply with SEBI, the regulators requirements on a continuous basis. The regulator protects all participants, especially investors through special measures to safeguard them. Price fluctuations are determined through demand and supply which are further dependent on company performance and prospects. Should a fraud or default take place, investor interest is kept paramount,” said Archit Gupta, Founder & CEO, Clear On the other hand, nations have struggled to regulate crypto markets. While some exchanges do a lot of self regulation through voluntary bodies and self declared code of conduct. Yet, this market is hard to understand and difficult to regulate due to poor understanding of the underlying basis of cryptocurrencies. There is hardly any reliable agency or resource for investors to trust. Besides, when there is a crash, entire wealth may be wiped out which does not exactly happen in stock exchanges, since SEBI has a circuit breaker mechanism when trading is halted if fluctuations are beyond pre defined levels since there is real time monitoring, added Archit Gupta Maturity Since stock exchanges have been in operation for a lot longer, they are more developed than cryptocurrency exchanges. “Their operations are governed by regulations and municipal laws, and stock exchanges also have government support. Companies are also required to give shareholders transparency by publishing information about market activities, such as quarterly financial statements and general meeting minutes,” Manoj Kumar Dalmia, Founder and Director, Proficient equities Private limited. On the other hand, cryptocurrency exchanges are still new and actively developing. The majority of exchanges’ operations presently take place outside of the regulatory and political arenas, despite efforts to tighten up exchange regulation in an effort to promote investor confidence, he added. Trading Given their recent development, cryptocurrencies are traded in significantly smaller quantities and with far less variety than stocks are, Dalmia said. Volatility Volatility in the markets frequently prompts excessive caution. In actuality, there are both advantages and disadvantages to market volatility.
Large transaction volumes improve the stability of the stock market and lessen its susceptibility to the actions of “big fish” traders. But with its ties to organisations and governments around the world, the stock exchange is constantly affected by geopolitical developments, said Dalmia The volatility on bitcoin exchanges is higher, in contrast. The cryptocurrency market is subject to trade swings because the market is new and has sharp highs and lows. Cryptocurrencies, however, are largely immune to political influences since they sit apart from governments and other global institutions, added Dalmai. Profitability The primary draw of cryptocurrencies is these profits, but the possibility of price growth carries a substantial amount of risk. Stocks have a long history of generating reliable investment returns; over the long run, Nifty50 returned roughly 10-11% average. Even though stocks have historically been safe to hold for extended periods of time, they can be volatile in the near term
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