There has been a long-time debate among traders regarding which is a better option, crypto or stocks. Each of these markets has some advantages and disadvantages. However, when you get into the technology and overall user benefit, one of these two contenders comes out on top. Here are 5 reasons why crypto is better than stocks.
The first reason why traders continue to shift to the crypto market is due to decentralization. Decentralization is a term that refers to the removal of central entities from the business process. Cryptocurrencies like Bitcoin, Ethereum, and META1 Coin operate as pure code. There are no large multinational bankers behind the majority of these projects. In most instances, these platforms incorporated community governance mechanisms.
A community-governed project enables users to dictate the future of the network. Users can put forth proposals regarding vital upgrades and changes. These proposals can include anything from fee changes, rewards, the addition of new networks, and token burns. Community governance beats out stocks in that regular traders rarely get their opinions heard or taken into account.
Decentralization leads to the next benefit that cryptocurrencies have over stocks which is that they are more transparent. Public blockchains provide users with the ability to monitor all blockchain activities via the block explorer. Additionally, many crypto projects are open source. Open source projects are considered the most secure because they enable anyone to vet the code.
On a larger scale, the crypto market is less entangled with large hedge firms than stocks. Evidence is easy to spot if you look at the recent GameStop sage. In this incident, a group of Redditors noticed that hedge funds were naked shorting stocks for GameStop and AMC movies.
Shorting is a trading strategy that requires you to borrow to strengthen your position with the goal to sell and repurchase the same asset at a lower price. However, if the price of the asset rises, you must repay the debt at a higher price. The Redditors exploited this fact and began to drive the price of the stocks upward.
Their plan was perfect except for one major problem, they didn’t consider that the trading apps they used like Robinhood were in bed with the hedge funds. In the end, the trading apps restricted traders from purchasing these stocks. These actions caused the stock to lose hundreds of dollars which cost traders big time.
When questioned by the public, Robinhood cited concerns and trading protections but it was later revealed that they had the hedge funds as their largest clients. This scenario helped to drive Redditors to the crypto market as many felt betrayed by their trading apps.
Unlike stocks, you can trade crypto no matter where you live or your past credit history. Most cryptocurrencies eliminate any gatekeepers. This strategy enables anyone to gain access to financial tools and services. You can also trade crytpocurrencies in more regions of the world which helps improve liquidity for the market in these early stages.
Cryptocurrencies are already taking over many of the bank’s primary purposes. For example, the META1 Coin offers users access to a high yield savings account. Unlike your bank that only pays out around 0.03%, you earn 10% APY. You can also find other examples of the bank being replaced such as DeFi lending platforms.
The centralized nature of the stock market leaves you at the mercy of third parties. When you purchase a stock it’s ultimately sent to you through a third party that charges a fee. The same goes for centralized exchanges. You must first deposit your funding and assets to trade.
There has been a drive to push non-custodial exchanges. These exchanges provide a more secure trading environment because they do away with large community wallets. You actually hold your digital assets when you trade cryptocurrency on a non-custodial exchange.
Privacy concerns continue to plague the markets. As of late, there have been billions of personal files stolen. These files can end up for sale on the dark web or used in other nefarious manners. There are very few options for privacy when discussing trading stocks. The entire market requires you to conform to intrusive KYC (know your customer) and AML (Anti-money laundering) requirements.
In comparison, non-custodial DEXs such as the META DEX provide a private trading experience. You don’t need to register for a trading account or provide personal information that can be stolen at a later date. Instead, you simply connect your wallet and trade in a non-custodial manner.
Crypto is Just Getting Started
The crypto market is only 11 years old. It’s still in its infantile stages. You can expect this market to expand considerably as more users, countries, and businesses join the market. For example, the recent legalization of Bitcoin as legal tender in El Salvador has already provided those citizens with a 20% increase in their holdings as Bitcoin’s price has risen.
Compared to the stock market, there is still a lot more opportunity and time to get in and become a vital player in the market. The stock market is highly centralized. Only those who meet the gatekeeper’s requirements can even access particular options. Additionally, there haven’t been any major technical upgrades in the stock market since the introduction of digital trading.
Crypto Beats Stocks Hands Down
After reviewing the facts, it’s easy to see why so many traders have switched to cryptocurrencies. The open nature of the market, its innovative nature, and its potential to revolutionize multiple industries make blockchain technology a real game-changer. Consequently, you can expect to see the cryptomarket continue to expand as more traders get hip to its helpful benefits and features.