—TechRound does not recommend or endorse any financial, crypto, investment or trading advice, practice or strategies. All articles are purely informational—
The world of crypto has grown enormously since Bitcoin first kicked off the digital asset revolution. While Bitcoin quickly proved itself to be a highly lucrative investment choice despite its volatility, for many years, cryptocurrency was never seen as a serious asset class for institutional investors.
A range of other tokens that have blown up too in recent years and the blockchain networks they run on have expanded into a range of practical use cases since. Between the amazing way NFTs have come to be used, the Decentralised Finance (DeFi) buzz redefining modern finance, and smart contracts upending the business world, cryptocurrency has entranched itself now.
However, now that more and more ordinary people want to invest in crypto, it isn’t always easy to understand its nuances.
Finding New Crypto Investments
For new and novice crypto investors, the market can be a little intimidating. Far from the days when Bitcoin was the only cryptocurrency around, there are now literally tens of thousands of tokens active on the market. Knowing how to pick a good one to invest in is a daunting task and entails a high degree of esotericism.
As new investors dip their toe into the industry, one of the best ways to identify fresh cryptos on the market is to make use of professional crypto token review sites. According to crypto writer Kosta Kostadinov, these platforms provide great insights to help amateur and seasoned traders alike sift through all the noise.
Given that new crypto projects enter the market all the time, with many falling away, never gaining traction, or even turning out to be scams, it’s important to conduct thorough research. For new coins, if investment is approached cautiously and smartly, they can end up creating massive returns.
Of course, losses are possible too. However, while there are never any guarantees, smart crypto investing can minimise risk and increase your chances of making it a profitable venture. On the other hand, unlike traditional investments, crypto price movements rely heavily on social media trends, online discussions, and influencer endorsements.
A promising project may gain traction quickly, but it could also collapse just as fast if interest fades. Due diligence is critical, and investors should be wary of hype-driven promotions. Using blockchain explorers to verify transaction activity and studying tokenomics can help assess whether a new offering has real potential.
Risk and Volatility Differences
Crypto’s massive rise across the world has come as a result of its growth into a full-fledged industry. While regulatory guidance is still varied and remains uncertain in many ways, the industry itself has matured a lot. With the proliferation of major exchanges, wallet providers, and well-meaning tech entrepreneurs, industry-specific guard rails have grown organically to internally protect the industry.
This has created greater credibility despite the fact that there is still the ever-present danger of scammer platforms and other bad actors seeking to exploit the industry. However, all the progress aside, high risk and volatility remains a hallmark of crypto investing. While major coins like Bitcoin, Ethererum, and Solana have somewhat matured and stabilised to an extent, across the industry, volatility is always a danger.
In that sense, the volatility of cryptocurrency investments far exceeds that of stocks and bonds. While traditional markets experience fluctuations, crypto can see double-digit percentage swings within hours.
On the other hand, traditional investments make use of safeguards like earnings reports and economic indicators while interest rate policies shape market trends. In contrast, crypto prices are influenced by factors like social media sentiment, regulatory news, and exchange liquidity.
deRegulatory Uncertainty and Legal Risks
As mentioned, the crypto industry also operates in realms of relative uncertainty when it comes to regulating it. As a fluid and rapidly changing industry, authorities face an uphill task of trying to regulate it in a balanced way that protects investors without discouraging trade by being too restrictive.
Another problem is the fact that the entire concept of crypto is built on the notion of decentralisation; essentially making it an industry that was envisaged to be beyond the scope of central authorities. These traits are its strengths as it is designed to provide democratisation of finance, greater privacy, and a system that can forgo intermediaries, precisely why crypto transactions are cheaper, faster, and more secure than traditional bank transactions, especially when it comes to cross-border payments,
However, for all these perks, unlike mainstream investments, which are overseen by agencies like the SEC or FINRA, crypto operates in a regulatory grey area. While some countries have introduced specific rules for digital assets, others still lack clear frameworks. This creates both opportunities and risks.
In the U.S., the classification of cryptocurrencies as securities or commodities remains debated. Some exchanges have faced lawsuits for selling unregistered securities, leading to de-listings and liquidity issues. New regulations could impact the value of certain tokens, making legal risk a key consideration.
Now that President Trump’s second term is firmly underway, the crypto industry in the US is anticipated to take a pro-crypto stance when it comes to regulating it. While this could mean major growth, DeFi platforms further complicate the issue. Unlike traditional banks, these platforms lack consumer protections, making hacks and smart contract failures potential threats.
Investors should therefore stay informed about evolving regulations and consider the legal implications before committing funds to any crypto project.
Market Structure and Liquidity Differences
Mainstream financial markets have well-defined trading hours and structured order books. Meanwhile, crypto markets operate 24/7 without centralised oversight. This continuous trading cycle can lead to price gaps and liquidity challenges.
Traditional investments rely on regulated exchanges with deep liquidity pools. Stocks and bonds have market makers ensuring stability, while crypto markets depend on exchange reserves and user activity. A sudden liquidity crunch can trigger price crashes, as seen during major exchange collapses.
Another key difference is the impact of whales—large investors who hold significant portions of a cryptocurrency. Their trades can influence prices more dramatically than institutional moves in stock markets. Understanding liquidity levels and market depth is essential for anyone investing in digital assets.
These and other unique facets of crypto investing show that it’s a different beast altogether in the world of investing. For novice traders, learning and understanding what makes crypto investing different is essential to succeeding at it.
—TechRound does not recommend or endorse any financial, crypto, investment or trading advice, practice or strategies. All articles are purely informational—
