Automated Cryptocurrency Trading

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Comparing the traditional stock markets and the cryptocurrency markets

1. A currency or a stock?

Why the cryptocurrency has to be associated with stocks and not with currencies?

The term 'cryptocurrency' includes 'currency' in the name but the assumption that it is something like a traditional (fiat) currency is wrong.

A traditional currency has to be stable in the long term - low fluctuations against other currencies.

Instability of a specific currency will bring inflation in a country, together with political instability, uprisings and revolts of the population.

In contrast the daily fluctuation of many cryptocurrencies may be several percent, and at times may be tens or hundreds of percents. Such fluctuations resemble on what happens in the traditional stock market.

2. Traditional stock markets

The traditional stock market is regulated to operate in a specific country, by laws in the country. The market is realized by one or more stock exchanges.

Usually such exchange operates (is open) during business hours -> 9am to 3-5pm, has local residents as customers, and the bulk of listed companies are local businesses.

Movements on the traditional market are based on earnings releases by businesses, and/or news about the business.

Investors (traders) in the traditional stock market may be individuals or organizations holding large amounts of funds.

Individual traders normally do not make trades themselves but use advise of stock analysts and services of a stock broker.

The usual way of trading on the market is 'buy & hold' - expecting gains months or years in the future.

The total market cap of the stocks listed on the traditional stock market is significant and is considered by some as the size of the economy.

3. Cryptocurrency markets

Current cryptocurrency markets are like the 'wild west' - a new frontier, with little restrictions and regulations.

In the same way the cryptocurrency markets are realized through cryptocurrency exchanges.

But, while a specific exchange is registered as a business in a specific country, it is accessible worldwide through its web site.

It operates non-stop - 24/7/365, may have customers from any country in the world, and may list any of the popular or newly issued cryptocurrencies.

Movements on the crytocurrency markets are based on the minute differences in buy/sell orders, and on the ability (liquidity) of a specific exchange to fulfill orders, and the pricing quote of the same symbol on other crytocurrency exchanges.

Investors (traders) in the crytocurrency market are usually individuals , but organizations holding large amounts of funds are interested in participating.

Individual traders normally do make trades themselves, and currently the usual way of trading on the market is still 'buy & hold' - expecting gains months or years in the future.

Even though the crytocurrency market is worldwide, is non-stop, and some exchanges may have large trade volumes, the total market cap of the crytocurrencies (based on 'mined' amount multiplied by current price) significantly lower than the market cap of the traditional stock market.

4. Major differences (summary)

Compared to traditional stocks cryptocurrencies have:
- many times larger swings in value
- many times faster/rapid swings
- many times smaller total market cap
- non-stop and worldwide trading