Can a relationship between cryptocurrency and stock trading Be established?
While financial experts and economic speculators have tried to find a link between cryptocurrencies and stock market trading, one thing is for sure: the link isn’t that deep, but it still has surprising consequences for the cryptocurrency world and stocks. Rather than trying to establish a meaningless trend between the two financial entities, more relevant questions should be asked. How does the rise of cryptocurrencies affect stock market trading? Is it a major threat to millions of stock traders around the world, or is it well integrated with established stock exchanges? Untangling these questions helps to make a more complex understanding of a highly tagged economy.
The crypto genie cannot be contained anymore. In a world that has suffered at the behest of centralized banking systems and encroachment in the financial privacy of people, the rise of cryptocurrency is not unwarranted. People are swift to adopt transaction means that guarantee them anonymity, privacy, and most of all: freedom from the clutches of governments and regulators. As digital assets, in the form of cryptocurrency, are becoming omnipresent, it is essential to assess how these integrate with traditional trading practices.
The foundational principle of
Cryptocurrency was this: financial transactions needed to be free from
third-party snooping such as central banks. This is the very reason that the
price and volatility of crypto sources such as Bitcoin operated independently
to those of traditional financial assets such as stocks. The crypto
infrastructure exists separately, but things are much more complicated than
this seemingly simple statement.
Although cryptocurrencies existed
independently of economic indicators and speculation, it still operated under
the most fundamental aspect of any economic entity: the legendary law of supply
and demand. Cryptocurrency and all its derivatives were still controlled by the
demand stipulated in financial markets, and this brought it closer to the
traditional stock exchange via the BTC/USD trading tool. Traders from all
around the world such as those working with FX-List.com/stock-forex-brokers saw
a lucrative opportunity to place their trades in this currency pair, soon a
domino effect was set in place, one that was riled with speculators and
currency bubbles that added to the volatility of cryptocurrency.
What started out as a beautiful journey of
financial independence for Crypto soon translated into manipulation and control
by traditional trading tools such as the stock exchange.
The consequences of interdependence
If this interdependence between cryptocurrencies
and stocks can be established, what do the consequences look like?
In a nutshell, crypto will abide by all
laws and regulations that are panned out by the movement of traditional
markets. If it follows the same path, its popularity is likely to take a hit.
Because the promise of crypto holds the idea of independence central to it,
falling prey to the same centralized financial structures can bring about a
crushing blow to this short-lived affair.
But, at the same time, there is an
inevitable silver-lining for crypto enthusiasts. The correlation between
traditional market assets like stocks and crypto will bring the shrouded
currency to the global economic mainstream, which will add to its refinement
When the crypto assets take an annual turn
in the global trading ecosystem, they are more likely to achieve stability and
strengthen the institutional guarantees of the currency bringing in more
The consequences for cryptocurrencies
Since a correlation between crypto and
stocks can be established, what stems from this relationship is more important
to discuss. If you stay updated with any news of cryptocurrency, you are likely
to hear a recurring statement: crypto cannot be trusted because its volatility
cannot be attributed to any distinguishable trend. But, when the
interdependence of crypto and stocks becomes significant, this is going to
The following process initiates, once the
trading volumes of crypto assets increase because of the correlation. Institutional
investors and venture capitalists join aboard the crypto bandwagon and the
investment portfolios all around the global trading market accumulate crypto
assets. This phenomenon serves two important purposes: Firstly, it reduces the
volatility of cryptocurrencies because the market confidence is reinstated with
the entry of high-profile investors and traders.
Secondly, it also surges the demand for
crypto assets which makes it much more lucrative because the supply of
cryptocurrencies is not regulated by any government entity.
The future of trading?
The introduction of crypto assets in the
list of traditional stock assets also significantly impacts the future of
trading. Traditionally, all stock trades follow the settlement method. The
settlement method is a convoluted process that takes days or even weeks to
execute. It is riled with inefficiencies in the form of intermediaries, like
clearinghouses and exchanges as well as external regulators. With the adoption
of cryptocurrency transaction systems, like the Blockchain technology, the
settlement time of stock trades could decrease from a matter of days to
Furthermore, since the Blockchain
transaction stream is transparent to all stakeholders, the need for external
audits and third party regulation can altogether be avoided. This will not only
decrease the cost of making transactions but also can bring about a seismic
increase in the savings of everyday traders. Every trade can enjoy a reduced
commission and fee, which can in turn increase the volume of trades executed
Whenever there is a rise of a novel
financial system, it cannot exist independently. The global trading ecosystem
is intimately integrated with forex and stock exchange, and cryptocurrency will
have to make inroads into the same mesh. Seasoned financial analysts all around
the world are drawing similarities between the emergence of crypto technologies
and the invention of the internet in the late 1990s. In a new financial order
ruled by the likes of cryptocurrency, only those traders can dominate the stock
market who stay updated with the nuances of cryptosystems. Only then can they
harness its potential, and use it to make a personal fortune.
Author : Collin Brown