The relationship between cryptocurrencies and traditional asset classes

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In my blog today I shall be discussing to great length about cryptocurrencies and some of the tradtional asset. When we talk about traditional asset we are generally referring to stocks and the bonds market so they form the basis of my discussion for today. We might ponder could there ever be a similarity with cryptocurrencies and this traditional asset, I mean if they are what exactly is it. Well in my post today I will be breaking down it's similarities as well as the difference between cryptocurrencies and the stock or bonds market, their relationship per say.

Connections and similarities between crypto and tradtional asset

Well one common thing cryptocurrencies and the tradtional asset share in common is that they both respond to news event. The stock market and the cryptocurrencies market are very connected in this aspect in that whenever there is a major economic high impact news the two are always impacted and despite the fact that we can say they are different in some ways but then the truth news that the price of crypto asset and traditional asset often respond to high impact news and events as it relates to the economy of a major player country so this is one aspect where cryptocurrencies and tradtional asset are similar.

Also there is always a need for risk management in both market. Proper risk management is needed both in the stock and bond market as well as in the cryptocurrencies market. I mean both market offers investment opportunities and as such there is always a need to manage our risk properly in other to thrive in any major investment scheme, there is a need to diversify our money as well to be able to properly mitigate risk both in the tradtional asset market and the cryptocurrencies market. So once we are dealing with any of this two market risk management is needed for guaranteed and sustainable success this is another similarity between the two.

Another common thing between these two market is that both are affected by the emotions of those invested in them, the market in general is often being moved by the sentiment, fear and greed of the investors and depending on the one that's on high at the moment it can impact price and this is true for both the stock market and cryptocurrencies market, they often are affected by the behaviour of it's investors in general and their decisions often motivated by dear or grease or risk appetite or sentiment could affect both market in ways not imagined.

The cryptocurrencies market and the stock market are both traded by exchanges, this is another similarity. Ofcourse this is necessary as these exchanges that allow them to be traded on their platform and this thus help to provide liquidity for both cryptocurrencies and tradtional asset as people easily come into both market and freely are able to participate in the market due to the liquidity provided by this exchange they easily purchase and sell their crypto asset or traditional asset and exchange it's one thing that help it to be much easier and they two have that connection.

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Difference between crypto & tradtional asset

Well the difference between cryptocurrencies and tradtional asset is the history. Whilst tradtional asset like the stock market and bonds has been around for ages and they are a more matured market, infact the stock market has been around since the late 1700's evidence suggest whilst cryptocurrencies has only been around for the last 15 years so ofcourse we know that it doesn't compare so the stock market provides a much more sense of stability because it's more matured than the cryptocurrencies market which is still envolving

well another difference between this two asset class is regulation, the tradtional asset has been around for much longer and thus it's more stable and more trusted and has a good regulation around it almost regulated and accepted by all countries of the world whilst cryptocurrencies have had to operate in a more tighter regulatory space since it's inception and this makes it to be less trusted by the masses unlike tradtional asset which has gained the trust of the vast majority since it's inception, it seems crypto asset still has a long way to go before it could cement it's place as a trusted asset class and for a clear regulatory environment for cryptocurrencies, that remains to be seen.

Well the cryptocurrencies market is one that's known for its volatility, it's renowned for being a highly volatile asset class often making people shy off the market who craves for more stability both the same level of Volatility is not experienced in the tradtional asset class, ofcourse it's relatively volatile as a market can be but not as volatile as the cryptocurrencies market which is know for it's extreme volatile nature which ofcourse could work for the good or bad of an investor depending on their risk appetite.

Most times when the fiat currency enters an inflation stage that's when most people run to cryptocurrencies with the hope of hedging the money against the inflated currency though cryptocurrencies could be used as both a currency and an investment vehicle and most times traders who want quick and massive gain and have more risk appetite are attracted to cryptocurrencies whilst conservative individuals are more drawn to the stock and bond for it's good measure of stability and thus this attracts them as they seek a measure of stability in their investment and can't quite stomach the much risk that comes with investing in the cryptocurrencies market.

Conclusion

Well as we have seen the relationship between cryptocurrencies and the traditional asset they are both related in some things and still stands at contrast with each other so ofcourse investing in any would be a personal choice after careful research and based on our risk tolerance and it would be wise too to always diversify our portfolio when investing in any market whether the crypto market or the tradtional one.