Why Bitcoin should not be confused with stocks - Where cryptocurrency excels

Bitcoin is a digital asset protected by algorithms!

Many of the newcomers to the cryptocurrency market have made a fundamental mistake:

They confuse them with shares.
And while activity and price dynamics may be associated with traditional markets on a case-by-case basis, they are in fact a completely separate asset category.
Bitcoin is a value protected by encryption algorithms that are used to make online payments over the Internet.
It is also used as an asset, such as gold and silver.

 Cryptocurrencies are like emails

Investors need to think of cryptocurrencies as e-mails.
They do not exist in physical form, they can be sent in a few minutes and do not require many intermediaries.
Unlike fiat currencies such as the US dollar. or the euro that stores all transactions in a central ledger maintained by a single authority, bitcoin and other cryptocurrencies use a technology called "blockchain".
It is a universally distributed universe that can be maintained and copied by anyone on the planet and ensures absolute transparency.

 Differences between bitcoin and shares

The shares have the following characteristics:
a) They are traded on traditional stock exchanges such as the Nasdaq, the London Stock Exchange, the Deutsche Börse, etc.
b) They are traded from Monday to Friday, while the opening and closing times of the market differ between the stock exchanges
c) They are regulated financial products
d) Buyers receive certificates to show legal proof of ownership
e) Companies can issue new shares after the public offering, although there is a limited limit
f) The brokerage companies maintain their own file of shares that they manage on behalf of clients.
In the United States, this information is not available to the public unless an investor buys more than 5% of a listed company.

Bitcoin has the following characteristics:
a) Sold and purchased with decentralized encryption transactions
b) Cryptocurrency markets do not close, so Bitcoin can be traded at any time any day
c) Bitcoin is not a regulated investment vehicle, however most international jurisdictions recognize it as property
d) Buyers maintain their own storage space for Bitcoin or can store it with the help of third parties. e) There will be only 21 million bitcoins, no new currencies can be created
f) In the blockchain all transactions are recorded and presented to the public

Shares of companies associated with Bitcoin

Despite the differences between these two investment options, there are several listed companies whose shares are linked to bitcoin returns.
This is because companies are either directly involved in bitcoin-related activities such as mining, hold significant amounts of bitcoin in reserves, or target cryptocurrency buyers.
Such companies are:

• Silvergate Capital
• MicroStrategy
• Square
• Riot Blockchain
• Nvidia
• Argo Blockchain
• MGT capital investments
• BitFarms
• Diginex
• Hut mining 8
• Digital Voyager
• Canaan Creative

Also, JP Morgan recently created a structured bond with shares of companies related to the most popular cryptocurrency, while Morgan Stanley does the same.

 Shares with a positive correlation in relation to Bitcoin

According to Morningstar, 2020 was a record year for the largest cryptocurrency market in the world in terms of its performance relative to traditional stocks.
An association is an indicator of the relationship between two or more assets.
In this case, it is used to measure the relationship between price movements of two markets.There are several methods for calculating the correlation, although the Product-Moment Pearson correlation coefficient (PPMCC) is the preferred method.
The PPMCC is measured between 1.0 and -1.0.
The closer the price is to -1.0, the less correlated the two assets are.
The closer the value is to 1.0, the more correlated the two elements are.The chart below shows a clear increase in the correlation between bitcoin and a number of traditional financial markets, including S&P 500 bonds, gold and oil bonds.
The highest correlation between bitcoin and the stock market is shown by the S&P 500 index, with a value of 0.22.
This is probably due to the increase in institutional investments entering the crypto market and large players adding bitcoin to diversify their portfolios.