Trading traditional stocks are different from digital currencies like crypto and NFTs.
A cryptocurrency is a form of decentralized finance, meaning that the value of a currency isn’t based on the issuance and backing of a government or central bank; instead, the value is based on the interest in the currency.
For example, a dollar is known as a fiat currency. This is because it has the full backing of the US government, and its value is controlled by the number of dollars in circulation, which the US Treasury and Central Bank control.
With cryptocurrency, the value of a coin is based on what the market perceives the value to be based on the overall availability of a coin (supply) versus the market interest in the coin (demand).
The more limited a coin and the higher the demand, the greater the currency’s value. The more available a currency and the lower interest, the less value the currency has.
Of course, the main difference between fiat currency and crypto is the lack of volatility with currency owned by a government. In contrast, crypto will have wide value swings based on supply and public sentiment.
The volatility of crypto provides investors with many high-reward opportunities, but they also come with severe risks.
NFTs are a form of DeFi as well. For example, with crypto, you can have one owner or multiple owners of a coin, and the value of the coin is determined by the percentage of ownership in that coin.
So, if you bought ¼ of Bitcoin, depending on the average value of Bitcoin, you would own 25% of a coin.
NFTs, on the other hand, don’t allow for shared ownership. Instead, an NFT stands for a non-fungible token, meaning that for the NFT, there is only one of a kind and can’t be parceled or broken apart.
The Difference Between Traditional Stock Trades And NFTs
With traditional stocks, an investor purchases a percentage of a physical company, and the value of the stock is based on two things.
The first thing to understand is the ability of the company to function profitably and without debt, and second, the perception of the value of that company in other investors’ eyes.
Say, for example, you’re interested in Apple. The value of a stock in Apple is based on the company’s functioning (profit vs. loss) and the perception of Apple in the eyes of other investors.
Apple reports continuously high profits, operates at good margins and is perceived as extremely valuable to others, making it a firm investment for people.
To succeed at trading traditional stocks, understand that a few avenues are available outside of simply buying and selling.
Some of the alternatives to traditional buying and selling include;
RSI Indicator: RSI indicator is a strategy that analyzes the changes in stock being overbought and oversold to determine a valuable investment opportunity.
Shooting Star Trading Strategy: With shooting star as a strategy, investors use this to discover patterns that may reveal a potential reversal in the market.
Swing Trading: Swing trading is a form of trading that tries to make a profit on securities within a day or a few days. This is the primary form of day trading.
Scalping Trading: Scalping is a more aggressive version of swing trading that occurs within minutes rather than days. The speed of trade is the advantage of this form of day trading.
Trend Trading: Trend trading is a strategy that focuses on buying and selling based on significant trends during the open market.
Conversely, trading in DeFi is more like scalping trading, where transactions are in minutes, not days.
One of the ways that investors like to utilize NFTs to make some money on investments is by loaning an NFT to another person in return for a set price or percentage.
NFTs provides a different opportunity for owners, as they can’t be transferred without a smart contract.
Since NFTs are unique and singular, to trade NFTs, owners will need to assign an NFT smart contract that allows the owner to transfer and loan the NFT to a new owner temporarily.
The advantage of an NFT smart contract is that it allows the owner to loan out their NFT to another temporarily and eliminates a broker or middle-man in the deal, making negotiations easier and profit margins higher.
