Filipino Traders Compare Stock Trading and Crypto Trading
The initiative: During the 52nd Episode of the BitPinas Webcast, John James Genove, also known as The Resistance Trader, and Fermin Barrenechea III, the founder of Museigen, explained the difference between stock trading and cryptocurrency trading.
To clarify, Genove and Barrenechea described stock trading as trading under the Philippine Stock Exchange (PSE) and crypto trading as trading on general crypto exchanges, not just local ones.
What’s the significance? The knowledge shared can guide traders, especially those who are new in the industry, to differentiate what fits their trading style and appetite.
What are Stocks?
A stock is a kind of security that represents the ownership of a fraction of the issuing company, according to Investopedia.
- However, stock trading is required to follow PSE’s general rule set by the government, as emphasized by Genove. Unlike in crypto exchanges, different rules are implemented.
Difference #1: Trading Suspension
According to Berrenchea, in PSE, once a stock’s price moves by 50%, either positive or negative, the trading activity of the security is automatically suspended.
- This is because the Securities and Exchange Commission (SEC) needs to monitor and ask the involved company about the reason of the price movement of the asset.
“Look at crypto, I’m sure all of us can think of a number of cryptocurrencies that have gone up easily by 100% or even more. In PSE, there is a built-in switch na kapag lumampas sa certain movement ang stock, they will hold the trading. You don’t really see that happening yet in crypto.”
Fermin Barrenechea III, Founder, Museigen
Difference #2: Having Leverage Tools
For Genove, what makes crypto exchanges more advanced than the PSE is the availability of leverage trading.
- Leverage trading is the use of a smaller amount of initial funds to gain exposure to larger trade positions in the crypto market.
- To enable this, the crypto exchange will allow the trader to borrow funds for the needed position.
However, Barrenechea clarified that though the PSE does not offer leverage trading, it has a margin trading feature called Securities Borrowing and Lending (SBL).
- In margin trading, there is a deposit required, called margin, to open a leveraged position.
- In PSE, the margin required can be in the form of cash, equities, and government-issued securities.
“But even when they do margin, it’s not like what you have in some of the crypto exchanges that allow 100x leverage. In PSE, siguro it will allow you to trade maybe up to 5x or 3x only.”
Fermin Barrenechea III, Founder, Museigen
Difference #3: Short and Long Positions
- Allowing short positions means that traders can create a “sell short” strategy when they speculate that an asset’s price might decline. The exchange will allow traders to borrow the asset and return it once a profit has been gained, or if not, the investment will be taken.
- Allowing long positions, meanwhile, is the opposite of sell short strategy.
In most crypto exchanges, they allow short and long positions. No local crypto exchange offers this feature.
In 2023, the PSE introduced short selling, but it was limited to the 30 largest stocks in the PSE index only.
Difference #4: Availability
According to BitPinas EIC Michael Mislos, what he sees as one of the major advantages of the crypto market over PSE is its availability, because crypto trading can be done 24/7.
- In PSE, trading days are from Monday to Friday only, and the market will open at 9:30 a.m. and close at 3:15 p.m. Aside from weekends, trading is also suspended on holidays.
However, Mislos noted that the crypto market’s 24/7 availability has its own advantages and disadvantages, like traders will have longer hours to monitor the right timing to buy or sell assets.
This article is published on BitPinas: Filipino Traders Compare Stock Trading and Crypto Trading
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