Trading Crypto (and how it’s different from stocks)

Around-the-Clock Markets

Unlike stocks, which trade during set hours (e.g., 9:30 a.m. to 4:00 p.m. ET on U.S. exchanges), crypto markets are open 24/7/365. There are no opening bells, no weekends, and no holidays.

While you technically can trade any time during the day, there are certain market characteristics to keep in mind.

This constant trading cycle:

● Increases volatility, especially during off-hours when liquidity is thin

● Requires traders to be more disciplined with setting limit orders

● Enables global participation across all time zones

Centralized vs. Decentralized Exchanges

There are two main types of trading venues:

● Centralized exchanges (CEXs): Platforms like Webull Pay match buyers and sellers and handle custody for most users. These operate similarly to stock brokerages and offer features like order books, market orders, and limit orders.

● Decentralized exchanges (DEXs): Platforms like Uniswap, SushiSwap, and Raydium allow users to trade directly from their wallets using smart contracts. They rely on liquidity pools rather than order books.

Key differences:

● DEX trades require on-chain transactions and gas fees.

● DEXs offer access to more tokens, especially newer or smaller ones.

● CEXs are generally faster and more user-friendly, but introduce custodial risk.

Most new traders start with centralized exchanges, then explore DEXs as they grow more comfortable.

Tokenomics vs. Fundamentals

Traditional investors often analyze a company’s fundamentals, like earnings, capital efficiency, and unit economics. In crypto, these metrics don’t apply in the same way.

Instead, crypto investors look at tokenomics, meaning, the design and behavior of a token within its ecosystem. This includes:

● Supply schedule: How the total supply of a cryptocurrency changes over time: fixed (Bitcoin), inflationary (ETH pre-merge), or deflationary (BNB burns)

● Distribution: Who holds the tokens? Are insiders or VCs heavily concentrated?

● Utility: Is the token actually used within its protocol?

● Incentives: Are users earning yield, rewards, or governance rights?

A well-designed token can accrue value as network usage grows, but poor tokenomics can lead to high inflation or sell pressure from insiders.

Volatility and Risk

Crypto is far more volatile than trading stocks or bonds. Investors may experience larger daily price swings or sudden price crashes.

Volatility stems from:

● Lower overall liquidity, especially on newer tokens

● Sentiment-driven markets influenced by news, social media, and macro trends

● Lack of institutional dampening mechanisms (like circuit breakers)

It’s often recommended for new traders to:

● Use limit orders instead of market orders to avoid slippage

● Start with more liquid assets like BTC or ETH

● Avoid leverage unless you fully understand the risks

Gas Fees, Slippage, and Settlement

On decentralized exchanges, each trade is an on-chain transaction. This comes with three key factors:

● Gas fees: Paid to miners or validators for processing transactions. Fees can spike during network congestion.

● Slippage: The difference between the expected price and the execution price. Higher during low liquidity or fast-moving markets.

● Settlement: On-chain transactions settle quickly but are irreversible. Double-check addresses and amounts before confirming trades.

Centralized exchanges usually abstract these mechanics, but it’s important to understand them if you move into DEXs.

Tax Implications of Crypto Trading

In the U.S., most trades are taxable events, even if you never convert the proceeds to fiat (like the U.S. dollar).

Unlike stocks, the wash sale rule currently doesn’t apply to crypto. This means you can sell a token at a loss and immediately rebuy it to harvest the loss for tax purposes. However, this could change in future legislation.

Tools like CoinTracker and Koinly can help you calculate and report these gains accurately.

Conclusion

Crypto trading introduces new dynamics: always-on markets, decentralized platforms, token-based incentives, and unique risks. While there are opportunities, the volatility and complexity make it important to start slow, manage risk, and build a foundation of knowledge.

In the next chapter, we’ll take a look at technical analysis in crypto and present the tools and patterns traders use to make sense of price action in this fast-moving market.