How Does Cryptocurrency Work in Stock Market

How Does Cryptocurrency Work in Stock Market

This article answers how does cryptocurrency work in stock market by explaining the principal ways investors gain crypto exposure through equities and exchange‑traded products, how crypto market mechanics differ from traditional stocks, and what risks, regulation, and settlement differences matter for stock‑market investors.

Introduction

The question how does cryptocurrency work in stock market is common among investors who want crypto exposure without holding coins directly. In this guide you will learn the primary vehicles that bring cryptocurrencies into capital markets (crypto stocks, ETFs/ETPs, trusts, listed futures, tokenized shares), how those products are structured, and how market mechanics, custody, settlement and regulation differ from ordinary equity trading. Practical comparisons and recent, dated industry examples are included to ground the concepts.

Background — What is cryptocurrency?

Cryptocurrencies are digital assets built on distributed ledger technology called blockchain. At a basic level:

• A blockchain is a distributed ledger of transactions recorded in blocks that are linked and cryptographically secured.
• Transactions are validated by network participants: miners (proof‑of‑work) or validators (proof‑of‑stake). Validation produces confirmations that make transactions part of the canonical chain.
• Cryptocurrencies exist for different purposes: payment (e.g., Bitcoin), programmable platforms (e.g., smart contract tokens), governance tokens, stablecoins for price‑stable settlement, and utility tokens that grant access to services.

Cryptocurrency networks have native settlement mechanisms that differ from the centralized clearing and settlement systems used for stocks. This distinction is central to answering how does cryptocurrency work in stock market: the asset class itself trades natively on blockchains, but capital‑markets products create bridges that let equities investors participate without native custody.

Key differences between cryptocurrency markets and stock markets

Understanding how does cryptocurrency work in stock market requires a clear comparison of market structures and trading mechanics.

• Trading hours and liquidity: Crypto markets run 24/7 globally; stock exchanges operate fixed hours with limited pre‑/post‑market sessions. Continuous trading changes price formation and liquidity patterns.
• Centralization vs decentralization: Stocks trade on regulated exchanges with brokers, clearinghouses and centralized order books. Crypto often trades on decentralized protocols or centralized crypto platforms that act as venue, counterparty and custodian.
• Settlement finality: Stocks typically settle under a T+ model (for example, T+2 in many jurisdictions) with central counterparty (CCP) clearing. Crypto settlement on‑chain is final once block confirmations meet network rules, but finality semantics vary by chain.
• Custody models: Equities custody is handled by brokerages and custodians under well‑established legal frameworks. Native cryptocurrencies require private keys; custody solutions range from self‑custody wallets to institutional custodians. This custody difference affects counterparty and operational risk.
• Market participants and infrastructure differences change how prices move and how shocks transmit between markets.

Market structure and participants

Typical participants in crypto markets include retail traders, validators/miners, centralized venues, decentralized exchanges (DEXes), liquidity providers, custodians, and institutional prime brokers or OTC desks. In stock markets the core participants are listed companies, retail/institutional investors, brokers, exchanges, market makers, clearinghouses and custodians.

When considering how does cryptocurrency work in stock market, remember: many stock‑market vehicles expose investors to the economics of crypto businesses or to crypto price movements through derivative and pooled structures—not to direct control of private keys.

How cryptocurrencies appear in capital markets (ways to gain exposure)

Summary: investors get exposure to crypto in the stock market via (1) publicly traded crypto companies, (2) companies holding crypto on their balance sheets, (3) blockchain infrastructure firms, (4) exchange‑traded products (ETFs/ETPs/ETNs), (5) closed‑end trusts, (6) listed derivatives (futures/options), and (7) emerging tokenized securities.

Publicly traded crypto companies ("crypto stocks")

Buying shares of a publicly listed company that operates in the crypto sector is one direct stock‑market route. Examples of business models include custody and wallet providers, miners or validation firms, hardware makers, or regulated trading venues. These stocks expose investors to company revenue and profit from crypto activity rather than to the market price of an underlying coin.

Key points:

• Equity returns track company performance, market expectations, and how company revenues correlate with crypto volumes and prices.
• Corporate risk (execution, regulation, competition) often dominates the stock’s behaviour more than token price moves.
• If a crypto company derives substantial fees from transaction volume, crypto volatility may translate into revenue volatility.

(When choosing an exchange for stock or equity trading that also offers crypto products, consider regulated platforms such as Bitget and custody via Bitget Wallet for integrated services.)

Companies holding crypto on their balance sheets

Some public companies hold cryptocurrencies as treasury assets. Buying shares in such firms provides indirect exposure to coin price movements because the company’s assets include crypto reserves.

Important implications:

• Share price sensitivity: A company with a large crypto treasury will show stock price reactions to crypto market moves.
• Accounting and disclosure: Public firms must disclose holdings, impairment policies, and risks—these change earnings volatility and balance‑sheet metrics.
• Corporate strategy: Treasury holdings may be strategic (store of value) or operational (liquidity for business purposes).

As of March 15, 2025, several firms publicly disclosed material crypto treasuries; one notable example included a company that rebranded to reflect its Bitcoin focus and reported approximately $500 million in BTC on its balance sheet, illustrating how corporate identity and stock valuation can become tightly coupled with crypto reserves.

Blockchain and crypto‑infrastructure companies

Firms building custody, wallet services, oracle networks, compliance tools, and blockchain infrastructure provide equity exposure to crypto adoption without direct coin ownership. These companies often benefit from recurring fees and enterprise contracts; their stock performance depends on technology adoption and enterprise spending patterns.

Exchange‑traded products (ETPs/ETFs/ETNs) that track crypto

ETPs and ETFs are the most direct bridge for many stock‑market investors. They trade like stocks and can hold crypto spot, futures, or derivatives. To answer how does cryptocurrency work in stock market via ETFs, it helps to distinguish product structures:

• Spot (physical) crypto ETFs/ETPs: The fund holds the actual cryptocurrency in custody. Investors buy shares in the fund; the fund’s net asset value (NAV) is directly tied to the market value of the underlying coins, less fees. Spot ETPs require institutional custody and regulatory approval.
• Futures‑based ETFs: These hold futures contracts (e.g., on regulated exchanges like CME) rather than the crypto itself. Performance differs from spot due to futures roll costs/contango or backwardation, and there is potential tracking error vs the underlying spot price.
• ETNs and synthetic products: Some products use swaps or derivatives to replicate exposure—these introduce counterparty and credit risk distinct from physically backed ETPs.

Regulatory context matters: regulators scrutinize custody practices, surveillance, market manipulation protections, and custody insurance when approving spot crypto ETPs. For example, the approval of certain spot Bitcoin ETFs in early 2024 materially increased institutional access to crypto via regulated capital‑markets wrappers.

Closed‑end trusts and funds (e.g., typical trust structures)

Closed‑end crypto trusts hold coins and issue a fixed number of shares that trade on exchanges. A trust’s market price can trade at a premium or discount to NAV because shares do not create or redeem on demand like ETFs.

Key characteristics:

• Potential for large discounts/premiums to NAV.
• Less flexible issuance; liquidity depends on secondary market trading.
• Often higher management fees than ETFs.

Investors should be aware of trust‑specific mechanics (creation/redemption limits, fees, and custody arrangements) when assessing exposure.

Derivatives and futures listed on traditional exchanges

Regulated exchanges list futures and options on major cryptocurrencies. For example, CME‑listed Bitcoin and Ether futures are cash‑settled futures widely used by institutions for hedging and speculative positioning.

How these instruments work:

• Futures provide price exposure without requiring direct custody of coins.
• They allow leverage, shorting, and use in institutional portfolios with established clearing through CCPs.
• Futures markets can support price discovery and institutional liquidity, but they can also amplify volatility when used with high leverage.

Tokenized securities and asset tokenization (emerging)

Tokenization mints blockchain tokens that represent ownership of real‑world assets (stocks, bonds, funds). Tokenized stocks are an evolving area where a token may represent fractional ownership of a share and trade on blockchain rails.

Potential benefits include faster settlement, fractional access, and 24/7 tradability. Regulatory frameworks differ by jurisdiction, and many tokenized securities must still comply with securities laws and reporting requirements.

Trading mechanics and settlement differences

Comparing settlement and clearing helps explain how does cryptocurrency work in stock market at an operational level.

• Equities: Orders route through broker networks to exchanges. Trades clear through CCPs and settle via central securities depositories under T+ settlement rules. Custody is legal and regulated; custodians provide protections and reconciliations.
• Crypto: Native settlement occurs on the underlying blockchain. Finality depends on confirmations and consensus mechanics. Custodial solutions abstract private‑key management but introduce counterparty risk if custody is not custodial or insured.

Implications:

• Settlement risk: In equities a failed settlement is handled by clearinghouse rules; in crypto a stolen private key can irreversibly transfer assets.
• Liquidity and order handling: Crypto on‑chain settlement allows settlement atomicity for some smart‑contract flows, but the wider market still uses off‑chain order books and custodians for performance and liquidity.

Price formation, correlation and market behavior

Understanding how does cryptocurrency work in stock market includes recognizing what drives crypto price moves and how these can correlate with equities.

Price drivers for cryptocurrencies:

• Network fundamentals: active addresses, transaction volume, staking/usage metrics.
• Supply schedule: fixed supply or issuance rules (e.g., Bitcoin’s capped supply, scheduled halvings).
• Demand drivers: adoption, macro liquidity, speculative flows, institutional allocation.
• Sentiment and liquidity: news, regulatory announcements, and large on‑chain movements.

Volatility and correlation:

• Cryptocurrencies historically exhibit higher volatility than major equities.
• Correlation with equities can increase during risk‑on/off macro episodes; at other times crypto behaves independently.
• Liquidity in ETFs/ETPs can transmit flows between equities and crypto: large ETF inflows/outflows may affect both markets.

As an example of cross‑market dynamics, consider institutional entrants and product approvals: the approval of spot ETFs in early 2024 broadened the institutional investor base and changed liquidity dynamics between crypto and capital markets.

Regulation, oversight, and investor protections

Regulatory treatment of crypto‑linked stock market products depends on jurisdiction and product type.

• Securities regulators (e.g., SEC in the U.S.) oversee ETFs, public company disclosures and many tokenized securities. Commodity regulators (e.g., CFTC in the U.S.) may oversee derivatives like futures.
• Custody standards, possession rights, disclosure and auditability are central regulatory concerns for spot ETPs.
• Investor protections available for equities (SIPC, regulated broker custody) may not extend to the underlying crypto unless the product explicitly includes institutional custodial insurance.

As of January 22, 2025, according to Benzinga, the public markets showed appetite for crypto infrastructure IPOs, illustrating how regulatory clarity and product approvals affect capital‑markets access.

Risks for stock‑market investors seeking crypto exposure

When asking how does cryptocurrency work in stock market, investors must weigh these key risks:

• Price volatility: Crypto prices can move sharply in short periods.
• Custody risk: Funds holding crypto require secure custody; private‑key loss or custodian failure can result in irreversible losses.
• Counterparty risk: Synthetic products or derivatives introduce counterparty credit risk.
• Regulatory risk: Laws and enforcement can change product viability and market access.
• Tax complexity: Crypto transactions may be taxed as property, generating capital gains events; funds and trusts may have different tax treatments.
• Product‑structure risk: Futures ETFs can underperform spot due to roll costs; trusts can trade at wide discounts to NAV.
• Liquidity risk: Secondary market liquidity for a particular ETP or trust can be limited.

Each vehicle has a different risk profile. For example, a spot ETF carries custody risk of the underlying coins but avoids trust discounts; a futures ETF avoids direct custody but has roll costs and potential tracking error.

How investors can gain crypto exposure via the stock market (practical options)

Below are practical stock‑market routes to crypto exposure and the main tradeoffs.

1. Buy shares in crypto companies or infrastructure firms

   • Pros: Familiar equity mechanics, potential for dividends, exposure to industry economics.
   • Cons: Equity performance driven by company factors; not a one‑for‑one crypto price play.

2. Invest in spot crypto ETFs/ETPs

   • Pros: Direct price exposure with regulated trading and intraday liquidity; custody handled by the fund.
   • Cons: Fund fees and custody arrangements; product approval depends on regulators.

3. Invest in futures‑based ETFs

   • Pros: Regulated derivative exposure without direct custody; uses established futures markets.
   • Cons: Performance divergence due to futures rolls; potential higher volatility with leverage.

4. Buy closed‑end trusts

   • Pros: Sometimes the only public vehicle early on; direct crypto holdings.
   • Cons: Discounts/premiums to NAV, possibly higher fees.

5. Trade listed futures/options on regulated venues

   • Pros: Hedging, leverage, institutional clearing protections.
   • Cons: Complexity and margin requirements.

6. Consider tokenized securities (emerging)

   • Pros: Potential for 24/7 settlement and fractional access.
   • Cons: Regulatory and custody uncertainty; product availability is limited.

7. Use brokerages that offer integrated services (custody + listed exposure)

   • Pros: Unified account, potential for seamless transfers between cash equity and crypto exposure.
   • Cons: Brokerage custody terms vary; check insurance and segregation policies.

For trading and custody, platforms such as Bitget and the Bitget Wallet provide integrated solutions for investors who want both market access and custody options in one ecosystem. Always confirm the platform’s custody model and regulatory status in your jurisdiction.

Tax and accounting considerations

Tax rules vary by country. Common features include:

• Crypto often treated as property for tax purposes, so sales trigger capital gains/losses.
• Funds and trusts may generate pass‑through tax events or have different tax treatments for distributions.
• Public companies holding crypto must follow accounting standards for digital assets; some jurisdictions require impairment testing and specific disclosure.

Investors should consult a qualified tax professional familiar with crypto and securities tax treatment in their jurisdiction.

Market implications and future trends

Key trends that will shape how does cryptocurrency work in stock market going forward:

• More spot ETFs and regulated ETPs expanding product choice and increasing institutional flows.
• Growth in tokenization as a mechanism to offer fractionalized securities and faster settlement.
• Continued institutional adoption of custody solutions; custody firms listing publicly signal maturation of infrastructure. As of January 22, 2025, a recent IPO of a major institutional custodian priced at $18 and opened at $22.43, producing a ~25% first‑day gain and implying roughly a $2 billion valuation—an event that underscores market appetite for institutional crypto infrastructure.
• On‑chain data feeds and oracle networks expanding to support hybrid products (for example, 24/5 equities data streamed on‑chain enables new DeFi derivatives). As of March 15, 2025, according to Chainlink’s announcement, continuous U.S. equities streams were launched to provide on‑chain access to real‑time stock and ETF data.

These developments point toward increasing interoperability between capital markets and blockchain rails, but legal and operational constraints will determine the pace and shape of adoption.

Glossary of key terms

• Blockchain: A distributed ledger of chained blocks recording transactions.
• Token: A digital representation of value or rights on a blockchain.
• Spot ETF: An ETF that holds the underlying asset directly.
• Futures ETF: An ETF that holds futures contracts rather than the underlying spot asset.
• Custodian: Entity that safekeeps assets; in crypto, custody often involves safeguarding private keys.
• Market maker: Provides liquidity by quoting buy and sell prices.
• Settlement finality: The point after which a transfer is irreversible under system rules.
• Tokenized security: A blockchain token representing a claim on a traditional security.
• Trust (e.g., closed‑end crypto trust): A pooled vehicle that holds crypto and issues tradable shares.
• Miner/validator: Network participant that verifies transactions and secures the blockchain.

Related topics

• Cryptocurrency
• Blockchain
• Exchange‑traded fund
• Futures contract
• Tokenization
• Securities regulation

Recent, verifiable industry examples (dated source citations)

• As of January 22, 2025, according to Benzinga, BitGo completed an IPO priced at $18 per share and opened trading at $22.43 on its first day, representing a roughly 25% first‑day gain and implying an approximate $2 billion valuation. This event illustrated investor demand for custody and infrastructure plays in crypto markets.

• As of March 1, 2025, according to Cointelegraph, a U.S. restaurant chain announced a Bitcoin bonus program for hourly staff that accrues $0.21 of Bitcoin per hour worked, distributed after two years. This example shows corporate payroll and compensation experimenting with crypto as a long‑term incentive.

• As of March 15, 2025, according to Chainlink’s public announcement, Chainlink launched 24/5 U.S. Equities Streams to provide continuous on‑chain access to U.S. stock and ETF price data, enabling new hybrid DeFi applications that require real‑time equities pricing.

• As of March 15, 2025, reported company filings show a public company rebranded to emphasize Bitcoin holdings and disclosed approximately $500 million in Bitcoin on its balance sheet, highlighting how public equities can become proxies for crypto exposure when corporations materially hold digital assets.

• As of 2026, according to Benzinga, a long‑term investing analysis reiterated that extreme portfolio percentage growth historically requires long time horizons, frequent reinvestment, and tolerance for prolonged flat periods—an important behavioral note for investors seeking outsized returns in any asset class, including crypto‑backed equities.

Practical checklist for investors asking "how does cryptocurrency work in stock market"

• Identify the exposure type: equity (company), direct price exposure (spot ETF/ETP), derivative (futures ETF), or tokenized/security wrapped product.
• Read product prospectuses and custody disclosures closely: where are assets held, who is the custodian, what insurance exists?
• Check regulatory approvals and filing dates: recent approvals materially change product availability.
• Understand tax treatment: consult local tax guidance for crypto and fund distributions.
• Review fees and tracking methodology: futures roll costs or trust fees can materially affect returns.
• Consider custody options if moving between listed exposure and direct coin ownership; Bitget Wallet is an integrated option for investors using Bitget’s capital‑markets services.

Further reading and authoritative sources

For deeper technical and regulatory detail consult the following types of sources: securities regulator releases (e.g., SEC/CFTC advisories), central bank explainers on crypto settlement, broker/dealer research (e.g., industry whitepapers), and established financial encyclopedias. Representative public resources include encyclopedia entries on investing in cryptocurrency stocks, Investopedia explainers on crypto ETFs, and central bank materials on blockchain settlement.

Final words — further exploration and next steps

If your goal is to learn how does cryptocurrency work in stock market for practical portfolio choices, start by deciding whether you want direct coin ownership or regulated, stock‑like exposure. For many investors, ETFs and publicly traded infrastructure firms provide easier access and traditional investor protections; for those wanting the functional properties of coins (programmability, self‑custody), native markets are necessary.

To explore regulated, market‑based exposure and custody in one place, consider investigating Bitget’s product offerings and Bitget Wallet for custody solutions. Always verify product disclosures, custody terms, and the latest regulatory developments in your jurisdiction before acting.

Further exploration: review the latest ETF prospectuses, trust filings and exchange disclosure documents; track on‑chain metrics (transaction counts, wallet growth) and institutional flow data to see how capital markets and crypto markets continue to converge.