Cryptocurrency vs Real Estate! Which one is better to invest in?
A good investment strategy is vital for saving for retirement, creating riches, building wealth.
A number of different investment opportunities exist out there that allow investors to diversify their portfolios while minimizing risk.
There are advantages and disadvantages to every investment opportunity.
Stocks, bonds, mutual funds, agriculture are good investment opportunities but here are two opportunities to consider in 2022: Cryptocurrency and Real Estate.
To begin, let’s take a quick look at cryptocurrencies.
A cryptocurrency is a digital currency that can be used to buy goods and services.
They are also used by some individuals to make a profit through trading.
Bitcoin was created by Satoshi Nakamoto in 2009. Although there are countless coins out there, Bitcoin is the most popular.
Getting bitcoins requires computer software that can solve complex mathematical problems.
A miner who has solved the problem receives Bitcoin as a reward. This process is called “Mining”
Okay! Without further ado, let’s take a look at why you should invest in cryptocurrency and why you shouldn’t.
Cryptocurrency: Why Should You Invest?
First, cryptocurrencies differ from traditional currencies because they are decentralized and cannot be controlled by just one entity.
Transfers of cryptocurrencies can be done quickly and easily via a series of privately connected computers that share a ledger.
Cryptos are publicly shared every time they are transferred via the blockchain.
In addition, a government cannot just print more coins since there is a limited number in circulation.
A big reason why Bitcoin is so popular is that this protocol makes it resistant to inflation.
Another advantage of crypto is that it has a very low entry barrier.
Bitcoin is trading between $46,423 and $46,752 at the time of publishing this article, but individuals can purchase units much smaller than that.
The unit is called Satoshi, and it represents a tiny fraction of a Bitcoin. Right now, 1 dollar will get you around 2,700 Satoshi.
There are also countless altcoins that will allow you to purchase a full coin for much lower prices, one of the most popular being Ethereum, which is currently going for around $3,818.
Moreover, crypto has a long-term upside, with the potential to gain exponentially.
The value of Bitcoin has almost 6,000% increased over the past six years alone.
In the past few years, other coins have posted returns of over 1,000%.
Furthermore, many institutional investors are increasingly interested in Bitcoin.
JPMorgan recently announced that the institution will be the first big bank to open up cryptocurrency funds to retail investors.
It is expected that the price of Bitcoin may reach over $100,000 in the near future and that the currency may eventually replace fiat money such as the US dollar or euro.
Cryptocurrency Investments: The Downside
Despite crypto’s numerous benefits, it also has significant downsides.
First and foremost, owning crypto doesn’t result in dividends or rents…
This means there is no passive cash flow unlike stocks and real estate.
With crypto, you can only make money via capital appreciation (increased value) that you will realize when you sell the coin.
Cryptocurrency is also not a tangible asset, which is another downside…
A Bitcoin exists only on the Internet. This makes it impossible to physically hold a Bitcoin in your hands.
As a result, you open yourself up to cyberattacks and other types of cybercrime that could drain you of your investments.
Furthermore, the lack of transparency makes it tough to determine the true value of a coin, which could result in a coin being traded for more than it is truly worth.
Cryptocurrency is considered to be a bubble by some, which leads to the fear that investors will lose everything.
High volatility is also a downside to crypto…
During the past year alone, Bitcoin went from being worth around $10,000 in October 2020 to over $60,000 in April 2021.
It fell below $30,000 in mid-July 2021 and is now over $46,000.
Historically, Bitcoin has been subject to extreme volatility many times.
In 2017, Bitcoin went from $1,000 to close to less than $20,000. It then returned to only $7,000 after about 4 months.
The volatility can make even the most risk-tolerant investors nervous since they know their investment could be lost at any time.
The last thing to note is that governments do not currently regulate cryptocurrency usage and trading, a possibility to be avoided if cryptocurrency becomes more mainstream.
As an investment, real estate is unquestionably among the best ways to build wealth, create cash flow and save for retirement.
Investing in Real Estate can be done in many ways, such as through developers, wholesaling, rental properties, house flipping, short-term rentals, and Real Estate Investment Trusts (REITs).
Real Estate investment is a popular choice due to the advantages it offers that other assets don’t.
Why Real Estate Investing is a Good Idea…
One of the major benefits of real estate is that it provides a predictable, consistent, perpetual and steady source of income – passive cash flow!
A suitable hedge for inflation is also real estate since its rent will typically increase with inflation.
Another advantage is that you will get a tangible asset you can see, feel, and even touch.
People will always need a place to live, work, exercise, and so on due to the necessity of real estate.
Real estate’s value comes from what it is, not what people attribute to it.
Furthermore, you will be able to force the asset to appreciate as an investor.
If you’re into rentals, you can improve your property’s value by making strategic improvements, which can result in higher monthly rent.
A property can be improved in many ways, including with painting or fencing, or with improved security, or even with a full interior renovation of the property.
Lastly, as a real estate investor, you will be eligible for many tax advantages, making it a more profitable investment than other forms of investing.
The Disadvantages of Investing in Real Estate
Real estate has its advantages, but it also has its disadvantages.
One disadvantage of investing in real estate is that it is less liquid than other investments. Stocks, for example, can often be traded at any time, but real estate cannot.
Real estate is typically a long-term play because finding a suitable buyer can take weeks, months or even years.
The cost of owning and maintaining real estate is also very high.
Purchasing land or a building can cost hundreds of thousands up to millions of Naira, making entry very difficult.
It is possible to get started in the real estate investment market without spending a lot of money, by engaging in wholesaling, investing in mini-projects or land banking schemes, but there are some challenges involved as well.
Cryptocurrency vs Real Estate: So, What’s the Best Investment For You In 2022?
Although most of the time, real estate is the better option, you might want to diversify your portfolio to include both cryptocurrency and real estate.
You can choose to invest in crypto or real estate depending on your needs.
But, Investing in real estate generates a reliable income every month as well as increases the value of your assets without exposing you to too much risk.
Moreover, real estate offers a number of tax benefits and incentives. You can also take advantage of leverage to increase your returns.
A crypto investment, on the other hand, is more akin to a speculative bet than an investment based on fundamentals.
A high degree of volatility is present in this market, and investors may lose part or all of the money invested.
Even though the price of crypto-assets can rise exponentially compared to other investments.
Capital appreciation is the only way to profit from it since it does not pay any dividends.
Investing in real estate reduces your risk, provides consistent returns and allows you to accumulate a tangible asset.
The question is: Where should you place your money in 2022?
I will say both! Yes, both.
But if you want to invest, make sure you fully understand what you’re getting into before you put your hard-earned money into it.