Investing in bitcoin: Cryptocurrencies vs Real Estate
“Think about this new investment opportunity!”
Diversifying investment is one of the key steps towards a financially secured life. There has been a growth in the number of investment options with time. Today, there are many investment options like precious metals, real estate, stocks, bonds, mutual funds, cryptocurrencies etc. The growing buzz around cryptocurrencies has led many investors to think about this new investment opportunity. The stories on Bitcoin millionaires have attracted the attention of investors from all across the world, however, the high volatility and lack of guidance in this sector has been a confusing element for many investors. There exists much more familiarity and ease when it comes to traditional investments like real estate, which leads an investor to compare the pros and cons of investing in a traditional investment versus a digital currency. So it becomes inevitable to compare real estate to cryptocurrencies to get a clear picture of the potential risk and rewards.
Rise of cryptocurrencies as a new investment option
To venture into any new investment opportunity, it is always advantageous to know about its background and the events surrounding it. Cryptocurrencies, which have been gaining interest from big institutions lately, had come into existence with the launch of Bitcoins (the first cryptocurrency) in the year 2009. The actual identity of the developer/developers of the first cryptocurrency i.e. Bitcoins is still a mystery and goes by the name “Satoshi Nakamoto“. After a mild start and operation, it became a large buzz factor in the year 2017 when its price soared in 5 figures. Many new cryptocurrencies grew out of the success and growing adoption of Bitcoins. If we analyze the utility of cryptocurrencies apart from investment, then we find that blockchain, the underlying technology of cryptocurrencies, has been making roads into every sector like gaming, software, entertainment etc. Cryptocurrencies are providing a medium to decentralize the economic world apart from providing cheaper and faster transactions with increased anonymity.
The well-known cryptocurrencies have been fluctuating heavily in their price range. The most popular cryptocurrency, Bitcoins, went from $1000 per coin in March 2017 to around $20,000 in December 2017. These heavy fluctuations also provide the scope for heavy returns if an investor invests in it during the bearish phase. Despite having tremendous potential, they are considered to be in their early stages as the sector is largely unregulated which leaves the room for market manipulation. In simple words, cryptocurrencies are highly volatile and therefore it needs a proper study and investment approach to be profitable in this investment alternative.
Real Estate as an investment option
Real estate is one of the traditional investment options and its volatility is much less than cryptocurrencies. A real estate is usually considered to be a safer investment option as it can provide a long term financial security because land and buildings are appreciating assets. Further buying a real estate and renting it can provide a continuous flow of income apart from the inherent value appreciation over time. Investing in real estate can also provide a hedge against inflation because the value of a real estate also increases significantly with inflation.
Cryptocurrencies Vs Real Estate
Let us examine various dimensions of cryptocurrency investing versus real estate investing to get a clear picture of their potential.
One of the key goals of any investor is to get maximum returns. The returns provided from a well-analyzed cryptocurrency investing strategy can be far ahead than that of real estate investing. As the value of returns from a real estate depends on many factors like location and infrastructure surrounding it, similarly the returns from cryptocurrency investing depends on many factors like its utility, its adoption rate, people/company behind the cryptocurrency etc. To develop a winning strategy of cryptocurrency investing, one can take the assistance of any cryptocurrency investment consultancy/firm.
The real estate sector is highly regulated by the government, therefore the price and future of the real estate market are largely dependent on government rules and regulations. On the other hand, cryptocurrencies are largely free of government control and their value is determined mainly by market laws of demand and supply. Even though less regulation makes the cryptocurrency sector prone to manipulations, but many cryptocurrency exchanges are coming up with their own set of norms and safety mechanisms to safeguard the investments of their users.
It takes a much greater amount of money to enter the real estate market whereas a person can easily invest in cryptocurrencies with a much lesser amount. A cryptocurrency investor can easily buy fractions of popular crypto coins depending on his budget. With a careful investing approach, a cryptocurrency investor can also get 1000’s of units of new cryptocurrencies for a meagre amount.
Paperwork and Formalities
Investing in real estate takes much paperwork and government-issued formalities to be completed apart from complying with the changing local and national laws. On the other hand, getting started with cryptocurrencies has become very easy with the growth of many cryptocurrency exchanges.
investing in bitcoin and any cryptocurrencies needs only a few KYC (Know Your Customer) norms to be completed.
Sale, Transfer and Conversion
Cryptocurrencies are much easier to convert into other cryptocurrencies or fiat money than selling a real estate. A cryptocurrency can easily be transferred to any other person holding a wallet within a day. A real estate deal may take a few weeks to months to get completed whereas a cryptocurrency conversion can be done comfortably from home with just an internet connection and a laptop/PC/smartphone.
Investing in real estate requires regular oversight for maintenance as the property deteriorates with time. Cryptocurrencies being digital in nature are safe from the need for maintenance.
Growth in demand
The higher the demand, the better is the potential of returns. The demand of real estate is more or less uniform as the population and businesses are growing at a predictable rate. However, the number of companies entering the blockchain space is having a direct impact on the growth, popularity and acceptability of cryptocurrencies. Many well-known entities like IBM, Microsoft, Facebook, Intel and JPMorgan have established a dedicated division for research and application of blockchain technology which indicates the potential of cryptocurrencies.
By looking at the above factors, it becomes clear that investing strategically in cryptocurrencies holds a much better potential than investing in real estate. Any investor who is serious to consider a new and rewarding investment option must definitely consider investing in cryptocurrencies.
“Investing in real estate requires regular oversight for maintenance as the property deteriorates with time. Cryptocurrencies being digital in nature are safe from the need for maintenance. “