Crypto VS Real Estate Investment

By Justin Mays

It is hard to ignore cryptocurrency these days. Its journey from the dark web to making headlines daily around the world has captured the imagination of would-be investors. However, building wealth and saving for retirement requires smart investing. Strategies for diversifying your portfolio and mitigating risk abound, but when evaluating crypto investments versus real estate investments, there is a clear winner. 

Crypto as a digital currency was developed as an alternative to fiat currency to purchase goods and services. Bitcoin, Ethereum, and Dogecoin are some of the most well-known and traded digital currencies out there. It is decentralized, saved in online wallets or popular services like Coinbase and no one entity regulates or has control over it. There is a low barrier to entry, you can buy crypto for mere pennies, or a fraction of a coin. Many traditional investors, banks, and institutions are helping move digital currencies to the mainstream, including household names like PayPal and JP Morgan, by accepting the coins for transactions or including platforms for crypto in their service-based portfolios. Crypto fever has even hit the stock market with the first Bitcoin ETF debuting on the New York Stock Exchange in October 2021.  What truly attracts investors though are the recent exponential gains, Bitcoin reached all-time highs in 2021, reaching $68,000 in November at a 30% increase from May 2021.

These extreme fluctuations in value attract high-risk tolerant investors but also represent a substantial drawback. Many see crypto as a bubble, purely speculative in nature with no real value behind it. There is no security or insurance for crypto; since it is digital, it is vulnerable to cyberattacks or to losing all your investment because of a forgotten password. You can only make money via capital realization when you sell your crypto, there are no passive cash flow opportunities like rents or dividends.  Additionally, governments are cracking down because of the deregulated nature of crypto. Calls to regulate the sale, transfer, and taxation by governments like China have resulted in the value of digital currencies dropping.

Historically, real estate is a solid and safe way to grow your wealth.  Unlike crypto, real estate is a tangible good and has real, not attributed, value. There is no substitute for shelter, people will always need a place to live or work in. You can strategically add value through improvements to the structure and real estate can also bring in passive cash flow through renting. There are special tax breaks for real estate owners. There are a few drawbacks, like how slow it can be to liquidate a real estate or the need for structural maintenance, but nothing as high risk as crypto.

Real Estate provides you with a tangible asset that can be rented out and appreciates in value. There are tax benefits and incentives associated with real estate and you can leverage these to increase your returns. Real estate is also a great way to diversify your portfolio as it operates independently of the stock market. 

All investment opportunities come with their own set of advantages and disadvantages. In the debate of crypto versus real estate, the decision is simple. Crypto is a speculative asset and is highly volatile. There is a high chance you can lose all your money, as famously happened last month with the Squid Game coin. Or lose half its value in a week like the swings in Bitcoin last spring. It doesn’t pay any capital dividends like stocks and the only way to make money from it is via capital appreciation. Real estate will give you more consistent returns, is a tangible asset, and is less risky. So, make the intelligent choice and check out our portfolio today!