Real Estate vs. Cryptocurrency: Which is the Better Investment?

When it comes to choosing between the best place to invest your hard-earned money into, it’s a difficult choice to make. Add to that the current ongoing pandemic, and the uncertainty of the whole affair only makes it more tough to choose. Like a game of chess, a couple of wrong moves and you are heading for a disaster, losing everything you were trying to save.

For the longest time, people have been investing money in two major asset classes – real estate and gold. While the gold prices have been fluctuating, the return on investment on gold isn’t on the same level as that of real estate. Besides, storage of gold is risky and hassled. In comparison, real estate is relatively risk-free, has higher appreciation, and the scarcity of available land makes it ideal for investors who like to go for an early investment in land development.

On the other hand, cryptocurrencies, such as Bitcoin, Ethereum, Monero, Dogecoin, etc. have become a hyped asset class for the past decade among investors. As the first cryptocurrency, Bitcoin has experienced an exponential rise in value over the past years, mostly based on speculation. Dogecoin, after receiving a social media shout out from Tesla CEO Elon Musk, is also basking in the new-found interest of individual and institutional investors all over the world.

It is well known that all investment assets carry a certain amount of risk. If your goal is to enjoy decent financial gains, build wealth, and attain financial freedom, then knowing which is the right investment option for you will determine your future significantly.

Why is Cryptocurrency a Bad Investment?

In their book Security Analysis published in 1934, experts Benjamin Graham and David Dodd said, “An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return.” Cryptocurrency does not promise that return.

Here are top three reasons why cryptocurrency is bad investment:

  1. There is no regulation of cryptocurrencies. It might be the USP of this asset class, however, given that investors are anonymous, there is no way to hold someone responsible if a transaction goes wrong. Speaking of Bitcoin, JP Morgan CEO Jaimie Dimon said, “If we had a trader who traded Bitcoin, I’d fire him in a second for two reasons. One, it’s against our rules. Two, it’s stupid.” Dimon’s remarks sparked a 23% drop in Bitcoin price in the next 48 hours.
  2. There’s a serious threat to cryptocurrencies like fraud and theft. Since cryptocurrencies are stored digitally, They are at a constant risk from malware, hackers, and operational glitches. If a hacker gets access to an investor’s private encryption keys, they can easily transfer the cryptocurrency to a different account. The biggest hacking incident happened in 2014 when about $460 million worth of Bitcoin were stolen from Mt. Gox.
  3. There is a serious environmental threat from Bitcoin mining. Musk has critised crypto mining following a decision to suspend Tesla car purchases using Bitcoin. Musk said that he worries about a “massive increase” in coal and other carbon-intensive energy to generate electricity needed to mine digital currency.

There is no way one can value digital currencies such as bitcoin as an asset. There is no data available, apart from transaction settlement times and total circulating token supply, that shows the value or utility of a cryptocurrency. Comparatively, real estate, stocks, and mutual funds have been providing value and appreciation to the investors.

Invest in Real Estate in 2021-2022

Unlike cryptocurrency, real estate has been proven to be the best way to invest money during the pandemic. According to recent research conducted by ANAROCK, Mumbai, Bengaluru, and Pune have been the most active real estate markets during 2020, accounting for 67% of total housing sales in the top seven cities of India. Attributing it to the ongoing pandemic, Prashant Thakur, Director and Head of Research, ANAROCK Property Consultants, said, “Given the ongoing uncertainties in the stock market and financial sector, housing is being viewed as one of the safest long-term investments.”

Investing in real estate is the best way to invest in your future. Here’s why:

  1. Real estate has tangible asset value. It is backed by actual land and constructed property.
  2. Value of real estate increases with inflation, providing you a good appreciation should you plan on selling the property after a few years.
  3. Investing in real estate provides tax benefits in terms of insurance and depreciation. There are several sections of the Income Tax Act of India that outline the tax reliefs available for real estate investors.
  4. Since it has no direct correlation with other asset classes, real estate provides diversification of assets for investors.
  5. Real estate investment can provide you with steady passive income if you are investing in rental properties.

So, which one is the better asset class to invest in, during uncertain times such as the coronavirus-induced pandemic? Well, comparing real estate vs cryptocurrency, the answer is plain and simple – real estate is the best way to invest your hard-earned money.

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