Property Investment Vs Bitcoin/Cryptocurrency - Which to invest in?
In this article, we present the case for both Bitcoin/Cryptocurrency and property investment to establish which is the best investment.
It seems that you cannot escape news of crypto at the moment. Every day there are news stories about Bitcoin fluctuations or arguments that Non-Fungible Tokens (NFTs) are the future of art. All of this is accompanied by large, attention-grabbing numbers which attract people’s interest.
This has led many to wonder if crypto is a good alternative investment to traditional markets like property investment. For the purposes of this article, we have used the catch-all term “crypto” to cover cryptocurrencies, NFTs and all other types of similar product. While there are small variations between them, in reality they are distinctions without a difference when it comes to this type of comparative analysis.
The upsides of crypto are widely known. The likes of Bitcoin, Ethereum and all manner of NFTs have received an unbelievable amount of publicity, and those in the crypto business have spent a huge amount of cash on buying advertising and celebrity endorsements to get the message out. What is this message? There are huge profits on offer, and they are available to everyone in the right conditions. This has proven to be a powerful proposition, and it is true that some early adopters are now extremely rich.
However, the very nature of the potential upside of crypto investment also leads inevitably to the downsides. It is a fact that people can only get rich from crypto if other people come along later to buy that same item from them. If there are no new entrants to the market, the ‘value’ of your crypto purchase will decrease. A tiny proportion of early adopters may get rich, but those profits can only materialise if a huge majority of later adopters put their money into it.
Indeed, it is the sheer extent of the publicity which offers our first clue as to why crypto is perhaps a bit too good to be true. In the case of Bitcoin, for example, its loudest proponents see it as a replacement for traditional forms of currency and promote it as such. It is meant to be decentralised, unregulated, transparent and uncontrolled by the large banks, making it a more democratic basis for transactions. This is a compelling, popular vision that makes abstract promises in the same way that astrology does.
They point out correctly that all money is based on a shared faith, and that our existing currencies only have value because everyone believes in them. The importance of faith in currency is underlined by how aggressively nations around the world pursue counterfeiters who create fake banknotes – anything that undermines faith in a currency cannot be tolerated in case people stop believing in its trustworthiness and the economy comes crashing down.
However, GBP, Euros and US Dollars do not need to advertise themselves at half time in the Super Bowl. They don’t need to convince more people to use them, and they don’t need to convince people that they have value. These currencies have people’s faith because they are backed by tangible, real world assets – the key differentiator. If you have an amount of Pound Sterling, that currency value is backed by the state, it can be used freely and is traded at an agreed value in a stable fashion.
In contrast, a picture of an ape or an imaginary coin are not backed by anything. They do not exist, and what’s more they have no use case to exist in any tangible form in the future. There is nothing that you can do with an NFT or an Ethereum coin which cannot be done using currencies which exist in the real world. It is this aspect which undermines crypto, and it makes it highly susceptible to crashes, as is demonstrated on a monthly basis.
Its complete lack of utility means that crypto can never be reliable. Without reliability and a quantifiable use in real life, it can never be trusted on a large scale. Without that kind of trust, it can never achieve stability and mass adoption. Without that, it can’t become anything more than a way for a tiny minority of people to become rich and the vast majority of others to lose their real-life money.
This is why crypto is a poor alternative to almost any other kind of investment – particularly property which is strong in all the areas where crypto is weak and provides the sort of tangible, long-term stability which investors look for. You don’t need faith in the concept of houses to know that they exist, and will continue to do so in the long term.
Property vs Bitcoin continued...
Property is about as useful an asset as can be imagined because people need somewhere to live. This is a real life need that can only be met by property, and this ensures that there will always be demand. In the UK, demand is increasing every year because there is not enough property on the market to house everyone adequately, and so stability and the potential for
Take Manchester for example. The Deloitte Manchester Crane Survey 2022 shows that the last five full years have seen almost 20,000 new residential units delivered to the Manchester market, including 5,500 in 2021. In addition, a further 10,700 units are in construction as of 2022, and should be completed by 2026.
At the same time, Manchester City Council estimates that Manchester’s population will grow by 70,000 people by the end of the decade, and all of those will need homes. Even historically high building rates in the city centre cannot meet demand – and that leads to serious potential for growth in the future as well as stability now. This cuts the risk of property investment enormously, especially when compared to crypto which is susceptible to any minor event and crashes regularly.
Likewise, because property exists in real life and is not based on faith alone, there is regulation in place to ensure that the sector is administrated fairly and that everyone involved has recourse to enforceable legal backing if the situation requires.
Compare that to crypto which is decentralised and unregulated by design. There are countless cases of large- and small-scale theft in the world of crypto where regular people are left with nothing, and they have no way to recover their money. It is not unusual to see people in charge of ‘cryptocurrencies’ run off with other people’s money, or hackers stealing people’s NFTs and then reselling them. When this happens it is game over for those who lose out.
It is for the above reasons, among others, that property is a preferable investment option to crypto in all its forms. The stability, predictability and regulatory accountability that come with property cannot be replicated by crypto – indeed, the latter is designed to have none of these things on purpose.
Want to learn more about what makes property such an outstanding investment option? Get in touch with our team today by clicking here.