Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Real Estate vs. Crypto: Which is More Lucrative?
Cryptocurrencies are thriving in the financial sector, proving to be lucrative and viable investment plans in today’s markets. Real estate has been there for a while, and many investors have grown fond of its market. However, real estate garners fewer returns compared to cryptocurrencies. That’s why a big company like Tesla, in February 2021, purchased $1.5 billion in Bitcoin.
What is Cryptocurrency?
Cryptocurrencies are alternatives to fiat money in digital assets that people use to buy goods, services, and investments. It began in 2009 with Bitcoin as the first and most used crypto. Cryptocurrencies tend to solve issues that clouded the traditional financial ecosystem – centralization. That’s why cryptocurrencies don’t deal with third parties like banks or governments; they are decentralized. They are unique lines of code that get verified through cryptography.
Since the creation of Bitcoin, thousands of cryptocurrencies have flooded the market, and more are still being created. Cryptocurrencies are stored in digital wallets requiring a private key to legitimize transactions. The private key is a unique code necessary for digitally signing off on purchases, which means you can’t do without it. In addition, cryptocurrencies operate under blockchain technology, a decentralized technology that manages and records transactions.
What is Real Estate?
Real estate refers to purchasing land and any artificial or natural improvements permanently attached to the land. Real estate comprises five categories: commercial, residential, industrial, raw land, and special use. There are many ways of investing in real estate, like directly purchasing a home or any other rental property through a real estate investment trust (REIT). In particular, real estate gives you full ownership rights of the land. It includes what lies above and below it and anything that is permanently attached to it. Real estate gifts you the right to possess, lease, sell and enjoy the land.
Which is More Lucrative, Between Real Estate or Crypto?
Over the years, many economic novices considered real estate a worthwhile investment, the best retirement plan. However, even though the real estate can generate cash flows, a few bounds limit it from being a lucrative investment. On the other hand, cryptocurrencies have a history of people making tons of money due to their volatile nature. Some enthusiasts consider it a modern-day gold rush, and many are eager to join the frenzy to get a piece of the pie. However, cryptocurrencies have their disadvantages which make them a risky investment plan. Let’s dive into their comparisons to determine which is more lucrative.
Volatility vs. Interest
To begin with, the high volatility in the prices of cryptocurrencies makes them a highly lucrative investment plan. In many past cases, crypto fanatics bagged big after the prices of cryptocurrencies skyrocketed. For example, in 2017, crypto prices rose from $900 to $20,000. However, Bitcoin’s price crashed the following year, losing more than half its value. Interestingly, it reached an all-time high in early 2021 by reaching more than $65,000, but it later deteriorated to around $35,000 at writing. Such examples prove crypto is a lucrative investment. However, the risk of losing most of your investment, if not all, due to volatility can make one think twice.
On the other hand, real estate appreciates by roughly 6% annually. As a real estate investor, you generate money through rental income and profits from business activity on your property. As a result, the value of your real estate increases over time, and rent also increases. As a result, you can profit when you decide to sell, leading to higher cash flows.
Predictability
Cryptocurrencies are highly speculative; crypto veterans cannot determine how they will perform over time. Even though speculation is a factor to consider before investing, cryptocurrency is a new market far riskier than traditional markets. You can’t know how it will perform in the long run.
Meanwhile, real estate has a predictable cash flow – net spendable income derived from the investment after paying operating expenses and mortgage payments. Thus, a lucrative real estate investment should garner you 6% or greater cash flow.
Inclusion
Since cryptocurrencies are completely decentralized, they are a good investment plan because no third parties will interfere with your financial activities. That’s why cryptocurrencies are fast gaining traction in the financial realm because no extra charges are needed to deal with intermediaries.
Meanwhile, real estate is prone to tax deductibles from normal expenses like maintenance, property upkeep, mortgage interest payments, and improvements. These deductions tend to dent your income and reduce your overall income.
Security
Investing in cryptocurrencies comes with some risks. Apart from the risk of volatility, owning and keeping cryptos poses some risks too. Since you require a crypto exchange to buy and sell cryptocurrencies, you need a secure digital wallet to hold your coins. Nevertheless, these digital wallets are vulnerable to hackers who might steal all your crypto investments. If you also forgot your digital wallet password, you have to say goodbye to your investment since you won’t access it without the password.
On the other hand, real estate has no major security threats apart from property damage, which you can improve over time and still earn from your investments.
Conclusion
The crypto currency realm is still a new financial fad that has proven lucrative to some with established skin in the game. Before investing in crypto, you require to understand the field better so that you can make more. Otherwise, you require rigorous research if you are new to the field. If not, steer clear since they can potentially flatten your investment in seconds.
On the other hand, real estate offers a good investment opportunity since you can receive a passive income flow. In addition, your real estate investments could also build your equity and wealth over time, and it acts as a good retirement plan.
Either way, both investments have lucrative profits, but some of the risks involved tend to outweigh your investment goals. That’s why you should do extensive research in both fields before investing.
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