Christmas is almost here and among being busy with shopping, holiday arrangements, work and life in general, there is one hot topic that is on the minds of many: The Bitcoin. A 40% price fall from Sundays peak left no investor and/or follower indifferent.
After performing from a ~$1000 price in January and reaching it’s current peak on Sunday at 9:00AM with $19,900, yesterday (Friday) at 9:51AM the Bitcoin price dropped to $11,237 (43%), another fluctuation after last weeks crash from $17,500 to $13,000 (25%) - according to CoinDesk. Given such a roller coaster ride in Bitcoin price the question of where to better put investment funds remains. But how do you know what’s in there for you?
The key to find the better investment lies in the fundamental differences between Real Estate and Bitcoin and how this appeals to you as an investor with subjective goals.
1. It is about technology
A Forbes article “What Is Blockchain And How Will It Change The World?” describes the 101 of why and how blockchain technology is so relevant: it is the key for economic growth by cutting out print money and government regulation. Even if assuming this analysis is true, it does not support investment in cryptocurrency in general or Bitcoin in particular. Looking at the Automotive industry which is driven by innovation and efficiency, no singular company has a way to have sole success from using innovative technological solutions; as Tesla Motors did not become the sole electric vehicle manufacturer and faces serious competition with bigger manufacturing capabilities with more cash to invest, similarly Bitcoin will face enormous competition as any company in a competitive market.
There are about 14,000 banks worldwide - each of them is a potential competitor. Large banks will surely protect their interest in staying relevant for their databases of clients and that won’t make any Cryptocurrency start-up's life any easier. If you invest in online technology then Cryptocurrency might be the way for you, assuming you’re ready to face a high risk.
2. Do you like risky ventures or just the casino
Even Tony Robins had something to say about this new Bitcoin/cryptocurrency phenomena, he gave a TED Lecture about “Why we do what we do” which discussed the "invisible forces" that motivate everyone's actions, it was even explained on CNBC as to why investing in Bitcoin is “like going to Vegas” because of Bitcoins uncertainty of returns which are unpredictable and unsteady both for short and long-term. Short-term wise you’ve seen the roller coaster price ride which leaves certain “windows” or opportunities to gain profit and high probability to lose. Long-term wise it took 7 years for the Bitcoin price to start its steep climb during only one month - the next time it will happen and to what magnitude remains uncertain. With such probability’s, it is risky to build a future through such strategy.
From those reasons, the investment in Bitcoin if one will safely allow is limited by a small Dollar amount, which is if one doesn’t mind loosing and doesn’t build their future on. Those investment patterns (high return, high risk, small time windows to invest and get money out) make Bitcoin and other cryptocurrency remind us of a risky venture or worse - a casino.
3. Security of investment or experiment
Apparently not all is perfect with the security of the Blockchain based cryptocurrency: “Cryptocurrency firm Youbit to shut down after hack”, YouBit (Yapizon) announced bankruptcy after a cyber attack resulted in the elimination of 17% of the company’s assets and thats after the fact in April 2017 the same company suffered from theft of about 4,000 Bitcoins worth $7.6 billion. And this type of hacking is the smaller problem with cryptocurrency companies, since all blockchain technology applications at this stage are an experiment; will start-ups successfully overcome institution's slow maneuvering and bureaucracy and will they cut the banks as middle man, or not, and if yes then to what extent and under what conditions.
4. Fraud and regulation
EtherDelta, a popular exchange for buying cryptocurrencies, website was hacked and their landing page was replaced by one that directs Bitcoin deals into hackers hands. After all, it seems that it’s not only about the blockchain technology but what ecosystem sounds it and who uses it; when demanded by and available to the masses an industry becomes threatened by fraud attempts, and that was the reason for regulation to become present. By the way, real estate was the first industry to adopt written laws and regulations to avoid attempts of fraud while leveraging technology. Cryptocurrency might not be an exception, for the good of the public.
5. Safe Alternatives
All Tony Robins, Warren Buffett and other financial philosophers agree that investing in S&P500 has a lot of sense in it, both because of the mechanism behind it and because of its financial performance in the long run (38% five-year annual average). The only way to get a higher return then S&P500 (and other stocks on the market) and with higher safety and certainty is investment in real estate in specific markets, Philadelphia for example. In 2017 S&P500 grew 18.7% while Fishtown demonstrated 31,8% year-over-year growth index. If you have safer thoughts of investment here are 1087 Philadelphia listings of 2+ bed Single Family, Townhouse priced $250k -$750K.