Many investors are comparing Property vs Bitcoin in order to establish which is the best investment?
When weighing up an investment’s credentials there are several factors that are considered including the risk vs return ratios, historical trends, future predictions and volatility in the market.
We’ve all heard of investors who happened to choose to buy at the perfect time and saw staggering success. Bitcoin has created many millionaires and in some cases billionaires who took a gamble at the very beginning.
The questions investors need to ask themselves now is whether Bitcoin is still a gamble? Are they too late to see the same impressive returns as those who bought the cryptocurrency early? What’s the outlook for bitcoin?
As entrepreneurs, we take a keen interest in knowing about different investment types that could make us money. Cryptocurrencies have been on our radar for some time and we’re often asked our opinion on whether it is a viable investment option.
In this article, we present the case for both Bitcoin and property investment to establish which is the best investment?
What is Bitcoin?
Bitcoin is a digital currency. It is created and held electronically and uses peer-to-peer technology, meaning the management of transactions and issuing of Bitcoins is carried out by the network collectively.
It is a decentralised currency; nobody controls or owns Bitcoin and it is open to everyone. Not being controlled by a large bank is one of the features that makes it so appealing, it’s also not printed like other currencies.
Amongst the hundreds of cryptocurrencies, Bitcoin is probably the most well-known and the one we all hear about in the press.
Who created Bitcoin?
Bitcoin was created by a software developer, Satoshi Nakamoto.
The idea behind Bitcoin was to create a currency that was independent of any central authority and would be instantly electronically transferable with low transaction fees.
In July 2010 when Bitcoin began trading its value was just US$0.0008 and it performed pretty flatly until April 2013 when it suddenly spiked to US$250 and by the end of 2013 its value was US$1,164.
Volatility had an impact between 2014 and 2015 when Bitcoin’s value decreased to just US$245 by October 2015.
The Coronavirus pandemic propelled the cryptocurrency to new heights, its value in March 2020 being US$4,841.60
As of March 2021, at the time of writing the value of 1 Bitcoin equals US$56,242.80. Those who purchased Bitcoin a year ago have seen the value increase by more than 10 times their original purchase price.
Should you invest in Bitcoin?
Those who purchased back in 2010 will have seen an unprecedented return on their investment, it’s hard not to feel a little envious of what was likely a chance gamble that paid off.
The question remains, is this a Bitcoin bubble? Is it really a viable investment class?
There’s considerable excitement surrounding cryptocurrencies but as many seasoned investors will have seen in the past, hard and fast returns can lead to huge fallout if they’re not sustainable.
Predicting the future for something so new as cryptocurrency is incredibly challenging as its in unchartered water meaning the risk to investors is very high.
And it’s also worth pointing out that in its short history Bitcoin has seen some serious troughs.
The number of unknowns alone would likely put off a large proportion of entrepreneurial investors, they’re more likely to view cryptocurrencies as though they were betting on horses at the races.
With an ‘either way’ mentality you’re likely to have some wins but won’t be significantly out of pocket should your gamble not be successful.
Property vs Bitcoin
To compare property vs Bitcoin and decide which is the best investment UK property needs to be considered for its merits and drawbacks.
Buy to let property has several key attributes that Bitcoin will never have or won’t have for many years to come.
Demand for homes in the UK
Firstly, property is a tangible asset, Bitcoin is not. Tangible means something you can touch, a physical and very real thing.
People need places to live and they will always need somewhere to live which is why property investment is such a strong contender when considering multiple types of investment class.
The demand for homes in the UK far out outstrips the supply to the market. With population growth on a sharp upward trajectory and housebuilding so far behind the requirement, there is no end in sight for this shortage in supply.
A valuable industry
It was recently reported that the UK property market was ‘too big to fail’ pointing at the measures put in place by the government in order to support the industry through the Coronavirus pandemic.
As the first industry to reopen after the first lockdown in 2020 and not be closed again throughout the pandemic, it is clear the government recognises the importance of the property market to the overall UK economy.
The significant reductions in Stamp Duty Land Tax that are currently available to those buying UK property together with several other initiatives are all signs that the government wants to keep the industry moving.
Bitcoin is not answerable to any authority which also means it is not protected by any authority or government – a crash could be catastrophic and without any safety net.
As we pointed out above its almost impossible to predict the future for Bitcoin.
There are loose speculations and large sums thrown about based on certain companies moving to incorporate Bitcoin into their strategies but it’s far too early in the cryptocurrency’s existence to really be able to forecast with clarity.
The UK property market has just endured one of the most unpredictable periods but enjoyed relative stability. Forecasts on price growth did vary for some time based on predictions for unemployment and other parts of the economy that have typically had a knock-on effect on the property market.
Similarly, traditional currency values are affected by political and economic factors that allow traders to forecast and take calculated risks. The key here is that it’s unknown exactly what triggers the growth of the Bitcoin value.
Revered American economist Paul Samuelson had a wonderful analogy that, despite him having passed away before Bitcoin was even created is very apt when comparing property vs Bitcoin. He said “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
The Best Investment
Slower and more steady but not boring in any way, in our opinion property is the best investment when comparing property vs Bitcoin.
Whilst you might say we are biased, and of course, we are given our line of work, we are also avid investors across a range of asset classes and recognise opportunity when it is present.
Bitcoin remains to be a fairly unpredictable option and with a lack of clarity surrounding the supporting factors for future growth, property is a far more transparent investment choice with real and predictable prospects for long term growth.