With the recent news of Bitcoin falling from £31,464 to £25,140 – a drop of over 25%- it is another reason why investors should do due diligence to ensure that their next investment is stable.
Since 2020 Bitcoin has been gradually rising with only a few dips appearing now and again. This positive growth has seen both online communities and investors excited with the prospect of turning a large profit as the value of one coin had recently reached the £50,000 mark.
However, since January 2022 Bitcoin has been dropping incrementally. In April alone the coin has singlehandedly wiped out an estimated £1 Trillion worth of value, in a destructive path that has dragged cryptocurrency down as a whole.
Dragged down with it was a stablecoin- a coin that supposedly never loses value-terraUSD. Coins such as terraUSD were previously matched the US dollar or GBP and used by investors instead of banks in a way to hedge against rising inflation. However, against all conceivable odds, the coin lost its value to the U.S. dollar, and in turn reduced the value of its support coin Luna by almost99%, falling to £0.000193 from a previous high of £68.30.
This rapid decrease in value has shocked the digital economy and forced investors to quickly sell their investments.
Initial Cost vs Returns
The decision to invest in either property or cryptocurrency is dependent on the investor’s capital. Some look toward crypto as a cheap alternative to tangible assets due to the low entry price when compared to assets like property.
However, the low entry fee for crypto is not as enticing as it should be. With some ‘crypto experts’ recommending an individual invest 10% of their net worth into the digital economy. So, while many investors find that it is initially a cheap buy in, to generate high returns, it is necessary to up the amount that you invest. But as detailed above, the monetary return may never happen.
It is a common occurrence that these digital assets lose value. Online communities have started to name these common periods of decline ‘crypto-winter’ and ‘bear market’, as to explain away the apparent ‘hibernation’ of value that happens every few years.
When compared to property, the initial investment is much higher with some rates reaching upwards of £50,000. But this is not necessarily negative. When an investor has secured the property, they can then use the asset to rent, creating a stream of passive income that can fund future ventures.
With financial opportunities such as loan notes (a promissory agreement with incremental payments) within the property market, the entry fee can be considerably lower than expected. With options to invest with as little as £5,000, property can be as cheap with more benefits.
Liquid vs illiquid
Cryptocurrency vs property offers a clear understanding of a liquid vs illiquid asset. Property is a tangible asset that an investor owns, whilst cryptocurrency is simply a digital asset.
The digital crypto economy is manipulated by highly valued corporations and volatility, this unfortunately dilutes the investors position and hands control over to outside influence.
On the other hand, the constant demand for affordable housing means property is always in demand and controlled by the investor. This positive side-effect of property benefits the investor and consistently provides a strong return yield and constant capital growth.
So, it is important for investors to research into these stable investments and realise the potential of a low cost entry into the property market compared to other volatile alternative investments.