Investing in Cryptocurrency vs. Stocks vs. Real Estate
Your cool friend at work tells you to invest in stocks. Your parents tell you to buy real estate. Twitter tells you to buy Bitcoin.
Investment options are available everywhere. It can be challenging to figure out which ones are best for you. (Spoiler alert: it’s all of them.) The concern remains: what if you’re missing out?
This guide will break down the parallels and differences between:
- Cryptocurrency.
- Stocks.
- Real estate investments.
What is cryptocurrency?
Cryptocurrency is digitally native money. That means it doesn’t exist in any physical form. You can use digital currencies to buy and sell goods and services. Crypto has also become popular as an investment.
Users record crypto transactions on a distributed blockchain database. Globally, thousands of computers update this public ledger together.
Cryptocurrency vs. Stocks
Stocks are shares of a company. Investors typically buy them hoping their value rises over time. Crypto and stocks share several parallels:
- Coins and companies both have a market capitalization.
- Both trade through online marketplaces (cryptocurrency exchanges).
- Both are higher-risk and return than other investments.
But cryptocurrency is money — it’s a medium of exchange or payment. We can’t use stocks to buy goods and services.
Cryptocurrency vs. Real Estate
Real estate refers to any valuable property, like land and buildings. Cryptocurrency and real estate are quite distinct. But they do have one common trait: scarcity.
Land is in limited supply. Some cryptocurrencies also have limits to how many can exist. Besides that, real estate is considered a far safer investment than cryptocurrency.
Comparing Digital Currencies, Real Estate, and Stocks as Investments
The differences between crypto, stocks, and real estate seem clear. But comparing factors you’d consider when investing is more nuanced. We’ll compare the three on:
- Returns
- Risk
- Liquidity
- Regulation
- Expertise
- Accessibility
Returns on Investment
Cryptocurrency. Over the last five years, Bitcoin has grown in value by over 8,000%. Headlines often feature people becoming millionaires almost overnight.
Stocks. The S&P 500 has grown by 105% over the last half-decade. In general, stock market investments grow by around 7-10% per year.
Real estate investment returns have averaged 10.3% during the last 25 years.
Risk of Investment
Cryptocurrency. The crypto markets are volatile. Coin values can jump up or down 10% at a single Tweet from Elon Musk. Anyone day trading crypto is taking on substantial risk.
Stocks. Investment securities like stocks are in the middle ground when it comes to risk. Solo stocks are riskier for beginners, but derivatives like ETFs are not.
Real estate. Returns on properties are slow, predictable, and relatively low-risk. It’s an excellent tool to hedge against inflation in your economy.
Investment Liquidity
Cryptocurrency. Digital currencies vary in liquidity. High-volume coins like Bitcoin and Ethereum are widespread and liquid. A smaller cap digital currency might be harder to buy or sell.
Stocks are high on the liquidity list. Trading fees are low, and there’s a constant demand. (Note: The native exchange will limit a stock’s liquidity.)
Real estate. Property investments are among the most illiquid assets. Real estate demand is high, but selling it is an arduous task.
Level of Regulation
Cryptocurrency is a newer innovation. Before Bitcoin, engineers tried digital currencies with little success.
Since then, governments have been slow to regulate crypto investments. You might have to deal with any fraudulent activity on your own.
A lot of effort goes into regulating stocks. Companies must fill out countless forms and paperwork to list on a stock exchange. Various government agencies’ sole focus is stock market regulation.
Real estate investment is prevalent worldwide. Market regulations are strict due to high levels of investment.
Expertise Required
Cryptocurrency. Investing in crypto is simpler than investing in stocks and real estate. For beginners, the Internet is full of free educational resources. Everybody has access to cryptocurrency, including the unbanked.
Stock investing can require more expertise and knowledge than crypto does. A person can spend years learning how to invest in securities.
Real estate investment requires a high level of expertise. Many people trade stocks and crypto for fun. But who on Earth does the same with real estate?
Level of Accessibility
Cryptocurrency investing is by far the most accessible of the three. You don’t even need a bank account to earn crypto. All you need is a device with an internet connection.
Stocks are less accessible than crypto, but more accessible than real estate. Take apps like Robinhood. They’ve made stock investing easier than ever with commission-free trading.
Real estate is the most challenging type of investment to enter. The money and commitment it requires are out of reach for most investors.
Investing in Crypto is a Good Idea
It would be unwise to pour your life’s savings into a Bitcoin call option. But crypto has been rewarding, accessible, and liquid for years. A little diversity wouldn’t hurt! (The personal finance gods will thank you.)
It is normal if the turbulence of the crypto markets puts you off. The good news is that you can profit from those fluctuations. With crypto grid trading bots, the market becomes a passive income machine. Marketing guru Dan Hollings teaches you how to do that in his new course, ‘The Plan.’ Curious to learn more? Check it out HERE
Frequently Asked Questions
Is investing in cryptocurrency a good investment?
Cryptocurrency investments can’t be guaranteed to pay off 100% of the time. But remember: cryptocurrencies are the future of finance. It’s wise to diversify your portfolio by holding some long-term.
What happens if I invest $100 into Bitcoin?
If you invested $100 into Bitcoin five years ago, it would be worth close to $8,300 today. Some analysts believe Bitcoin will be worth more than $100,000 by the end of 2021.
How much money do you need to invest in cryptocurrency?
The barriers to entry for cryptocurrency investment are low. Many exchanges will let you trade with less than $10 in your account. If you create a wallet, you can buy as little or as much as you’d like.
