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The Investment question: cryptocurrency or real estate?

Investing in cryptocurrency still throws up uncertainty and risk. But is real estate still the real deal?

Despite my belief in the technology behind cryptocurrency, we must remain cautious.

When I first heard about Bitcoin, I dismissed it as just another fad like many others did. Then last year the cryptocurrency skyrocketed to a point where no one could ignore it.

By the time everyone was ready to jump on the Bitcoin bandwagon, it was already trading at a then-record high of $2,200. 

Bitcoin is the first decentralised cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash.

In December last year, Bitcoin left many with their jaws on the floor as it shot to high of more than $19,800. Alas, this was not to last.

Soon after soaring to record values, the cryptocurrency plunged to below $10,000, with experts reporting it could drop to as low as $1,000 over the course of 2018. 

This uncertainty positions cryptocurrency in the same basket as gambling and my recommendation is not to fall for the bait. If you’re interested in betting with your money, you might as well turn it into a holiday and just go to Vegas. 

Having said that, I can also say I believe more in Blockchain, the technology behind cryptocurrency. Blockchain has transformed cryptocurrencies like Bitcoin into an asset class that stands on its own two feet.

Yes, we see the rise and fall of of cryptocurrencies, but we do also see the rise of a new asset class. Blockchain finance has the potential to be disruptive not only in finance but also other spheres, and it also has the potential to not be transformative at all. 

Why do I consider blockchain a wiser gamble than cryptocurrencies?

By buying cryptocurrencies, you’re not betting on blockchain itself. Instead, you’re supporting a specific application of blockchain. For your investment to work out in the long run — and I use the term investment loosely here because cryptocurrencies have no intrinsic value — you must be right about blockchain living up to the hype and about cryptocurrency someday becoming useful for anything other than speculation.

Blockchain can succeed, becoming a widely used technology in a variety of applications, and these cryptocurrencies could still be worth nothing.

Despite my belief in the technology behind cryptocurrency, we must remain cautious.

Cryptocurrencies have been around since 2008. Bitcoin, the first ever cryptocurrency, gained momentum after Occupy Wall Street accused big banks of misusing borrowers’ money, duping clients, rigging the system and charging mind-numbing fees.

Bitcoin pioneers wanted to put the seller in charge, eliminate the middleman, cancel interest fees and make transactions transparent to hack corruption and cut fees. Thus, creating a decentralised system. However, 2017 changed the game for virtual money. 

Last year made cryptocurrency and Bitcoin move from being just a currency to an asset class that people buy and hold. Similar to gold. We are now seeing cryptocurrencies becoming institutionalised. The rise in cryptocurrency is just the stepping-stone for the Blockchain technology that will be adopted across different industries. 

Despite my belief in the technology behind cryptocurrency, we must remain cautious. Looking at the volatility of the price of cryptocurrency, it is definitely not a safe investment.

Any asset class that jumps up by ten per cent or loses its value with such frightening magnitude in one day is far from what I consider as safe.

The argument for this volatility may be attributed to the maturity of the new asset class but this does not make it a safe investment.

The growing frenzy around bitcoin and other cryptocurrency offerings creates serious warnings on the risks that current and potential investors should keep in mind. Potential traders should educate themselves, and trade in a manner that is well informed with realistic expectations. 

If you’re looking to invest and invest safely, directing your money into real estate gives you a good 7-8 per cent annual return and can be done without fear of devastating overnight price crashes. 

I highly recommend the purchase of a house in strategic areas of Dubai.

The science behind probable returns is backed by years of analysis, and even in the event that the market sees decline, the investment risk you take is to decrease your annual return from 7 per cent or 8 per cent to around nil growth, meaning some years there could be no growth, or a drop in value, but you don’t see significant price drops. 

Even if the value does drop, as long as your property is tenanted you will receive rental income, unlike with cryptocurrency, which only offers growth as opposed to income.

Ultimately, real estate is long-term investment with a 10-year strategy and not an overnight gamble, and 2018 is a moment to take advantage of prior to a rising market. 

The writer is an entrepreneur and founder of Dream Design Real Estate

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