How to Invest in Bitcoin vs. Real Estate in 2021

In the last few years, Bitcoin has become an increasingly popular buzzword in investment circles. The search term ‘Bitcoin’

on Google produces 653 million results, which shows growing interest in this asset class. The current Bitcoin price is almost $63,000, with some analysts predicting that the Bitcoin value could skyrocket to as high as $400,000 by the end of 2021.

Investing in Bitcoin vs investing in real estate: Which is better?’ This is a debate that has raged for a while now. To answer this question, let us dive deeper and understand the pros and cons of each asset class.

What is a Bitcoin?

Often described as digital currency or cryptocurrency, Bitcoin is basically virtual money. It was created in January 2009 by a group of individuals or an individual using the pseudonym Satoshi Nakamoto. Many merchants all over the world are now accepting payments in the form of Bitcoin. Last year, the famous online payment service, PayPal, started allowing its customers to buy and sell using Bitcoin. Though there are hundreds of other digital currencies, many people still say that Bitcoin is the best cryptocurrency to invest in.

How does bitcoin work?

Unlike normal currency (also referred to as fiat currency), Bitcoin is created, stored, traded, and distributed using a decentralized ledger system known as blockchain. The process by which Bitcoin is created and released into circulation is referred to as Bitcoin mining. Basically, mining involves solving complex puzzles on special computers, after which new blocks are created and added to the blockchain record. The production of Bitcoin is reduced by half every four years, with the last halving happening in May 2020.

How to Invest in Bitcoin

Find out how to invest in Bitcoin step by step

Let us look at where and how to invest in Bitcoin, as well as the pros and cons of this asset class.

Where to buy Bitcoin

You can buy, sell, and hold Bitcoin on a centralized Bitcoin exchange such as Binance, Coinbase, Bisq, Kraken, Huobi, Kucoin, Bitstamp, and OKEx. Alternatively, you could buy cryptocurrency from a Bitcoin ATM or a peer-to-peer crypto exchange like localbitcoins.com or paxful.com. Savvy investors also engage in Bitcoin trading on these platforms. Compare the different exchanges and choose what works best for you before starting your investment. Simply create an account on your preferred exchange and start selling or buying Bitcoin.

How to buy Bitcoin

When creating an account on an exchange, you will be required to choose a payment option. You can either connect a credit or debit card, or connect your bank account directly. However, be sure to check if your bank allows deposits to crypto-related sites. Once you’ve connected a payment option, you can then start purchasing Bitcoin and other cryptocurrencies. The assets can be stored in online wallets (hot wallets) or hardware wallets (cold wallets).

Pros of Bitcoin

Inflation proof – Only a total of 21 million Bitcoins will ever be created. With this fixed supply, you don’t have to worry about inflation.
Easiness to sell – If you require money urgently, you could sell your Bitcoin within minutes.
Decentralization – Since Bitcoin is a peer-to-peer network, you don’t have to deal with any central authority when transacting.
Long-term potential – If current performance is anything to go by, Bitcoin has lots of potential for the future.

Cons of Bitcoin

Lack of security – Since there is no central authority controlling Bitcoin, you don’t have anyone to complain to in case of fraud. When it comes to how much to invest in Bitcoin, only invest what you are ready to lose.
Market volatility – In 2017, the price of Bitcoin shot to almost $20,000, and then dropped below $4,000 within a few months. This volatility makes investing in Bitcoin very risky.
Government regulations – Bitcoin has been banned in countries like Iran, Bangladesh, India, and North Macedonia. You never know when the same thing could happen in your country.

How to invest in real estate

In 2021 you might be wondering about the best investment strategy: Bitcoin vs real estate properties. Real estate has historically proven to be one of the most effective ways of making money and building wealth. Now that you know how to invest in Bitcoin, now we will take a look at how to invest in real estate for maximum return.

Here are the best real estate investment strategies in 2021 to consider:

Traditional rental properties
Airbnb rental properties
Buy and hold
House flipping
BRRRR method
Real estate investment trusts (REITs)
Real estate limited partnerships

To find and analyze the best investment properties, be sure to leverage the Mashvisor real estate investment tools. These include the real estate heatmap, the investment property calculator, the property finder, and the property marketplace.

Pros of investing in real estate

Easiness to understand – With its abstract concepts, learning how to invest in Bitcoin can be very difficult. On the other hand, real estate investing is much easier to understand for a beginner investor.
Tangible asset value – Real estate is a physical asset which you can see and touch. Bitcoin is a virtual currency that isn’t backed by any tangible asset.
Hedge against inflation – Typically, the value of real estate goes up in direct proportion to inflation.
Tax benefits – Rental property owners can take advantage of tax deductions such as interest, repairs, depreciation, travel, pass-through deduction, insurance, and legal services.

Cons of real estate investing

High transaction costs – Besides the cost of buying rental property, real estate investors incur other costs like home inspection fees, appraisal fees, closing costs, property taxes, HOA fees, and insurance.
Low liquidity – It could take months or even years to sell your income property.
Maintenance costs – The ongoing costs of maintaining an investment property can eat into your profits.
Slow growth – Investing in real estate today will not necessarily make you a millionaire tomorrow. It usually takes years to make a significant return on investment.

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Conclusion

So, which is the better investment between Bitcoin and real estate in 2021? While cryptocurrency seems very promising, its main undoing is the risk involved. Due to market volatility and government regulations, you could lose all your Bitcoin investment overnight. And as mentioned earlier, learning how to invest in Bitcoin can be very hard for beginners.

While real estate also has some level of uncertainty, it is easier to mitigate the risks. Therefore, the right investment strategy for 2021 would be real estate. To find the best places to invest in real estate, be sure to leverage Mashvisor real estate investment software.

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How to Invest in Bitcoin vs. Real Estate: What’s the Right Strategy for You in 2021?