Given a choice between these two, which investment option should you choose?
To the left is a traditional heavyweight champion, one that billionaire Andrew Carnegie claimed helped 90% of millionaires create their wealth—real estate.
To the right is the new kid on the block, an overnight sensation, currently experiencing a few teething problems but with a market value hovering around the $1 trillion mark—cryptocurrency. So, which one should you settle on? In this article, we discussing the pros and cons of each in great detail. Keep reading to learn more about which investment option is best for you.
Investing in Cryptocurrency
Cryptocurrency is a digital or virtual currency that uses cryptography to secure transactions and verify the transfer of assets. It’s decentralized, meaning no central bank or government controls its flow like traditional currencies.
Since it’s digital, it exists as a string of numbers on a computer hard drive or as an electronic file stored on the cloud, instead of a physical form, like money or gold. This makes it easier to store, send and receive cryptocurrency worldwide.
Some of the advantages of investing in cryptocurrency are:
Volatility can produce high returns
Most crypto experience a lot of volatility, which can be a good thing. The sudden price changes mean a crypto token’s price can skyrocket, massively increasing your investment’s value.
Another advantage of these high volatility rates is that it creates headlines. That motivates investors into entering the crypto world, which only adds fuel to the fire, increasing your investment’s worth further.
Benefits of DeFi
Decentralized Finance, or Defi, is the financial applications and tools built on the disseminated crypto networks. In simple terms, these financial systems allow you to transact with complete confidentiality, without interference from external forces.
Various DeFi protocols are available, but you can classify them into two categories: lending and borrowing. The use of these decentralized finance options is beneficial in multiple ways, such as:
- Not limited to geographical locations.
- You have complete control of the funds.
- It provides the highest levels of security because of its unchangeable transactions.
Crypto coins usually have high liquidity because of their high demand, ensuring high trading volume. The high liquidity of cryptocurrencies gives them an upper hand over other market assets. You can sell and buy orders quickly and more efficiently.
And since there are many market players, you can quickly end or enter another deal. A thriving cryptocurrency market enables people to trade with fairer and better prices.
Investing in cryptocurrencies also has some demerits:
Volatility can also obliterate investments overnight
Cryptocurrency’s high volatility can be a drawback for digital currency. Prices can rise and fall. When they fall, the value of your investment follows suit.
Moreover, a fall in prices leads to panicked investors. Some will look to offload their tokens, further depreciating the coins’ value.
Downsides of DeFi
Although it offers inexplicable advantages, DeFi also faces problems and risks related to blockchain technology. Some of the disadvantages of DeFi include the following:
- Scalability problems: When there is congestion, it either takes too long to confirm a transaction or becomes too expensive.
- Lack of insurance: There’s no way of tracing transactions, which increases the risk of losing money due to fraudulent activities.
- Low Interoperability: Because each blockchain has a different DeFi ecosystem, interactions and carrying out some projects between the blockchains is impossible.
Investing in Real Estate
Real estate investment refers to property buying, selling, and renting. Something to understand about real estate is that it’s an asset class, as it’s a physical item you own and can sell at any time. If there is a down market, you’ll still have your investment intact.
Real Estate Investment Pros
Some of the benefits associated with real estate investment include:
Predictable returns based on historical data
Investing in real estate offers more predictable returns when compared to other forms of investments. You can predict the cash flows of real estate with a high degree of certainty because the growth of rental pricing is anticipatable.
Historically proven to be the best investment asset class in the US
Investing in real estate is nothing new. It has been the investment choice of wealthy individuals because of its tried-and-tested record of positive results. According to a report, the average 25-year return for commercial real estate in the private sector outperformed the S&P 500 index at 10.3%.
Even today, real estate is proving its staying power, with millionaires giving it wholesome approval. Some of the reasons to invest in real estate include:
- Earns income all year round: this is the case when you are in it for long-term investment rather than getting quick returns.
- Has a six-figure tax break: Investing in real estate comes with incredible benefits, such as those related to taxes, where, in some instances, it relieves you from paying taxes for the gains you get from your investment properties.
Real Investment Cons
Some of the drawbacks of investing in real estate include the following:
High barriers to entry
Real estate has a high barrier to entry as property is expensive. The housing market, for instance, is dealing with historically high property prices, which are out of reach for potential first-time investors.
Some measures have helped reduce the high barrier of entry, such as real estate investment trusts (REITs). Still, investing in these is not that cheap, and REITs typically offer low yields of less than 5%.
Real estate is a tangible asset which means it is relatively illiquid. For some, the only way to cash out on real estate quickly is to sell the asset below market price. Otherwise, it could take months before you sell a property, especially in a down market.
So, you’ve probably decided which investment route you’ll choose but hang on a minute. What if I told you that you could invest in both real estate and crypto simultaneously and enjoy all the benefits of both but none of the drawbacks? That’s coming up next.
Investing with United States Property Coin (USPC)
USPC is a form of cryptocurrency token backed by real estate, allowing you to own a real estate asset through fractional ownership.
USPC comes with various inherent advantages over investing in real estate or cryptocurrency:
Low barrier to entry
According to a report, more than 80% of the population claim that investing in real estate is advantageous, but only 3% of the global population invests in it. The high barrier to entry is a common drawback in real estate investment.
That’s where the USPC token comes in handy, as it has put measures to minimize this barrier, namely, fractional ownership. USPC has helped reduce upfront investment costs, which usually result in a high barrier to entry in traditional real estate investments.
Unlike traditional real estate investments where you must purchase the entire asset, USPC allows you to buy a portion of the property. That reduces the cost of investing in real estate, increasing accessibility of real estate investing to more entrepreneurs.
Unlike contemporary cryptocurrencies that are not regulated by any financial institutions and take too many risks with token holders’ collective value, USPC is a security token. As such, offerings of USPC must comply with all federal securities laws and regulations.
Real estate developments, management, and selling processes are all regulated transactions. And, because USPC is tied to an underlying portfolio of real estate properties, the value of USPC is, therefor, indirectly subject to those regulations. This degree of regulation will benefit investors in the long-run, as it will provide a secure and transparent token.
Trading and investing in traditional real estate properties is usually challenging because of the properties’ low liquidity. However, investing with USPC makes selling and buying real estate property faster because it allows you to enjoy liquidity for your property without necessarily selling it.
For example, a typical real estate transaction can take months, years, and sometimes, decades to finalize. But with USPC, an investor could complete a transaction within minutes because the token utilizes blockchain technology.
Since USPC token holders only own a piece of the property (which is cheaper) and hold the rights in digital form, they can sell that stake online. This process enhances market fairness and democratizes investment in illiquid assets.
In addition, USPC holders who possess a digital record of ownership can sell their property to international markets more easily than if they sold the property through conventional methods.
Hedge against inflation of fiat currency
Since the invention of paper money, cases of inflation have become standard-faire across global economies. In October alone, inflation in the US hit a three-decade high.
Unlike fragile stablecoins pegged to fiat currencies that suffer from inflation, USPC is less susceptible to inflation. This is because the value of USPC is stored in a U.S. real estate portfolio, NOT on the blockchain. Historically speaking, real estate has proved one of the best investment asset classes time and time again, and we believe that creating a cryptocurrency that is tied to this asset class is a no-brainer.
Hedge against the volatility of the crypto market
There’s no doubt that cryptos experience many challenges regarding volatility, which gives USPC an upper hand as it doesn’t suffer from crypto volatility. As mentioned, USPC is a real estate-backed token, a solid asset that rarely suffers from market volatility.