Bitcoin appreciating better than real estate,why not invest BTC?

Question

Bitcoin juggernaut has begun its rampage yet again and has been appreciating ridiculously so why not invest in Bitcoin instead of real estate without all the hard work that goes into realestate investment? a classical argument for this question is Bitcoin investment is a speculative investment but so is realestate? I am interested to hear other arguments.

Bill B. · Answer

So obviously jo Morgan and Citi sold all their stock holdings and borrowed every last dollar they could as they are assuming a 2000% return in Bitcoin.  Wait? They didn’t? Why not? I assume they at least invest 50% of their assets in Bitcoin with hose kind fo returns? Nope?

These “expert bulls” are investing 1/5th of 1% of their money, I guess you could invest that much but I wouldn’t invest more than the experts. That’s too much for me, but then I think their 3% in gold is too much too.

NOBODY would be surprised if Bitcoin dropped 30-50% tomorrow. It probably wouldn’t even make the news. A 20% drop in real estate would be headlines for weeks. Even if everyone says they’re investing in real estate for cashflow and appreciation doesn’t matter. I understand you already own some and want to prop up the price but what’s the intrinsic value?

I wonder if “gold bugs” are going around quoting JP Morgan saying “gold will suffer for years because of Bitcoin” somehow I doubt it.

Morgan’s calculations suggest Bitcoin only accounts for 0.18 per cent of family office assets, compared with 3.3 per cent for gold ETFs. Read more at:https://economictimes.indiatimes.com/markets/stocks/news/jp-morgan-says-gold-will-suffer-for-years-because-of-bitcoin/articleshow/79655180.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Allan Smith · Answer

I am amazed at how much hype Bitcoin gets. There is no inherent service it provides in order to gain appreciation on Merit. If it appreciates, it is simply due to increased demand. And the increased demand is solely based on the hype Factor. People buy because other people are buying.

You are basically gambling and yes you can win big, but you can also lose big. That's not investing.

Jonathan Barr · Answer

Yes but bitcoin can drop at anytime.   It just doesn't work that way for real estate.   With real estate you know more what your getting.   I think its good to diversify some when possible.   I did a little bitcoin in march which I am happy I did.   I bullish on real estate when being conservative during these times.

Joel W. · Answer

Thanks for the interesting perspective Matt. WB has definitely missed some good opportunities, and does not understand tech, but I think he's still right about it being a non-producing asset (not sure the right word for it). BTC's value is only determined by the demand for it, which I guess is the difference between speculation and investing. Of course, BTC and other cryptocurrencies provide value as a currency, but that's not the reason they are valued the way they are. And I understand why a mutual fund, etc., may have to invest in BTC, but that still doesn't make it right.

On a funny note, I recently saw a Dave Ramsey YouTube video where he answered a call from someone who made $100,000 off of BTC from a $1500 investment (after a lot of volatility I assume). DR of course was very much against investing in BTC, and he said he would be surprised if the guy could sell it at all. Obviously DR knows nothing about BTC, or any cryptocurrency, but that still doesn't make him wrong. The caller got lucky is all. There are probably just as many people that lost out on BTC.

I read Skin in the Game by Nassim Taleb recently. One thing that stood out to me from the book was his reason why Warren Buffett has made so much money. The reason is that WB has a very fine-tuned filter. He only takes good deals, and they don't necessarily come along that often. We in the RE industry could learn a lot from that.

George W. · Answer

Bitcoin has no ability to cashflow you monthly like real estate has the ability to. A smart REI wont buy a property only on the hope of appreciation, it's just icing on the cake.

You could buy a rental using mostly banks money and leverage it over time then have tennats pay it off. Does anyone lend money to bitcoin investors?

I like the idea of bitcoin but Its more of a currency than a investment and I wouldn't put all of your eggs in 1 basket

Joel W. · Answer

Warren Buffett thinks BTC is garbage, and that's good enough for me. You might as well go buy Canadian dollars and consider that an investment. Block chain technology itself may have some good uses, but BTC is just a currency. Unless you're arbitraging between currencies, what's the point of buying any currencies? I feel the same way about gold and other previous metals. They're supposedly a good store of value until their price tanks. Even if the price of real estate goes down you're still left with a producing asset (assuming you bought something that actually cash flows).

Matt R. · Answer

I assume part of its merit today is primarily an alternative to gold. I think another merit might be is you can deposit btc in a KYC US regulated insured account and earn 5-7%. Another merit might be you can transfer absurd value amounts (billions) for a couple bucks.  It does have the distinction of being the best returning asset class in the last 1,5 and 10 year windows. I did see a little old lady at the bitcoin atm at a local gas station a few months back. I asked her how long has she been buying. She said for a few months and she stocks up weekly. I got a bit of a landlord vibe from her like she knew what she was doing and considering she was pre mainstream institutional money maybe she did.

Getting back to it being an interest paying capital asset maybe throws a wrench into this is now equal to gambling. The recent institutional buyers at mid 9 and low 10 figure sums I assume they don't consider it gambling. Recent millionaires survey claimed 73% wanted to own it or already do. If one put $1k in Jan 1 2020, they would have $3,296.67 as of Dec 23rd. I think Tesla stock beats that still. Probably both have a decent degree of hype we can understand. If only my old Chucky Cheese tokens had such hype.

Happy Holidays!

Matt R. · Answer

Two different animals generally speaking. One typically is active the other is passive. Still it might not be the worst idea in the world to have some allocation for bitcoin considering JPMORGAN has a $650k price target and Citibanks is $300k. These are conservative numbers coming from conservative insitutions according to some math models which point to north of 1 mil per. As one stock flow math guy said, he predicts $500k only because his actual 1.2 mil model prediction sounded too insane for most so he shaved off 50%+ for public consumption.

Personally I have no clue on the value other than 50k seems reasonable now and one can earn 5%-7% interest on it in the meantime.

Steve Morris · Answer

"so why not invest in Bitcoin instead of real estate without all the hard work that goes into realestate investment?"

You can say the same thing about the stock market, so just go do it.

Just hope that neither has a 50% drop in a few months like history shows.

Account Closed · Answer

Do you have a consistent method to place a quantitative/intrinsic value on Bitcoin (and therefore margin of safety)? At least with REI, you have a lot of comparables to go by to value the property in question.

Bitcoin appreciating better than real estate,why not invest BTC?

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