Real Assets for Real Investors: Why Bitcoin Is Too Risky for Me

Let me start by saying I am not anti-Bitcoin. I see the value of the technology, and I see a million future use potentials. But I want to invest my hard-earned money. For me and my money, Bitcoin (and other cryptocurrencies) are still a gamble, not an investment.

Could Bitcoin make you rich? Of course. But so can dropping a million dollars on “00” at the roulette table. That doesn't make it an investment.

The Case for Real Assets

Real assets provide tangible value that cryptocurrencies cannot match. Real estate is a physical asset that provides the tangible purpose of shelter. It has clear value in terms of location, condition, and income-generating potential. While Bitcoin has a purpose as a digital currency, it lacks the tangible value of income-producing assets. (We won't even touch on the other huge benefits of real estate such as depreciation and leverage.)

Another reason real assets are a better choice than Bitcoin is their long-term track record of appreciation. Real estate has been proven to appreciate in value over time, providing investors with a reliable return. Bitcoin, on the other hand, is a relatively new option that has seen significant fluctuations. While it may continue to appreciate, its long-term track record is still uncertain — and its current volatility makes it a rough ride for most investors.

I have been analyzing real estate investments, personally investing, and gaining experience in the field for 15 years. I have hired mentors and learned from people with decades of experience. Major tax laws regarding real estate have been in place for over 50 years. Real estate investing has a proven and stable foundation built on years of history. By contrast, Bitcoin was invented in 2009. Its value was only $1 per coin in 2011. Its whole experience in the world is about 14 years old. Placing my hard-earned money into it would be like asking my 12-year-old daughter to take my money and go invest it wisely.

In my brain, I don't understand how we can have crypto “experts” when the industry hasn't even graduated high school yet. I get “Wolf of Wall Street” vibes watching the graphs of some new cryptocurrency shoot straight up in a single day, and then come crashing down with a single tweet.

The Two Outcomes of Bitcoin

Even if an investor believes Bitcoin will become the new currency in the future, I still think it is better to invest in real assets today. The simplest reason: real estate can be sold for Bitcoin in the future if necessary. If I buy a storage facility today with dollars, I can sell it for Bitcoin later “if” Bitcoin has become the new currency at that time.

In my mind, there are basically two outcomes. Bitcoin reigns supreme and becomes worldwide currency. My apartments and storage facilities will still be a cash-flowing (or Bitcoin-flowing) asset. I don't care what piece of paper or digital currency we use to express value. All I care about is that I have a valuable asset I can exchange for the current currency. Bitcoin flops and the U.S. dollar lives another day. I invested in value — my apartments increased in value, produced cash flow, my tenants paid down the mortgage balance, and I got a ton of tax benefit. The same benefits as if Bitcoin was never created.

I have a very simple approach to investing:

The focus is always on value, never on speculation.

I personally don't feel Bitcoin has yet crossed the line from speculation to value. Real assets provide tangible value, a long-term track record, more flexibility, and the ability to sell for Bitcoin in the future if necessary. While Bitcoin may continue to appreciate in price per coin, its actual “value” as a speculative investment is still uncertain, making real assets the safer and more reliable option.

The rebuttal Bitcoin people tell me is that I'm going to miss “the ride.” My response: “I don't invest for excitement. I get my excitement skiing a steep black diamond at Vail. I invest to make a predictable return on my money.” For now, I will stick to the tried and true strategies that have created wealth for centuries.