For example, the price of Bitcoin reached just under $24,000 in December 2020, an increase of 224% from the start of 2020. It then took less than a month for Bitcoin to smash its previous price record and surpass $40,000 in January 2021.
However, crypto currency is also highly volatile. Using the previous example, Bitcoin was changing hands at $41,528 on Jan 8, 2021, but three days later it had slumped to $30,525. At the time of writing, it is currently $38,060, but this will no doubt change by the time you read this, with factors such as heightened regulation by China, or Elon Musk latest comments causing seismic swings in the value of the asset.
Protecting crypto currency profits
Volatile doesn’t necessarily mean bad; it just means you need to think more carefully about how you manage your investment. So, if you have been fortunate enough to invest in crypto currency and benefit from the meteoric rises, you may want to think about how you can protect some of your profits. If there is a crypto crash in the future and you have retained all of your profits in this asset class you could find that a large proportion of your gains is wiped out. If, however, you withdraw some capital and invest in another asset, you can start to diversify your investment portfolio, which makes it more resilient to volatility. Diversification is one of the fundamental tips to long-term investing and can help you to build more sustainable profits.
One area where many crypto currency investors are choosing to diversify their capital is property. The UK property market is underpinned by long-term demographic and infrastructure trends of demand from people needing accommodation continuing to significantly exceed the supply of housing. In addition, in times of economic uncertainty, investors like tangible assets that they can see and touch and so property can perform well even when other assets struggle.
With bank accounts paying little in interest and mortgage interest rates at all-time lows, there are many reasons why property is proving a popular investment. Consequently, it’s also a very competitive market for buyers, with an increasing number of properties selling for above asking price and going to sealed bids. There are, clouds on the horizon, with the end of the furlough scheme approaching and the potential for future interest rate rises, butthe long-term outlook for property remains strong.
If you are thinking about diversifying your investment portfolio and putting some of your crypto profits into property, you may choose to reward yourself with a luxurious home, holiday home or a buy to let investment property. But whatever you choose, you should also think about how you protect your property investment.
At Arnold & Baldwin, we specialise in valuation and surveys of properties in London and the wider South East of England, and can help you to enter the market and protect your investment. As property prices surge ahead, it is vital you buy at the right price. Many similarities exist in property and crypto, particularly the old adage of time in the market vs timing the market.
You can protect yourself by investing in a property survey and valuation by a RICS accredited chartered surveyor. It might cost you to have a trusted advisor, but this should be seen as an investment as the advice might pay dividends and could save you many thousands down the line. For example, one extremely high net worth client was looking to buy a £30,000,000 super prime mansion for cash, and following a valuation by Arnold & Baldwin, it was found to only be worth £20m! They later settled on £22.5m, a £7.5m saving from where they were entering the market at.
Who knows what the future brings for crypto currency, or the property market? By diversifying your assets, you can continue to benefit from price rises, whilst also protecting against slumps. If you do choose to invest in property, do it properly and protect your investment with a survey. It is an investment opportunity, but more also a great opportunity to spoil yourself and enjoy the proceeds of your hard work!
