Peer to peer vs Cryptocurrencies

Introduction

You keep hearing about the newest currency from your pals, the news is always reporting on how quickly it is growing, and you've even heard traditional financial and investment consultants advise their clients to invest in cryptocurrencies. And at this point, you might be wondering: should I include cryptocurrency in my portfolio?

We felt it would be helpful to contrast cryptocurrency with peer-to-peer (P2P) lending as two potential investments. Both of these investments seem like good additions to your portfolio, don't they? When is the best time to put your money into each one?

We'll go through the primary distinctions between investing in cryptocurrencies and peer-to-peer loans in this section of the guide.

First things first, though, let's review the fundamentals.

What we mean when we talk about peer-to-peer lending and investing in cryptocurrencies

If you are new to the world of investing, let us explain what we mean by the following:

Collecting cryptocurrencies with the intention of holding them as an investment rather than using them as a medium of exchange (also known as "crypto investing") is what we mean when we talk about "crypto investing." You may acquire cryptocurrencies by using a broker like Coinbase as well as Bitpanda, or you can store your cryptocurrency in a physical wallet that is kept apart from your other digital assets.

P2P lending: P2P investing, sometimes known as "loan money online for profit," is essentially the same thing. Businesses and average individuals may now borrow money directly from you and return your interest, eliminating the need to go through a bank as a middleman. Because this is accomplished through a peer-to-peer (P2P) network like Mintos, you can be confident that you will not only get your money back but also a nice return on it.

Let's do a comparison between peer-to-peer lending and Cryptocurrency using the following criteria:

Stability/risk

Observing the value of Bitcoin or Dogecoin (which recently increased by 4,000%) shows that cryptocurrencies really aren't solid investments.

Huge fluctuations make it difficult to estimate future profits. Cryptocurrency usage is expanding and becoming more widespread, yet volatility is severe and individuals can lose money.

P2P lending modernises the loan idea. You borrow from a peer via a platform instead of a bank. Simple idea means less variable investments. P2P investing has hazards, though.

• Credit-risk

• Exchange-rate risk

• Borrower risk

• Platform risk

Most P2P lenders aren't regulated by financial institutions, although they must follow local laws. Buyback helps reduce credit default risk, a characteristic you won't find in bitcoin.

P2P lending is less hazardous and much more stable than cryptocurrency investing.

Liquidity

The market for cryptocurrencies is extremely liquid, much more so than the market for equities. You may sell your cryptocurrency assets through some online brokers, and the money will be sent to you on the same day. Because of this, it is simple to exercise control over and compute the return on your whole cryptocurrency investment.

P2P investment is less liquid than traditional investing since loans have predetermined repayment timeframes. Because of this, it is often dependent on the peer-to-peer platform that you use including the kinds of loans in which you invest.

If you want to get your hands on your money right away, you could also sell on secondary market; however, keep in mind that not all P2P platforms offer this functionality.

Returns

There is no doubt that individuals who "gamble" their money by investing in cryptocurrencies may make enormous returns, ranging from 500 percent to even more than 1,000 percent. For example, the price of one Bitcoin rose from $13.40 in 2013 to even more over $58,000 in 2021, which is a rise of 410,347 percent. With stocks, you won't even get close to that!

However, it is also essential to bear in mind that by December 2019, the price of bitcoin had dropped to $7,112.73, representing a decline of 65 percent. When you invest in bitcoin assets, you stand to earn significant gains, but you also stand to make significant losses.

People that used platforms like Twino or EstateGuru to invest in peer-to-peer loans achieved consistent returns of 12–16 percent per year from their investments between 2017 and 2020. Despite the fact that it is not as exciting as investing in cryptocurrencies, it is far more secure and predictable than the stock market or crypto currency investments, in addition to providing returns that are significantly greater than 8 percent annually.

P2P investment returns are less than cryptocurrency investing returns, but P2P investing is more stable, and you most likely won't lose all of your money in a single day.

Conclusion

As is customary, the response is "it depends"! Both peer-to-peer lending and cryptocurrency are examples of alternate forms of investing.

Although it is possible to argue that both of these get a place in the portfolio, the answer ultimately relies on your objectives. Let's compare them to some other goals and see how they stack up:

P2P lending is definitely the way to go if you want to achieve your goal of retiring early on monthly earnings as it is quite stable, more predictable, and can give a regular income.

The goal is to make significant profits as rapidly as possible with cryptocurrency; but, you should also be prepared to suffer significant losses. The goal is to diversify the portfolio by investing in P2P lending and cryptocurrency; select both!

P2P lending should really be a part of your portfolio if you're seeking for investments that won't put you under undue stress and deliver consistent and predictable returns on your money.