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Crypto is crashing and term deposits are rising: Choosing a high or low risk investment

Crypto is crashing and term deposits are rising: Choosing a high or low risk investment

The price of Bitcoin, Ethereum and other cryptocurrencies have plummeted in the last 24 hours, meanwhile interest rates for term deposits are on the rise again. Investors looking to grow their nest egg may be wondering if high or low risk investments are better for their finances in 2022.

Around $400 billion was wiped from the combined crypto market since Friday, triggered by interest rate hikes in the U.S, stock market value decreases and other factors.

In the last 24 hours alone, major cryptocurrency, Bitcoin, saw a sharp value decrease of $5,899.20 to $43.419.84. Not only is this the lowest it has dropped since July 2021, but it has also fallen 50% since its highest peak in November 2021.

This latest drop could cause a ripple effect for other major cryptocurrencies. Ethereum was also down $446.73 over the last 24 hours. Binance’s BNB, Solana , Cardano and Ripple’s XRP also lost between 15-20% since Friday.

Meanwhile, one of Australia’s lowest-risk investment options, the term deposit, appears to be on the up and up. After a decade of falling interest rates, the Reserve Bank of Australia has hiked the cash rate, and lenders are passing this on to their deposit accounts.

In several instances, banks are not passing on the rate hike to savings accounts, but instead focusing on just hiking their term deposit interest rates. Australia’s biggest bank, CommBank, did not pass on the rate hike to savers, but instead offered an “olive branch” in the form of a new, competitive term deposit.

So, for Australian investors wondering where to deposit their funds in 2022, the question may be whether it’s better to gravitate towards a higher risk but more volatile investment, like crypto? Or one that offers less reward for more stability and safety, like term deposits?

Bitcoin vs big banks: comparing high or low risk investments

Investment risk is all about the fluctuation and volatility of returns you are comfortable with and prepared to accept when it comes to your money.

Generally speaking, higher risk options can come with greater returns when conditions are in your favour, but if a market crashes or there is a downturn, the fall can be severe. And low risk investment options may not offer the biggest immediate returns but can offer stability to your portfolio over a long period of time.

  • Cryptocurrency and risk

Yahoo Finance reports that Bitcoin saw returns of over 70% in 2021, outpacing both the S&P 500 and gold in the same period. Whatever your opinion of cryptocurrencies, it’s clear that for some, there has been an opportunity for high returns.

Everyone seems to have an opinion about the level of risk that investing in cryptocurrencies comes with. Ultimately, it is a personal decision as to the level of risk you are comfortable with, but it may be worth exploring ways you can invest in cryptocurrencies with less risk.

Firstly, focus on the fundamentals. Take your time researching exactly what cryptocurrency is and how it operates. There are numerous resources available online to catch you up to speed.

Storing your cryptocurrency is also more difficult than owning other investments, like stocks or bonds. You will need to carefully choose a cryptocurrency exchange, like Coinbase, when buying or selling your assets.

These exchanges are vulnerable to being hacked, which is another risk to consider when investing in crypto. You may want to consider using ‘cold storage’ options like a cold wallet, maintaining multiple wallets and regularly changing your password.

Cryptocurrencies like Bitcoin and Ethereum became popular because they are decentralised currencies, with their value maintained and derived by their users. But this can influence the level of fluctuation seen in the last 24 hours.

If you’re concerned about the risk of buying cryptocurrencies due to this, you may want to consider alternatives like stablecoins. This is a cryptocurrency that is pegged to an external reference, like gold or a currency, which is perceived as more ‘stable’.

Stablecoins, as the same suggests, may offer a “best of both worlds” option for some investors by allowing you to add cryptocurrencies to your portfolio with the stable valuation of Fiat currencies. In fact, earlier this year, big four bank ANZ minted the first stablecoin pegged to the Australian dollar; the A$DC.


  • Major cryptocurrencies have offered high returns in past
  • Can be a highly volatile investment
  • Consider prioritising security, like cold wallets
  • Lower-risk investments like stablecoins may suit some investors

  • Term deposit and risk

Term deposits are considered some of the safest forms of investment in Australia due to their simplicity and the Australian government guarantee on deposits.

Customers simply choose a term deposit lender, choose a fixed term they prefer (1-5 years typically) and lock their savings away to gain a guaranteed return at a fixed interest rate.

And unlike other investment options, the Financial Claims Scheme means that the Australian government guarantees term deposits up to $250,000 if the provider were to go under.

While term deposits are considered much less risky than cryptocurrency, the biggest downside of term deposits is the level of return you may gain. Again, coming back to the notion that “the greater the risk the greater the reward”, a term deposit with a very low interest rate may not give investors the returns they desire.

With the average 3-year term deposit interest rate on the RateCity database sitting at 3.30%, even with a large deposit of $100,000, your return will only be $6,600 in interest.

But the cash rate has been forecast to rise several times over the next few years, with big banks predicting it could climb above 2.00% by 2024. And if providers continue to pass on hikes to term deposits, this means the rate of return for term deposits may continue to grow.


  • Lower risk, lower reward
  • Interest rates are on the rise
  • Financial Claims Scheme makes term deposits a safer investment

Which risk option is better for investors?

While the new offer of 2.25% for an 18-month special term deposit from CommBank is competitive in the world of term deposits, it pales against returns that major cryptocurrencies, like Bitcoin, have provided investors in the past.

However, as the last 24 hours have proved, cryptocurrencies are highly volatile investment options and the level of return they may provide is not guaranteed, unlike a term deposit.

If you believe in the goal of cryptocurrencies as a form of decentralised money, investing in something like Bitcoin may mean more to you than a return on investment. If you just want a guaranteed return on your investment, even if it’s small, it may be worth waiting for term deposit rates to climb higher and locking away your savings.

Ultimately, the best investment option for your financial needs and goals will depend on your specific desires and appetite for risk.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.



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