Real Estate in the Age of Bitcoin
Posted On September 16, 2021
The global economy came to its present complex form once societies developed a medium of exchange: money. What one takes for granted today was developed over centuries of exchange. Money has no value, but people’s trust in its intrinsic value— its interchangeability, transportability, and reliability—gives it value. As technology progresses, the medium of exchange is also going through an evolution in the form of cryptocurrencies. Cryptocurrencies are digital currencies that use a decentralized system to carry out a transaction. Bitcoin, the most well-known cryptocurrency, has become synonymous with the word cryptocurrency. This blog looks into the impact of Bitcoin on investment in real estate.
Fear of Bitcoin taking Investment away from Real Estate is Exaggerated
There are concerns that physical currency is disappearing. According to one estimate, one or two percent of transactions in the United States take place in bills—notes— and coins. In 2018, cryptocurrency or blockchains were valued at USD 700 billion. Bitcoin is the largest among these cryptocurrencies in terms of its value.
In recent years, there have been fears that Bitcoin will take investment away from real estate. The reason for this is a 101% return on investment in Bitcoin, but this fear is exaggerated. Bitcoin does not pose any challenge to real estate investment for several reasons. First off, investment in real estate is more secure. The decentralization in the Bitcoin system makes it unregulated and an unknown area for investors compared to real estate.
Secondly, in real estate, there is less chance of fraud. Social media is full of Bitcoin scams, and many vulnerable people are lured out of their savings in get-rich-quick schemes via Bitcoin. In most cases, this has nothing to do with the actual Bitcoin; the fraud occurs in its name. It is not easy to create a fraudulent situation like this in real estate.
Real estate investment is certain and stable; the value of real estate changes at a predictable rate. Bitcoin, on the other hand, is very unpredictable when it comes to fluctuations in its value. There are no tax breaks or deductions in Bitcoin, which can easily be found in real estate. In short, Bitcoin investment is not a competitor for real estate investment.
Bitcoin as an Opportunity for Real Estate
Real estate can benefit from the popularity of cryptocurrencies. First, cryptocurrencies have created a new class of wealthy people. These were primarily initial investors who were more or less related to the tech sector and jumped on the Bitcoin bandwagon. These people want to bring their newfound cryptocurrency wealth into the real estate sector. From this perspective, cryptocurrency will increase investment in real estate.
Another cryptocurrency trend benefitting real estate is conducting real estate transactions in cryptocurrency. There are many benefits for the real estate sector to try this. The most basic one being that cryptocurrency does not need a third party to carry out transactions. QR codes can be received from one party to another, and the transaction is done. There is no need to involve banks or other financial institutes. The simplicity of this transaction will attract people to invest in real estate.
There might be some people in real estate who are afraid of the fluctuating nature of Bitcoin. There are some strategies such people can use. They set the Bitcoin at the rate of the US dollars or Euro and receive payment in these currencies, and that is how they can avoid fluctuations in Bitcoin.
The Way Forward
Even though cryptocurrency presents a good picture of bringing investment to the real estate sector, it has a long path to cross before becoming equivalent to paper money. The system of Bitcoin is not secure yet, and the threat of hacking lures. Therefore, it is essential for Bitcoin or any other cryptocurrency to establish solid cybersecurity measures. At the same time, it needs to create an image of being safe.
Another concern regarding the growth of Bitcoin is the digital divide. In countries like Pakistan, where most people do not have access to the internet and internet users are primarily limited to social media and lack digital awareness, cryptocurrency fraud can become a real problem. There is a need to ensure media literacy first and introduce Bitcoin and other cryptocurrencies in countries like Pakistan.
In a nutshell, Bitcoin is one of the cryptocurrencies, digital currencies operating under a decentralized system. There are usually two camps when discussing the impact of cryptocurrency on real estate investment. One is afraid of it, while the other hypes it. So far, it has been observed that the impact of cryptocurrency would not take away investment from real estate. In the long run, cryptocurrency can bring more investment to the real estate sector. The new wealthy class created by cryptocurrency will invest in real estate. Cryptocurrency can also be used for real estate transactions. It is too soon to say that cryptocurrency will revolutionize transactions in the real estate sector. Therefore, It should be approached with positivity and caution.