From Bitcoin to Real Estate: How Crypto is Changing the Way We Invest in Luxury Properties
When you consider just how popular cryptocurrency is, it’s of no surprise that it’s flowing into many industries and investments.
The global cryptocurrency market value was $4.67 billion in 2022, with a 12.5% CAGR now expected between 2023 and 2030. These statistics alone show that there’s no sign of the crypto boom going anywhere anytime soon.
Savvy investors recognize this, and they’re exploring different ways of leveraging cryptocurrency in terms of their investment portfolio. This is where property comes in!
If you think about property investment, it’s always been very traditional. Cash payments are the norm. Depending on your circumstances, this may or may not mean getting a mortgage too.
However, with cryptocurrency, another option is now on the table for those who want to invest in luxury real estate, and this is something we’ll explore in greater detail below.
What Is Cryptocurrency?
Before we delve deeper into the relationship between cryptocurrency and real estate, we must first answer a critical question; what is cryptocurrency?
Cryptocurrency is a type of digital or virtual currency that’s secure by cryptography.
These coins have been designed for different reasons. For example, Bitcoin, the first-ever cryptocurrency, was to provide people with a type of payment that the central government does not control.
You then have Ethereum, with the main purpose of enabling developers to create automated applications in what is now known as Decentralized Finance.
The Evolution of Cryptocurrency and Real Estate Investment
Sometimes, it still feels like cryptocurrency is quite new, doesn’t it? It’s actually been around for longer than you may expect! You need to roll the clock back to 2009 when the first cryptocurrency, Bitcoin, came to be.
It probably doesn’t come as much of a shock that when cryptocurrency first came onto the scene, it was met with skepticism and uncertainty.
After all, we are so used to using fiat currency it just seemed unfathomable to switch to an alternative option.
No one really started to take much notice of Bitcoin for a good few years. And, when people started to purchase crypto, it was more to hold onto it and make money.
If you invested $100 in Bitcoin back in 2010, well, let’s just say you’d be one of the richest people in the world right now!
Real Estate Was Honed in Tradition
Now, looking at the real estate industry, we can’t argue that it’s long been a traditional one. As touched upon in the introduction, conventional methods of financing and investing have been the norm in this space.
No one was really thinking about using cryptocurrency to invest in real estate.
It Got to the Point Where Investors Could No Longer Ignore Cryptocurrency
Investors saw that cryptocurrency could help them diversify their portfolios and offer a number of benefits in the process.
Now, 14 years have passed since Bitcoin came onto the scene! During this time, it’s become integrated into many walks of life. This shows no sign of showing down, and the real estate sector wants a piece of the action.
Real estate investment trusts have started to invest in cryptocurrency. They’re actively using crypto to finance their investments.
You may have also noticed that more real estate developers are accepting crypto as an alternative to standard cash payments. If you take a look at some real estate websites, you may notice that prices are now listed in both dollars and Bitcoin.
How Cryptocurrency Is Evolving Luxury US Real Estate
There are many ways that cryptocurrency is evolving luxury real estate in the USA, including:
Purchasing Real Estate with Cryptocurrency
A number of luxury property developers and brokers are now accepting cryptocurrency as a form of payment for purchases.
- The Related Group
- Sotheby’s International Realty
- The Aston Martin Residences
- Magnum Real Estate Group
If you hold cryptocurrency, you can invest in luxury real estate without converting your digital currency into fiat currency.
Real Estate Tokenization
Tokenization involves exchanging sensitive data for “tokens” – data that is not sensitive. These tokens can be used in an internal system or database without bringing it into scope.
In terms of real estate, this means that assets can be divided into smaller units and sold to several investors, each of which will have a share in the property.
Tokenization means investors can purchase and sell real estate assets more easily.
It also means that more investors, including those holding cryptocurrency, can involve themselves in the real estate sector.
Increased Security and Transparency
Most cryptocurrencies are built on blockchain technology, an immutable and decentralized ledger that records all transactions.
Once a transaction has been recorded on the blockchain, it cannot be removed or amended.
This offers high levels of security and transparency for real estate transactions, which typically involve numerous parties and complications.
Faster Transactions Are Possible
If there’s one thing many people complain about when purchasing a new property, it is just how long it takes for the sale to go through!
Traditional real estate purchases can take weeks or even months to complete.
Cryptocurrency transactions, on the other hand, can take a matter of minutes!
This means the entire buying and selling process can be much quicker.
Which Cryptocurrencies Are Tied to Real Estate?
Did you know that there are over 22,900 cryptocurrencies at present? Out of these, three tied to real estate include:
- Bitcoin (BTC) – There’s only one place to begin, and this is with the most well-known cryptocurrency in the world! Bitcoin has been used to purchase several luxury properties in different locations. You may have even noticed that many real estate companies now advertise two prices; one in fiat currency and one in Bitcoin.
- RealT (RET) – RealT is a tokenization platform that gives investors the ability to purchase and sell fractional ownership in real estate assets. You can leverage blockchain technology to generate digital tokens that represent ownership of the properties available.
- Propy (PRO) – Finally, we have Propy, which is a real estate platform that’s also based on blockchain. Both investors and sellers can complete real estate transactions using cryptocurrency. Smart contracts are used to facilitate transactions, ensuring a high degree of security and transparency.
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Potential Challenges and Strategies for Mitigating Risks
While there are many benefits to using cryptocurrency in real estate, we also need realistic outlooks about the challenges and risks.
Cryptocurrencies are notoriously volatile. The value of your coins can rapidly fluctuate. This can create uncertainty for any real estate investor utilizing crypto to finance properties.
The solution: It’s a good idea to diversify your cryptocurrency holdings. Hold a mix of stablecoins and other cryptocurrencies that aren’t as volatile.
Cryptocurrencies are very much unregulated in many parts of the world, including the United States. This lack of regulation can create uncertainty while increasing the risk of illegal activity, including fraud.
The solution: Stringent due diligence is a must! Ensure the real estate developer you work with complies with all applicable laws and regulations.
Lack of Widespread Adoption
There’s no denying that the use of cryptocurrency is growing, and considerably so! However, we cannot say adoption is widespread.
This is worrying because it equates to a lack of liquidity, meaning investors will find it more challenging to use crypto for their property purchases.
The solution: You should develop relationships with real estate brokers and developers with cryptocurrency transaction experience. They’re then likely to have their own relationships with investors who want to use crypto to buy or sell properties, and you can leverage this.
While blockchain technology is highly secure, the fact that cryptocurrency transactions happen online means they can be susceptible to hacking. Of course, the same goes with fiat currency too!
The solution: Choose a cryptocurrency currency platform and exchange with care. Ensure they’ve got strong security measures in place. Offline storage, such as cold wallets, come highly recommended.
The Future of Luxury Property Investment with Cryptocurrency
The relationship between cryptocurrency and real estate is still very much in its infancy. However, there are some trends we can expect to see over the coming years.
For example, greater acceptance by the real estate industry is very much expected. As an increasing number of luxury property developers and brokers accept cryptocurrency for payment, the industry will likely become more accepting. This means there’ll be more liquidity, making it easier for investors to use crypto to buy and sell properties.
We can also expect increased regulatory clarity. Regulators around the world are trying hard to establish clear regulations when it comes to the use of cryptocurrency in general, including the use of cryptocurrency in real estate purchases.
Finally, it’s highly likely that smart contracts will be adopted more in the real estate market. A smart contract is a self-executing contract with the terms and conditions of an agreement between a buyer and seller. This is written directly into lines of code. Smart contracts can increase efficiency and reduce the need for intermediaries by automating a lot of the processes involved in buying or selling real estate.
Cryptocurrency Is Changing the Way We Invest in Luxury Property Investment
There’s no denying that cryptocurrency is changing how we invest in luxury real estate. While fiat currency is clearly the preferred and most popular approach, the fact that properties are now being sold in Bitcoin and other coins gives you a great indication of where the industry is heading.
From faster transactions to enhanced transparency, it’s not hard to see the appeal that crypto has when it comes to this traditional investment market!
About the Author
Kerry Leigh Harrison has over 11+ years of experience as a content writer. She graduated from university with a First Class Hons Degree in Multimedia Journalism. In her spare time, she enjoys attending sports and music events.
Feature Photo by VJ Von Art
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