Whether or not you are a financial enthusiast, you must have heard of cryptocurrency or Bitcoin at least once in the past year. In 2017, these encrypted digital currencies managed to make their way into almost every market, including real estate.
The days when Bitcoin was used only by a niche audience are long gone. Over the years, high-profile businesses have started adopting it as a secure form of payment. On the other hand, the rise of this crypto coin has not been without controversy, and a few governments have banned it altogether.
Crypto coins can be created through a process called mining, using special mining rigs—for example, computers with powerful GPU’s—connected to a blockchain, which is essentially a digital ledger. The transactions made through the blockchain are safe, as the technology is designed to resist data modification attempts.
Unregulated by banks, the crypto market presents massive fluctuation values, and is therefore considered exceptionally risky. However, it continues to attract new investors and industries every day.
Real Estate: One of the Blockchain’s Many Links
To look into how sustainable a Bitcoin payment is in real estate, PropertyShark made a case study on a hypothetical transaction. The real estate data provider centered the research around a luxury condo in NYC, which was sold in April 2017 for $45 million. The results were striking, to say the least.
The condo, located in the iconic San Remo building, formerly belonged to Demi Moore. If it had been sold in Bitcoin, it could have fetched 37,000 BTC, as in April 2017 one such coin was equal to $1,206. Come May, Bitcoin’s value quickly surged to $1,895, meaning that the price of the condo went down 13,000 BTC in just one month.
Throughout June and July, the condo’s price kept hovering at 17,000 BTC, as the value of the Bitcoin had its small ups and downs. In August and September, 11,000 Bitcoins would have been enough to acquire the 14-room residence. By October, you would have only needed around 8,000 BTC.
Fast forward to the end of November, when the digital coin continued to soar. By then, the property could have been bought for only 6,000 BTC, and in December, when the historical spike occurred, it could have been purchased for under 3,000 BTC. When the currency reached its peak in December 2017, with 1 BTC amounting to $17,000, the condo could have been bought for just 2,700 Bitcoins.
Through January and February 2018, Bitcoin’s value started contracting, and by March, the apartment’s price would have been around 4,800 BTC. In hindsight, the amount of Bitcoin needed to buy the $45 million condo in April 2017 could have landed you 13 such condos by the end of the year.
Looking at the data, selling a property in Bitcoin at the beginning of 2017 would have been a great idea. However, even if some crypto investors knew where the market was headed, nobody could have guessed it would blow up like it did. Keep in mind that investing and trading in cryptocurrency requires in-depth knowledge of the business. It is not just speculation or luck.