Real estate markets are extremely hot right now as they continue to be impacted by a time of unprecedented change. From climate change to the COVID pandemic to the devaluation of currencies across the globe as governments “print” their way out of economic trouble, all bring new challenges for buyers, sellers, and agents.
In these circumstances, it is tempting to take a pessimistic view of the world. However, technology, in particular blockchain and cryptocurrency, offers a reason for optimism in the search for the total value in assets, including real estate.
Buyers and sellers must think differently about the value to facilitate a sale and ensure fair value and avoid significant discounting and value leakage. Here are some things to consider:
Using cryptocurrency as the sole alternative to FIAT cash in a real estate deal
Previously considered a “fringe” option, cryptocurrency is becoming more widely accepted as a new route to value. In Miami, the 9th floor Lower Penthouse at Arte was most recently bought entirely in publicly listed cryptocurrency at a value of $22.5m.
When we consider that the total number of users of cryptocurrencies doubled in the six months from January to June 2021, from 100 million to 200 million (report from Crypto.com), the indication is clear that cryptocurrencies are certainly gaining momentum.
While publicly listed cryptocurrencies are becoming more of an option for real estate, there are still concerns, including the volatility of digital assets such as Bitcoin and Ethereum.
In times of economic uncertainty, the smart investor is the one who realizes that cash is not king; Asset is King. Value can be maintained and enhanced through focusing on hard assets as cash consistently loses value and buying power. Acquiring and holding assets is the route to value. With this in mind, the true game-changer occurs when buyers, sellers, and Realtors realize that cryptocurrency, as a new digital asset class, can be used to route to many different opportunities for maximum value of physical assets.
Using cryptocurrency as a new way of achieving full value for Real Estate
With technology, innovation and creativity are never far away, and businesses are emerging that seek to combine the opportunity of cryptocurrency with hard asset value.
With such a “platform business,” it is possible to connect digital to tangible value, combining a cryptocurrency designed for high-value luxury assets (real estate, fine art, jewelry, precious gems, luxury cars, yachts, to name a few).
This approach does two things, it mitigates the risks associated with economic volatility and enables customized options for real estate owners to secure value.
A great example is an exclusive chalet in the French Alps, “Chalet Brickell.” Clients such as the owner of this chalet see significant value in the utility that a cryptocurrency, focused on high-value luxury assets provides, and thus are willing to accept eight figures in cryptocurrency as part payment, as they are confident that they can use the digital asset to acquire other tangible assets; such business models also allow asset placings with a small cash component and majority cryptocurrency. This represents a value equation for the owner who may need cash to pay a debt and crypto (tokens) to maximize the value through trading for other assets on the platform.
In this new type of business model, buyers, sellers, and Realtors can also convert digital assets, such as Bitcoin or Eth, as part of the non-cash component (avoiding the costly step of converting to cash) as part of a full value deal.
The world of real estate is no stranger to change, and there is a strong track record of innovation across the sector. It’s not surprising that cryptocurrency opportunities are opening, and buyers, sellers, and agents are looking to take advantage.
In times of economic turbulence, the sensible play is to acquire assets rather than cash, and the digital world can help. Using a digital asset to access new routes to tangible value is innovation at its best, and the good news is that partners across the sector can help.
