With the continued growth of the cryptocurrency market, cryptocurrency investors are placing heavy bets on real estate this year. A recent survey conducted by the New York Digital Investment Group (NYDIG) found that 46 million Americans own Bitcoin, Equivalent to 22% of all adults. Although optimistic, some cryptocurrency investors have expressed concerns about the security, custody, and volatility of digital assets.
For example, Nickel Digital Asset Management, a regulated European investment management company dedicated to the crypto market, Under investigation Institutional investors and wealth management companies from the United States and Europe have total assets under management of US$275 billion. The survey results show that 76% of these people are worried about the safety of their digital assets. The same percentage said it was about market size and liquidity, followed by 71% who believed that the regulatory environment of the crypto market was a major issue.
With this in mind, many cryptocurrency holders have begun to invest in Bitcoin (Bitcoin) And other cryptocurrencies are converted into lower risk assets, such as real estate. Ben Shaoul, managing partner of Magnum Real Estate Group, told Cointelegraph that the company has recently received more requests to sell real estate to cryptocurrency holders. According to Shaoul, Magnum started encrypting real estate transactions about three years ago:
“We haven’t solved this problem before because most real estate developers don’t understand crypto payments. But we understand what it means and how we structure cryptocurrency sales. With the help of our legal team, we figured out how to regulate Encrypted transactions with the agency’s consent. We first sold some residential units, and then we sold a retail apartment in New York about three years ago for use in cryptocurrency.”
Eric Hedvat, Chief Operating Officer of Jet Real Estate and Special Advisor to Magnum, further told Cointelegraph that given the rapid growth of today’s crypto market, BTC-paid real estate is more important than ever because it provides opportunities for crypto investors to grow with cash flow: “The cryptocurrency market has created a huge network of new wealth, hoping to find traditional assets for investment, such as real estate. There are not many commercial real estate that can be purchased with Bitcoin.”
Specifically, Sauer pointed out that from Magnum retail apartment building sold for $15.3 million in BTC 2019 is all credit. “M&T Bank has been a tenant of this building since it was built. They are a bank worth billions of dollars.” This is an important detail, as Shaoul further commented that individuals who have created new wealth with cryptocurrency have no choice. Monetize it or create a stable income stream:
“This property has more than $1 million in free cash flow every year. For those who are sitting on the wealth they create with cryptocurrency, this is a very attractive product. This gives them the opportunity to monetize and Effectively collect forward bonds.”
This is especially true because of interest rates in the United States.To put this in perspective, a recent survey conducted by the Financial Times and the University of Chicago Booth School of Business Established High inflation may cause the Fed to raise US interest rates at least twice before the end of 2023. “In an environment where interest rates are at current levels, you cannot monetize into cash and keep the money in the bank and convert it,” Shaoul said, adding that, as a result, Magnum has seen a large amount of cash move from cryptocurrency and stock markets to real estate Waiting for hard assets.
Piper Moretti, CEO and founder of The Crypto Realty Group, told Cointelegraph that encryption for real estate transactions is indeed becoming more and more common. Moretti shared that her company currently has available Bitcoin real estate listings in Tulum, Uruguay, Puerto Rico and Costa Rica.
Although this is the case, Moretti mentioned that many buyers of real estate Crypto is lending in their cryptocurrency“Due to capital gains issues and the belief that the price of Bitcoin will reach $100,000 by the end of this year, people are using their cryptocurrency to make loans. In this way, they can keep their cryptocurrency and still monetize it,” She commented.
Joseph Kelly, CEO of Bitcoin financial services company Unchained Capital, confirmed this, noting that approximately 30% to 40% of the company’s loans are used for real estate.
But cash is still king of sellers
Although Bitcoin and other cryptocurrencies are used to purchase real estate, it is important to note that when processing these transactions, sellers generally prefer cash to cryptocurrencies. Moretti explained, “If sellers receive multiple offers, they will push the cash offer to the top 99% of the time, even for cryptocurrency conversion, because they are likely to be closing.”
To put this in perspective, Sonny Singh, chief commercial officer of Bitcoin payment processor BitPay, told Cointelegraph that BitPay has facilitated $100 million in real estate transactions in the past five years. Singh mentioned that crypto transactions can be easily converted to U.S. dollars:
“The first thing that needs to be done is the ownership or escrow company to participate in this process. Sellers can also use companies that BitPay has already partnered with. Then buyers can pay in Bitcoin and we convert it into cash. The escrow company can now Pay the spot exchange rate in cash to get bitcoin. The whole process takes one day, and a 1% fee is required to initiate the transaction.”
Although this is usually the case, Shaoul stated that Magnum will keep a certain percentage of the cryptocurrency obtained through real estate transactions in the company’s vault. “We kept some of it to keep the same percentage of cryptocurrencies that we have been balancing over the past six to seven months.” To do this, Shaoul said the company is working with crypto investment company Galaxy Digital, Help manage the cryptocurrency obtained from real estate transactions.
Is Bitcoin payment for real estate just hype?
Although it is worth noting that cryptocurrency holders have seen more opportunities to purchase real estate with digital assets, some industry experts believe that this recent trend has been exaggerated.
For example, Natalia Karayaneva, CEO of Propy, a real estate trading platform powered by blockchain technology, told Cointelegraph that many stories in the media today focus on encrypted payments for real estate, as if this is a new development.But as far as Karayaneva is concerned, the acceptance of encrypted payments dates back to 2014, when BitPay provided help promote Sale of a Lake Tahoe property sold for $1.6 million in BTC. In 2014, a tech entrepreneur also listed his Tiburon, California Houses sold for $3.6 million, paid in Bitcoin.
Karayaneva believes that the use of blockchain technology to facilitate cryptocurrency-to-cryptocurrency transactions will truly change the rules of the game in the real estate industry. Real estate transactions can be completed entirely with Bitcoin without any cash conversion. Karayaneva explained that trading in this way can save both buyers and sellers time:
“This can save up to 1% of transaction fees, and blockchain-encrypted transactions are 100% transparent and immutable. They also allow the use of smart contracts, allowing users to create, review, and verify documents from anywhere in the world in real time. This It eliminates the need for middlemen and minimizes the risk of any payment disputes, because the transaction can only be completed if all requirements are met.”
Karayaneva further mentioned that today many custodian companies still do not want to participate in encrypted transactions, which is why the smart contract framework is a more attractive option.
However, Moretti disagreed and pointed out that using blockchain for real estate transactions may be difficult because it does not go through the normal escrow process. “I know this can be done, but it’s cumbersome. We have also followed good fund laws in California, and it may be difficult for regulators to adopt such a solution.”
Although it is too early to judge whether blockchain technology will become the missing link in real estate transactions, it is clear that more and more cryptocurrency holders are using Bitcoin to buy real estate. “People want to transfer unstable assets to stable assets. What could be more stable than real estate?” Singh commented.