Bridging the Gap? Property on the Blockchain?
As the cryptocurrency sector continues to burgeon into a massive industry, one question remains solution les: How to best bring Real Estate onto the Blockchain? Many cryptocurrency investors, whether new enthusiasts or early buyers sitting on massive gains are wondering how to convert these gains into a tangible asset. Whether it be for diversification, profit taking, new investment, it is a dilemma hereto without a perfect solution. Government restrictions are limiting options for investors and steering some to pursue the only feasible path currently available by investing in property using their digital assets to make capital contributions to private equity investments in Real Estate.
Some real estate developers are beginning to accept blockchain stablecoins (USDC and USDT) for private placement investments in new projects. For example, real estate investment company, Paine Group, is makes it possible to invest in Real Estate with cryptocurrency for their projects and funds such as this hotel development in Bozeman, Montana. Unfortunately, these types of deals still have six-figure minimums and aren’t available to non-accredited investors. Time will certainly bring change.
One of the big advantages of investing in real estate with cryptocurrency is that any investor from anywhere in the world can securely invest in America. Another is the convenience of the ready liquidity that many cryptocurrency investors have in digital tokens they have accumulated.
Should I buy real estate property with crypto?
Many crypto investors who want to pivot or diversify into real estate are already aware of how quickly inflation destroys wealth and savings that have not been invested in growing, profitable commercial enterprises or in a deflationary commodity that is hard to produce.
Inflation has always been the great destroyer of savings and wealth absent an investment vehicle to protect them. But since the pandemic, the dollar decline has been severe. An April 26 CNBC report says “the data so far is showing inflation isn’t going away” any time soon.
Cryptocurrency investors understand that real estate holds value against central bank currencies — like the dollar, euro, yuan, and yen — in much the same way that deflationary cryptocurrencies like Bitcoin do. They are both what investors call hard assets.
Is it better to invest in crypto or real estate?
Most financial advisors say diversifying is the best investing strategy, so it isn’t better to invest in crypto over real estate or vice versa as much as it is simply best to smartly diversify your wealth using assets that protect it from inflation and grow your wealth by using it as capital for business.
It is harder to create more bitcoin than it is to create more dollars. Likewise, it is harder to build more real estate than it is to create more dollars. That is what has made home ownership one of the most important ways Americans stay ahead of inflation and protect and grow their wealth.
High net worth investors (HNWIs) who qualify as accredited investors have also learned to move their savings into residential, commercial, and industrial real estate developments to convert their cash into hard assets as a shelter from dollar inflation.
But investing in real estate with bitcoin and other major cryptocurrencies does have some challenges and disadvantages. A recent report on LinkedIn — by a luxury real estate agent in Sarasota, Florida — outlines why stablecoins are better than bitcoin for investing in real estate.
According to the report, “Stablecoins offer a potentially more stable way to integrate cryptocurrency into real estate transactions compared to Bitcoin.”
Can you buy a house with crypto profits?
Previous attempts to integrate crypto into the real estate world and move real world assets (RWAs) onto the blockchain have been hassles at best when they were not flat-out failures.
One reason is “most jurisdictions in the world do not have a legal framework for direct, on-chain issuance of RWAs,” according to crypto liquidity provider and market maker Anton Golub.
The price of Bitcoin is simply too volatile compared to stablecoins like USDC and USDT to serve well as a medium of exchange for real estate investing using cryptocurrency. Stablecoins are pegged to the U.S. dollar, so they make financial accounting far simpler than using Bitcoin.
Using NFTs (non-fungible tokens) to invest in real estate through the blockchain has also been full of challenges and failures. Selling these digital assets for stablecoins and using stablecoins for a private equity investment in real estate is more financially and legally sound.
The best way for high-net-worth individuals and accredited investors to invest in commercial real estate with cryptocurrency is via private placement investments with a property developer that accepts stablecoins.
Paine Group is one of the few to accept crypto in the form of stablecoins for private investments. It’s accessible to domestic and international investors and possible today. It may serve as a model to the industry.
