Is Bitcoin a Viable Option for Real Estate?
Bitcoin, an open source digital currency, has been making headlines for sometime. Recently, the buzz has entered the real estate industry as BOND New York became the first brokerage to announce their acceptance of bitcoin as a form of payment. This leaves me and many others wondering if bitcoin is a viable option for real estate.
Bitcoin has proven to be a good medium of exchange because it’s easily transferable, divisible and universally valued. However, economists do not see it replacing the dollar anytime soon because it fails at what economists call a “store of value”. Meaning, it does not maintain value reasonably well.
Bitcoin’s value in U.S. dollars changes almost daily as you can see on this chart from Blockchain. Christopher Matthews from Time Magazine discussed how on December 6, 2013 and December 7, 2013 the value of one bitcoin fell from $1200 to $600 in the course of 48 hours. These occurrences could have a potentially destabilizing effect on a business. It makes you wonder: why are brokerages like BOND New York jumping on this bandwagon and risking the volatility of bitcoin’s value?
Turns out they are bypassing it. BOND will be accepting bitcoins for the currency exchange rate of the day, and have set up a process with their merchant services provider to instantly transfer these bitcoins into dollars.
However, if you are going to accept bitcoin and exchange it immediately, why accept them at all? Co-Founder of BOND New York, Noah Freedman, answered this in a recent interview with CNBC saying that by accepting bitcoin, he is able to lower the overall transaction cost. This is due to their being no transfer fee for buyers and sellers when using bitcoins.
It is also important to note that BOND New York will not be accepting bitcoin for the total home value, only the commission value. This makes sense as it is hard to believe there are really sellers out there who would accept bitcoin as payment for their house.
There are a few sellers willing to take the leap though. As early as last May, one seller proclaimed that he would only accept bitcoin offers for his Trump Soho Condo. And last month another man said he would be willing to accept Bitcoin as payment for his Southhampton, N.Y. house although he is still open to the normal dollar offer as well. He also plans to follow in BOND’s path and accept bitcoin for the currency exchange rate of the day and immediately exchange it.
In terms of currency, bitcoin is definitely in it’s infant stage and there are a lot of odds stacked against its long-term success, but all of these moves are surely increasing the public’s knowledge of bitcoin and its breadth of acceptance.
What do you think about bitcoins future in real estate?