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The Recent Rise of Bitcoin: What We Know, Where We’re Looking, And What This Might Mean for Real Estate

I remember the first-time Bitcoin broke $20,000 USD in 2017. Heads turned, mouths dropped, and global attention flooded into the cryptocurrency conversation.

I read recently in a UBS report that during that first rise, Google searches using the word ‘bitcoin’ skyrocketed up to 30,000 searches per week.

As Bitcoin smashed through $53,500 on Friday, it is apparent that we have entered a new chapter of the cryptocurrency story.

Sourcing the Action

Like other observers around the world, I’ve been guilty of keeping the Bitcoin chart open on a browser window, watching the squiggly line climb and sometimes drop. It’s been a remarkable ride, to say the least. But when the Financial Times called 2020 “The Year Bitcoin Went Institutional,” I started paying closer attention.

Their announcement didn’t surprise me; this headline is one of many that’s made waves over the course of 2020. Still, it felt like an important turn of the page. Since mid-March, when Bitcoin sat at just $4,000, the price has climbed roughly 900%. In May, on the early end of that climb, Paul Tudor Jones announced his intention to invest about 2% of his portfolio into Bitcoin. Following him was Mutual Life Insurance Co., the Guggenheim Funds Trust, ARK Invest, and household names like Elon Musk, Jack Dorsey, and Jay-Z.

As institutional support increased Bitcoin’s traction, barriers to ownership simultaneously decreased, allowing more retail investors to enter the space. PayPal secured the ability to make Bitcoin, Ethereum, Bitcoin Cash and Litecoin available to accountholders, and they plan to do the same across their Venmo platform this year.

In the last three months, 10 million new digital wallets were created on blockchain.com; that’s more than the total wallets created in the 12 months prior. All this activity shows the boom is supported from multiple angles, and all eyes are fixed on Bitcoin. Naturally the question follows: where do we look next?

Following The Conversation

Deriving a valuation model for Bitcoin is almost impossible. Without similar models to look toward, there are things we just can’t know. But one of Bitcoin’s most promising use cases is tokenization. Tokenization—a cryptocurrency buzzword—refers to the process of turning things into digital assets. To do so, a digital contract system needs to be developed, secured, and shared. Blockchain’s ability to make tokenization transparent and secure has obvious applications across multiple industries, including fractional ownership, more accessible assets, a new method of wealth storage, and maybe a better language of economic trust.

When investors take interest in Bitcoin, they’re often taking interest in those kinds of questions. Can a tokenized economy become a reality? Will the user count continue to increase such that there are enough buyers to absorb new units? Is this five years, ten years, or fifty years away?

Volatility and uncertainty are baked into the Bitcoin model; maybe no one can answer these questions with full certainty. But as time goes on, we can continue to debate, make our predictions, place our bets, and watch things change on a day-to-day basis—that’s what makes it so hard for investors to look away.

What This Means for Real Estate

In my recent conversation with Bar Mor, we touch on some of the above questions, and explore how Blockchain, Bitcoin, and the crypto-frenzy might impact the real estate sector, specifically the PropTech space. In both of our minds, it’s a question of when; Bar is estimating the bulk of the impact to be somewhere between five and ten years away.

Both of us are big believers in Blockchain and its applications in the real estate space. The concept of decentralization will make fragmented ownership more possible, boosting asset liquidity and investor participation.

Dealing with different property types and asset classes, a language of trust is essential to real estate activity; in this sense, Blockchain could be a great enabler.

Still, and for a couple reasons, I think the Blockchain transition is a few years away. A key take away from my conversation with Bar was this: digitization before tokenization. A sector that’s always been a few steps behind, real estate companies are still undergoing a digital transformation. Bar pointed out that before companies can take full advantage of tokenization, they need to centralize their fragmented data into one system of record. This is a necessary prerequisite; companies in the real estate sector need to digitize before they can employ the Blockchain technology as a means of trust and exchange.

I haven’t yet made an investment in a Blockchain focused PropTech company. I’ve taken great interest in the Blockchain infrastructure, and while all of the action is promising, it’s hard to know at this point it’s exact relation to the PropTech space. What I know to be true is that we’re all emerging from a watershed event.

We’ve shared a sort of global trauma over the course of the pandemic, and we’ve developed a bias against some of the systems we had in place that left us overly exposed or ill-prepared. New solutions are in-demand, and new habits are already setting in. On that list, I think cryptocurrencies rank highly, and I’m continuing to watch closely. A future that operates on the principles of cryptocurrency isn’t hard to imagine, and might not be too far away.