About a month ago, Scottish entrepreneur and lingerie tycoon, Michelle Mone, announced she was establishing a property development project in Dubai, with her luxury apartments to be offered for sale in Bitcoin, the online currency (source). The online, or cryptocurrency, has grown in value substantially over the past few months, by 500% in 2017 alone, though exchange rates do remain volatile. Here we take a look at what Bitcoin is all about and whether you should ever consider investing in property via the digital currency.
The rise of Bitcoin
What is Bitcoin exactly? Put simply, its a type of digital currency which is based on blockchain technology, logged on a list held by many computers around the world. The list is regularly compared meaning that there is always a definitive list of who owns bitcoin and how many. Being a decentralised ledger, this means that central banks are not required to guarantee or control the currency. It is also encrypted and has been called the new gold by the co-founder of PayPal. Back in 2013, you could purchase one bitcoin for just over $20. With Michelle Mone’s cheapest apartments expected to sell for around 30 bitcoins (at the current value), you would have only had to invest around $600 in the digital currency back in 2013, to be a luxury apartment owner in Dubai today! The currency has steadily grown in value and popularity with investors, particularly in 2017, with one bitcoin now costing around $4,200!
How does it work?
You need an e-wallet to receive and pay Bitcoin transfers, otherwise it’s like trying to read an email without having an email address, and transactions are verified through the Bitcoin network. The current value trajectory has been sharply upward and although this may or may not continue or go into reverse, the current trend signifies the growing importance of Bitcoin and other cryptocurrency.
So you’ve heard of it but never used bitcoin before, which makes it hard to consider buying/selling property – perhaps your largest investment – with it! As in Michelle Mone’s case, many are looking to Bitcoin as the future and are beginning to venture into property investment within the cryptocurrency market whilst value is rising. There are other reasons why Bitcoin is becoming more popular, for example, how fast transactions are compared to traditional banks, the fact that there are no transaction fees or exchange fees and that there is anonymity – with no names or addresses being linked to bitcoin purchases. People may consider purchasing property in bitcoin in order to diversify into other asset classes or invest a large sum into something stable such as property, all which can be done anonymously too.
Bitcoin is relatively new in the property market, so a large drawback is that many vendors do not yet accept it as a valid means of purchase. However, using an exchange service can easily convert a hefty bitcoin sum into GPB currency for any home purchase. Investing in property with Bitcoin is most probably not for first-time investors – you not only need liquidity, you also have to have a substantial amount of both traditional and cryptocurrency on your account. There are also concerns about the future of Bitcoin – and that like in the traditional financial sector, the bubble might eventually burst, and there have already been instances where the value of Bitcoin has dropped dramatically. As a newer currency, it is therefore prone to more fluctuation when it comes to exchange rates. However, those who are in the position of having a substantial sum in Bitcoin already may consider investing in property as a great way of avoiding a possible devaluation and putting it into something brick and mortar.