Bitcoin and Real Estate: How Bitcoin is Revolutionizing the world’s largest Asset Class

In June 2024, I had the honor to speak at BTC Prague. Going into history books as the largest European Bitcoin conference, the event attracted thousands of international delegates. My keynote focused on the differences between Bitcoin and real estate and how investors should think about the two asset classes.

Below you can read and download the transcript of the keynote or watch the video recording. I’ve also linked the slides of the presentation for your convenience.

I hope you enjoy it.

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Keynote Transcript

Vanam! What’s up, guys? It’s great to be here today. I’ll be presenting on Bitcoin and real estate and how Bitcoin is revolutionizing the largest asset class in the world. A few words about me: I learned about Bitcoin while studying philosophy and financial economics at university. Shortly after, I started working in the real estate industry, focusing on project financing, project development, and asset management. Ever since, I’ve been closely studying both assets. Working in real estate has allowed me to understand how broken our monetary system is and the potential of Bitcoin as a superior store of value compared to real estate.

Today, real estate is the number one store of value in the world. It’s about 300 times larger than Bitcoin, which has already turned into a trillion-dollar asset. Depending on your view on fiat money and debt, between one to two-thirds of the world’s wealth is stored in real estate. At some point in my career, I started to ask myself: how come that in a highly digitalized world we still use physical objects to store value? I thought that was pretty strange. This development coincides with August 15, 1971, when U.S. President Richard Nixon announced that the U.S. would stop the convertibility of the dollar into gold at a fixed rate. This created the fiat era—an era with no monetary standards and an exponential increase in the money supply. This has solidified real estate’s role as the number one inflation hedge and store of value in the world.

This becomes very obvious when you look at the rates of monetary increase and housing prices. The M2 money supply, which broadly reflects the funds available for spending, saving, and investment, has seen an exponential increase since 1971, with a compound annual growth rate of around 6.8%. If we look at housing prices, they have increased at a compound annual growth rate of around 5.7%, closely following the expansion of the monetary supply. The same is true for commercial real estate; although it hasn’t grown as aggressively in value as residential real estate, it has grown at a compound annual growth rate of 4.4%.

When we layer all three graphs on top of each other, it becomes clear that real estate rises alongside the monetary supply. As new monetary units enter the market, existing units lose purchasing power, forcing people to invest in real estate due to scarcity and attractive financing options. This has turned real estate into the number one investment. Commercial banks, acting on central bank policies, create new fiat currency, which they funnel into the market through credit in mortgages and property investments, inflating the nominal value of real estate. Real estate acts as a reservoir for new money entering the fiat economy and also for capital looking for a safe haven from inflation.

The rise in the nominal value of real estate largely reflects the debasement of fiat currency. Historically, real estate was priced based on its utility value—characterized by the fact that you can live in it, use it for production, and rent it out to generate cash flow. This has been true across various civilizations, from ancient China to the Roman Empire and beyond. However, the use of real estate as a predominant store of value is a relatively new phenomenon. For instance, in the second to third century AD, the Romans began inflating their gold currency, leading to an appreciation in land prices, coinciding with the empire’s decline.

Many real estate investors mistakenly believe that real estate is a good investment because it carries intrinsic value based on its utility or cash flow. This concept is fundamentally flawed; intrinsic value does not exist—value is subjective. This is something that Carl Menger, a pioneer of the Austrian School of economics, proved in the 19th century. For example, the price of a Rolex watch is not merely a reflection of the materials or craftsmanship that went into its production; it is as much about what someone is willing to pay for it. This is true for all types of assets, including Bitcoin and real estate. Real estate has only become valuable because it has been priced away from its utility value and is used as a speculative investment vehicle to hedge against inflation.

When we compare the characteristics of real estate and Bitcoin, it becomes clear that Bitcoin is a superior store of value. Firstly, Bitcoin is the first absolute scarce asset in the universe. Absolute scarcity is irrelevant if there’s no demand; however, Bitcoin has demand due to its excellent monetary properties. Additionally, Bitcoin is cheaper to maintain, relatively inexpensive to store, highly liquid, mobile, and indivisible—qualities that are increasingly important in a world of rising conflict. In contrast, real estate creates a local dependency, which can pose a threat.

The only significant difference between real estate and Bitcoin is cash flow. However, the cash flow of real estate does not prove that it’s a good store of value; it merely shows its role as a reservoir for new money entering the fiat economy. Commercial banks favor this policy because they profit from issuing loans for mortgages, which creates money and generates interest.

When we look at the price of housing in Bitcoin, we understand that the value of real estate is collapsing against Bitcoin. For example, the price of an average home in the U.S. was about 1,000 Bitcoin eight years ago in 2016; today, it’s around 10 Bitcoin. We need to change our unit of account—Bitcoin is the new unit of account, repricing the world.

Bitcoin, as a near-perfect digital store of value, threatens real estate’s capacity to store value. This digital disruption can be likened to the impact e-commerce had on retail. Real estate capitalizes on scarcity in the physical realm, while Bitcoin introduces scarcity to the digital realm. A digital network can grow exponentially through network effects, which is something that assets like real estate cannot keep up with. Real estate investors are facing a historical transformation; the role of real estate as the number one store of value over the past 50 years is threatened.

I believe that Bitcoin will drain the monetary premium that currently sits in real estate, causing it to collapse to its utility value. Historically, the real estate sector benefited from inflation for two reasons: it decreases debt incurred to buy and build real estate, and it forces people to invest in real estate, driving up its nominal value. However, inflation has reached a point where constructing real estate has become unprofitable due to higher interest rates. This means that the cost of borrowing goes up, making it more expensive to build real estate while demand decreases. At the same time, governments are forcing property owners to maintain their properties, which will lead to skyrocketing maintenance costs.

There’s also a social change occurring. Millennials, Generation Z, and Generation Alpha will likely gravitate toward Bitcoin as their preferred store of value. They have been priced out of real estate and will trust a digital network much more than an asset that is part of a system that can be corrupted. Generation Alpha, born in 2010, will enter a reality where Bitcoin is the norm. The disruption that Bitcoin brings to the real estate sector is beneficial for society because it will lower the cost of living and make housing more affordable.

As a real estate developer, the question is: how can we survive? The use of real estate as a speculative investment vehicle to hedge against inflation is generally bad for society, but the provision of housing by the private sector remains crucial. Everyone who has lived in countries with Soviet-style economies or who pays attention to peripheral regions understands the importance of this issue.

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