How does bitcoin cause the deflation of the real estate market?
Real estate prices are attributed not only to their utility value but also to a “monetary premium” driven by financialization. This premium is seen as vulnerable to being diverted to Bitcoin, which is perceived as a superior store of value due to its scarcity, liquidity, portability, resistance to taxation, and lower maintenance costs.
Leon Wankum notes a significant paradigm shift in the perceived store of value from real estate to Bitcoin, and the potential challenges this poses for real estate investors.
He describes Bitcoin as a superior store of value compared to real estate due to its deflationary nature and historical performance.
Bitcoin vs Real Estate
Leon estimates that up to 70% of the value of real estate is derived not from its physical utility (i.e., providing shelter or generating rental income) but from its perceived value as an investment or hedge against inflation. As Bitcoin gains prominence as a superior store of value, the monetary premium traditionally associated with real estate may gradually shift towards Bitcoin.
This shift could potentially lead to a re-evaluation of real estate prices, aligning them more closely with their utility value rather than speculative or investment-driven factors. Leon predicts that a significant number of real estate developers may face financial distress within the next 18 months and suggests a potential shake-up in the industry.
This could lead to consolidation, bankruptcies, or shifts in investment strategies among real estate companies as they adapt to changing market dynamics. Leon asserts that Bitcoin is direct competition to real estate as a store of value.
He suggests that the deflationary nature of Bitcoin, especially following events like the upcoming halving and ETF adoption, will make it more attractive to investors compared to real estate.
This perspective portrays Bitcoin as a disruptive force in the traditional real estate market, challenging the dominance of real estate as a store of value and prompting investors to reconsider their investment strategies in light of Bitcoin’s advantages.
