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Use Bitcoin To Buy Real Estate – Is Chaos Beckoning?
If you believe that trading is just a form of value exchange, then welcome to the world of possibilities. Because if hard cold cash can be traded for plastic chips in Macau and a 2 centimeter rock can buy a posh penthouse in Manhattan, then in the same line of thought, Bitcoin can be used to buy real estate.
An anonymous founder first launched Bitcoin in 2009. And instead of a central bank printing money, Bitcoin “printing” is governed by complex computer cryptography and maths. The act of harvesting these virtual coins using computers and software to solve these extra-terrestrial level of mathematics, is called “mining”.
Governments all over the world are denouncing the validity of Bitcoin as a currency because it is not backed by anything. But look at what can happen to our monies even though they are supposedly “backed”. And contrary to a lack of backing, the new virtual digital currency is actually backed by the most valuable thing of all to a currency – Trust and Confidence. Because just like any other currency in the world whether it’s the USA, UK or Singapore, the moment markets lose confidence in one, it tends to go down. And the value of currency stays strong feeding from the confidence the market puts on it. Meaning there must be pretty strong support for Bitcoin for it to reach it’s astronomical standing today.
When I first learned that a house somewhere in the world was legitimately transacted with Bitcoins, I experienced another one of those moments where the reality bubble seemed to pop. But a minute later, it sunk in that there was a value exchange between 2 willing parties. Who is anyone to question the legitimacy or radicalism of such transactions? When both parties believe that they are both getting what they want from a transaction, it is a fair way to do business.
The reason why buying properties with virtual money raised eyebrows is because the 2 belong to opposite ends of the investment spectrum. One is the most virtual of intangible assets while the other is the most accepted form of tangible assets. One is an asset with dynamics and dimensions that few players in the world truly understand, while the other is a physical asset that everyone can implicitly understand. To some people it would be like using a worthless piece of toilet paper to exchange for a $100 bill. But to others, it would be like selling a home for 10 times it’s current value.
But there has always been a question on how value is determined. Because there is a limited number of merchants who accept Bitcoin for sales and purchase transactions, there is a limit on what the receiver of the virtual currency can do with it. If there is not a lot you can do with the coins, how do you value it so highly. Even though more and more companies are slowly accepting the new digital currency as a form of payment, it is still nowhere close to a minor majority. This attributes the meteoric rise in value to a speculative nature rather than a real demand nature. This explains the wild volatile fluctuations of it’s value. The worrying aspect is that these are signs that a bubble is inflating.
Since the gates to Bitcoin real estate transactions are now open, it is now only matter of time for more doors to open within the supply chain. Legal documents may start describing closing prices in terms of Bitcoins, valuers might start putting a Bitcoin value on a house, authorities could start placing liens in terms of digital coins, and banks may even start issuing mortgages in Bitcoins. A circus is potentially brewing below the surface that can cause short and medium term chaos in the industry and economy.
But even amid the potential chaos, it is a necessary step to take for economies to evolve. Markets are after all dictated by demand and supply as we are tutored in school. And if demand and supply calls for the use of a new digital currency, a free market will allow it.
If you do run into a situation where a buyer of your property propose to pay by Bitcoins, you have to ask yourself some serious questions to decide whether to do it rather and brush it off as ridiculous. As you are an investor who is out to make the best of your returns, you owe it to yourself to see what your best actions are. Ask yourself these questions regarding Bitcoins.
Do you understand the basics of how it works? You are looking to understand the basic fundamentals. Let’s put it this way. Very few people really knows how the currency market work, but everybody are still using them. And you do not need to know how electricity works in order to flip a switch for the lights to come on.
Do you know how to use it or cash out? Transfer of ownership requires the use of e-wallets or via online exchange platforms. You have to get familiar with these in order to exit. Just like having to know where the cashier is and what payment they accept when checking out of the grocery hypermart.
Why would you be receptive to this? There can many different reasons why any individual would want to transact in this manner. What is yours? Is it because you believe that values will go up substantially in future? You simply want to diversify your portfolio? Or you just feel tipsy for a punt at a new form of investment?
Can you afford a total loss? The reality with any asset is that things can go bad very quickly. And with such a new, virtual, intangible currency with no “backing”, who knows what can happen tomorrow. Even billion dollar organizations can announce bankruptcy and put the whole economy into panic without warning.
I cannot imagine the emotional pain and mental torture of losing a physical asset as real as a house in exchange for some numbers in a virtual wallet with a disputed worth. So I will stay away for now.