Bitcoin is primarily seen as an alternative to gold ($10-12 T) due to its limited supply and excellent monetary properties.
In fact, however, bitcoin is a competitor to the world's most used store of value, real estate ($330 T).β¨β¨
In the global financial landscape, gold has seen a shift from its traditional role as the primary store of value. Since 1971, this pivotal role has transitioned to real estate, characterized by its potent mix of scarcity and appealing financing opportunities, establishing it globally as the primary store of value.
The total value of global real estate has exceeded $330 trillion. In comparison, the value of all gold ever mined, estimated at $12.2 trillion, appears modest, accounting for just over 3% of global real estate value. β¨β¨
This development coincides with the βNixxon shockβ of August 15, 1971. When US President Richard Nixxon announced that the United States would end the convertibility of the US dollar into gold.
Since the adoption of a fiat-based monetary system globally, with floating exchange rates and no currency standards, the money supply has steadily increased. This has driven investors to seek protection against inflation, with real estate emerging as a favored asset.
Examining the annual growth rates of the money supply (M2) and housing prices in the U.S. reveals a discernible trend. Since 1971, the money supply (M2) had a compound annual growth rate of 6.9%, while housing prices had a compound annual growth rate of 5.7%.
This illustrates a direct correlation between monetary expansion and rising real estate prices, underscoring real estate's longstanding role as a preferred store of value for safeguarding wealth against inflationary pressures. However, this characteristic is increasingly challenged by the emergence of Bitcoin.β¨
If you think about it, #bitcoin's characteristics reflect many of the value propositions of #realestate, in addition to inherently safer custody, easier maintenance, and, most importantly, the ability to liquidate or move your wealth in times of crisis.
Real estate cannot compete with bitcoin as a store of value. Bitcoin is rarer, cheaper to maintain, more liquid, easier to move and harder to confiscate, tax or destroy.
Given bitcoinβs vastly superior properties as a SoV, it has the potential to absorb a significant portion of the monetary premium that real estate carries as such.
If 1% of global real estate equity was reallocated to bitcoin it could drive the price to $18 million +/bitcoin. The math: $330 trillion market cap global RE x 1% = $3.3 trillion. $3.3 trillion x 118 Bank of America study multiplier = $390 trillion. Current #Bitcoin market cap = $1 trillion. Total hypothetical bitcoin supply = 21 million. 391 trillion / 21 million = $18 million per bitcoin. The price would probably be even higher as many coins were lost...
We can see in real time how the market recognizes the advantages of bitcoin over real estate for storing value. Swiss Bitcoin exchange Relai has reported that 75% of its OTC volumed came from real estate investors diversifying profits into bitcoin.
I expect this trend to continue, particularly in the current market environment. With bitcoin's price presenting an appealing prospect against its anticipated long-term growth, while real estate is facing challenges due to rising interest rates and lower demand, which encourages investors to look into Bitcoin.
Bitcoin Magazine
Why Bitcoin Is Digital Real Estate
The properties of bitcoin reflect many of real estateβs value offers on top of fundamentally more secure custody.
