MIAMI, FL – APRIL 7: MicroStrategy Chairman and CEO Michael Saylor gestures while speaking during the Bitcoin 2022 Conference at the Miami Beach Convention Center on April 7, 2022 in Miami, Florida. .. (+). The world’s largest Bitcoin conference will be held from April 6th to 9th and is expected to draw more than 30,000 attendees and more than 7 million livestream viewers worldwide (Photo by Marco Bello/Getty Images) )
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In past generations, owning real estate has been a great opportunity for the average person to build generational wealth.
However, for Gen Z, Bitcoin is an entirely new touchstone that will separate the haves and have-nots in retirement.
Here are three ways Bitcoin acts like digital real estate, and three reasons why it could erode its analog counterpart over time.
1. Universal desirability
Bitcoin is a global, uncensorable, neutral reserve asset with no counterparty risk. As long as there is a demand for a secure store of value in the world, there will also be a demand for Bitcoin.
Similarly, as long as people need space to live and do business, real estate will continue to be in demand. Both Bitcoin and real estate are ideal assets to accumulate, having always been in fashion for almost everyone around the world, and with a low risk of long-term value collapse.
“Bitcoin is the city block of cyberspace,” MicroStrategy founder Michael Saylor said in a 2020 interview on the Funky Crypto podcast. Are you going to keep it in your family for a hundred years? ”
2. Reliable scarcity
Money can be printed and stocks can be diluted by issuance. Consumer products such as phones and cars can be reproduced to meet consumer demand.
However, when it comes to real estate, it’s a different story. Although technically we can build more buildings, it is difficult to build more housing, especially in already densely populated and high-demand urban centers such as New York, London, and Tokyo. It’s a time consuming process.
Factors such as geography, climate, economic activity, and zoning laws make it increasingly difficult to find the right places to actually build desirable homes and businesses. On the other hand, as the local population and currency supply increase in parallel, the demand for land in these areas increases, driving up costs over time.
Since Bitcoin is definitely a rare asset, it could experience price appreciation similar to real estate over time. Bitcoin, which has a hard-coded supply cap of just 21 million units, has repeatedly proven that it appreciates faster when U.S. interest rates are low. Both real estate and Bitcoin serve as excellent long-term stores of value and strong hedges against inflation.
3. Yield generation
Bitcoin’s most vocal critics have long argued that it has no real value because it is an unproductive asset with no intrinsic yield. “Apartments will generate rent and farms will produce food,” Berkshire Hathaway CEO Warren Buffet said at the 2022 Woodstock for Capitalists Annual Meeting. (Bitcoin) ) will do nothing.”
However, this distinction is rapidly changing. The launch of the Bitcoin Spot Exchange Traded Fund in the US earlier this year gave Bitcoin access to the financial rails and tools of other investment products.
Additionally, BlackRock currently has approval from the Securities and Exchange Commission to list options on a Bitcoin ETF. This allows Bitcoin owners to start earning interest by selling call options to traders, turning their Bitcoin into a cash-flowing asset. New technologies are also making Bitcoin more productive. Projects like Babylon are currently working on introducing “staking” to Bitcoin. This is a feature that allows you to earn BTC by locking your BTC to other blockchain networks to ensure their safety.
This feature is already available for cryptocurrencies such as Ethereum, where stakers currently earn 3.2% per annum.
Where Bitcoin beats real estate
Not only does Bitcoin share the core properties of real estate that make it a great store of value, but its digital nature fundamentally improves on those aspects.
Real estate is landlocked by definition. Therefore, a particular piece of land is entirely subject to local regulations and tax laws, which can fundamentally impact the value of a particular land investment over time.
In contrast, Bitcoin is a fully fungible global asset. Efforts to heavily tax Bitcoin ownership are likely to drive wealthy overseas Bitcoin owners to regions that will most kindly treat them and their digital possessions.
Unlike real estate, Bitcoin is hyper-divisible down to a fraction of a cent. This allows small buyers to acquire Bitcoin in small amounts and existing owners to cash out their Bitcoin piecemeal at their discretion.
However, there are barriers to entry in real estate. Young people in metropolitan areas have to take on large down payments and significant debt in order to own a home and enter the market.
Considering Bitcoin’s accessibility and excellent returns on land over the past decade, it’s no wonder this asset is especially popular among young people. A PolicyGenius survey conducted in early April showed that 20% of U.S. Gen Z respondents own cryptocurrencies, compared to just 5% of baby boomers. Compared to other investments, only 18% of Gen Z own stocks and 13% own real estate.
Digital currencies are now the primary financial instrument, rewriting life’s formula for financial success. For baby boomers, that meant going to college. For Gen Xers and early Millennials, that meant buying a home.
For today’s youth, that might be HODLing Bitcoin.
