Coming soon: Cryptocurrency
Actually, cryptocurrency is not coming soon, it's already here.
For the unenlightened, here's a cryptocurrency (aka digital currency or virtual currency) primer: You may recall Bitcoin, the world's most recognizable cryptocurrency. Bitcoin and others are no different than the currency you carry in your wallet or the credit line on your cards, but instead of handing bills over to someone or swiping a card, cryptocurrency is traded online for goods and services.
Cryptocurrencies and bitcoin mining are growing in popularity in part because they represent a monetary system free of the restraints of the typical financial institutions. In addition, you can almost buy bitcoins instantly.
As of June, more than 2,200 different brands of cryptocurrencies were traded publicly and the total value of all cryptocurrencies was pegged at about $246 billion.
The use of cryptocurrencies in real estate transactions was muted at first but they have recently emerged as a viable alternative to dollars. BitPay, a popular cryptocurrency, appears to be leading the charge to have real estate transactions become a major segment of their transaction portfolio.
In 2017, BitPay processed approximately $20 million in real estate development and sales transactions. This year, after stumbling badly in 2018, BitPay has rebounded and processed over $5 million in transactions through the first half of 2019. The average price of a home purchased through their exchange is $1 million.
One advantage of a cryptocurrency transaction is the fee. Where a bank wire charge could be around 5 percent, cryptocurrencies command about 1 percent. That may change as demand rises, but for now, it is an economic benefit.
Real estate is tailor-made for the cryptocurrency transaction, which appeals to the younger buyers entering the housing market.
A significant portion of the expansion of cryptocurrency into the real estate market may be the cryptocurrency investors themselves who see real estate as a solid, long-term way to diversify their portfolios.
Cryptocurrency has another advantage in that it offers the benefits of paying in cash, which increases a buyer's leverage during negotiations.
Of course, there are hazards. The tax ramifications can be complicated and financial advice prior to sealing the deal is always recommended. Also, cryptocurrencies are subject to wild swings in value and may hurt the prospects of closing a real estate transaction in the required time.
It is safe to say that regardless of the brand or the value, real estate transactions via cryptocurrency offer a security and transparency that will appeal to an increasing number of buyers and sellers.