Mansion Global | The wild ups and downs of cryptocurrency markets have been near the top financial headlines for months, so it’s perhaps no surprise that a rapidly increasing number of luxury real estate developers and sellers are getting into the game themselves, making properties available for currencies like Bitcoin and Ethereum, and in the process, creating an attention-grabbing hook for their listings.
But the new proliferation of crypto-friendly listings may be a boon to certain buyers, as well, providing a prime opportunity to diversify a portion of their holdings from the volatile world of digital currencies into the traditionally much more stable world of real property.
“We are definitely a fan of digital assets, and the boom and bust cycles are natural,” said Amanda Agati, chief investment officer for the PNC Financial Services Group. “They are [also] one of the most volatile assets on the planet, so the ability to potentially diversify from digital into real assets like property is very attractive.”
For sellers, offering listings for cryptocurrency may significantly broaden the pool of potential buyers, given the number of investors with significant holdings in digital currencies but few liquid assets elsewhere, or even those who have more diversified portfolios but have seen their crypto holdings explode in value since this time last year. Bitcoin, for example, was valued at around $9,200 in mid-July 2020, and is now up more than threefold to around $31,500, as of Thursday afternoon. “A lot of people have created great wealth in the last year with crypto,” said Thomas Duger, vice president of sales at Elegran Real Estate, who is currently marketing a $2.595 million condo near New York City’s Gramercy Park for a seller who is willing to accept Bitcoin.
“The seller is so bullish on cryptocurrency, he thinks this is just the beginning,” Mr. Duger said.
Purchasing property in cryptocurrency isn’t necessarily the right investment move for everyone, however, and in such a new market, buyers would do well to go into transactions with a close eye on the details. Below, what to know if you’re looking to trade in some of your frothy digital currency holdings for good old brick-and-mortar.
A Prime Time to Diversify
While some cryptocurrency die-hards are content to keep their entire holdings staked on the fate of a currency like Dogecoin, other investors with significant digital assets are now strategizing around the most timeless piece of investing wisdom in any year or market: diversify.
“You’re seeing a lot of people that might have put $10,000 into Dogecoin and now they have $10 million,” said Dalton Skach, founder and CEO of Gold Gate, a luxury real estate investment fund manager that recently launched a new fund allowing buyers to invest in property via cryptocurrency. “But they also don’t have any other assets.”
And for buyers with a disproportionate percentage of their overall net worth now represented by digital currency, snapping up a condo in exchange for a portion of their Bitcoin holdings can offer a tidy solution.