hey gathered in downtown Miami — an estimated 4,350 Bitcoin believers — to trade pitches for apps and start-ups. They discussed and debated trends in cryptocurrency. They speculated about the volatility of Bitcoin, which shot up in value from $900 to $19,000 over the course of 2017 and is currently hovering around the $10,000 mark.
But despite the national stir created last fall when a $544,500 Edgewater condo was listed for sale in “Bitcoin only,” none of the panels or presentations at Miami’s sixth annual North American Bitcoin Conference focused on real estate. Although Bitcoin is the oldest and best-known of the nearly 1,500 kinds of cryptocurrencies currently available, real estate developers, brokers and analysts are cool on its use in an industry that is literally defined by physical assets.
In other words, if you’re hunting for a home, don’t worry that you’ll get outbid by a buyer offering cryptocurrency. At least not yet.
“I think it’s fine to buy Bitcoin, because high risks lead to high returns, and I believe in capitalism,” said Nela Richardson, chief economist for Redfin, a national real estate brokerage. “But when you come to buy my house, I’m going to need a currency that I can use to buy milk at the grocery store. I wouldn’t accept junk bonds or a lottery ticket as a payment. Any currency that drops 45 percent in value within three months, like Bitcoin has done, is not a currency that is stable enough for large transactions.” According to Redfin, only 134 out of the site’s total 568,000 listings in December 2017 a minuscule .03 percent — included a Bitcoin mention. Created in 2009, Bitcoin is digital currency tracked on decentralized ledgers — called blockchains — that keep a real-time, immutable record of every transaction made around the world. Buyer and seller interact directly. Bitcoins can be purchased through a digital currency exchange or broker and are kept in a “wallet” that protects the user’s anonymity. And because the blockchain system is not centralized, security is considered to be significantly safer than current e-transaction software. For now, at least, Bitcoin is not regulated by any bank, state or nation.
General awareness of Bitcoin and blockchains exploded in 2017 as the cryptocurrency’s value skyrocketed. Earlier this month, the stock price of Eastman-Kodak shot up 89 percent, to $10.70 a share, just a day after the company announced an Initial Coin Offering (ICO) to develop a blockchain system for photographers to secure the digital rights of their work. Miami is one of the nation’s staunchest and most enthusiastic cryptocurrency hubs, and proponents of Bitcoin argue that cryptocurrency is a perfect fit for real estate. On Dec. 22, the first-ever Bitcoin-only real estate deal in Miami closed, with a buyer paying 17.741 bitcoin — the market equivalent of $275,000 — for a two-bedroom condo at 777 NE 62nd St. in the Upper East Side.
But some experts believe a lot of the hype around Bitcoin is just that — hype. The currency’s value fluctuates so much that the value of a Bitcoin transaction could either gain or lose thousands of dollars in value within a week’s time. In an interview with CNBC on Jan. 10, billionaire investor Warren Buffett warned that the cryptocurrency craze is destined to end badly, costing a lot of people a lot of money. “We’re in an area of hysteria right now involving Bitcoin,” said Andrew Ittleman, a partner at the Miami law firm of Fuerst, Ittleman, David & Joseph. “There are a lot of people making claims about Bitcoin that they can’t substantiate and for the most part are not meant to be substantiated. I do see a lot of uses for cryptocurrency in real estate, but I don’t see the disruptive effect some people are promising.”
Waning favor?
Andrew Hinkes, a partner at the law firm of Berger Singerman who specializes in technology-related issues, said cryptocurrency is nearing the end of its initial wave of interest from Wall Street and investment by new ventures. Bitcoin still has a long way to go before it is widely embraced by the real estate industry.
“Nothing has really changed insofar as how virtual currencies are impacting real estate,” he said. “A lot of people saw tremendous gains in the values of their holdings in 2017. But now that the IRS has made clear how they want to treat the gains on crypto like Bitcoin, there’s uncertainty in the market as to how you sell them and find value. In South Florida, that’s traditionally in the ground. But if you want title insurance, or if there are any liens or taxes that are owed, those will have to be payed with fiat currency.” Although the Internal Revenue Service taxes Bitcoin capital gains — if you cash out for a profit, the IRS gets a cut — there’s no procedure in place that forces people to report those transactions. (In November, the IRS ordered Coinbase, a platform for buying and selling Bitcoin, to turn over information on accounts from 2013-2015 that were worth at least $20,000.) The current lack of regulations is one of Bitcoin’s biggest draws for its users. And despite suspicion that Miami’s real estate market is prey to money launderers, it can be a deal-breaker for real estate. For example, South Korea, the third biggest cryptocurrency market in the world (after Japan and the U.S.), has banned anonymous cryptocurrency transactions, fearful of the potential for shady business. That uncertainty and lack of transparency, combined with cryptocurrency’s volatility, is making real estate developers and investors wary. “Bitcoin is too new of a form of currency,” said Daniel de la Vega, president of One Sotheby’s International Realty. “Anything that operates in a gray area is not something I would want to associate with. I do believe in the future of cryptocurrency. I’m just not bullish on it short term.”
