Bitcoin and Real Estate Match Up
It is unprecedented that when making a purchase, a customer can have a huge payday. At least, this is true if you are making a purchase using volatile cryptocurrency. Volatile cryptocurrency usually suffers from huge changes in value. Bitcoin’s price volatility is one of the reasons that hinder its mainstream adoption. This prospect did not dampen the resolve of one bitcoin enthusiast from making a huge purchase in bitcoin.
As a matter of fact, the bitcoin user was lucky enough to not only purchase a new house but also make a profit of $1.3 million because of his preferred mode of payment. The benefits for this buyer arose from short-term price volatility in bitcoin. Instead of taking a mortgage, or carrying a suitcase full of cash or even writing a check, the homebuyer in California made a decision to buy a $4 million estate using cryptocurrency. Cryptocurrency serves as an ideal means of exchange for online banking platforms such as Hansa Market.
How the House was Purchased
Sonny Singh, the CCO at BitPay, told Bloomberg Markets that a real estate agent paid him and the company a visit to deliberate on how an expensive purchase of a property would take place using bitcoin. Mr. Singh was kind enough to help the real estate developer understand logistics associated with the chosen mode of payment.
At first, the real estate agent was unsure about the use of bitcoin for the purchase. However, in the end, the two parties were able to agree on a deal. This is because in recent years bitcoin has only been a currency accepted by few vendors, and primarily traded on the darknet. Some markets like Alphabay have been known for doing fair and even sales of products and merchandise with bitcoin. But never a house.
Singh indicated that BitPay in the past few years helped facilitate several such transactions. After further discussion, the developer settled on a $4 million asking price for the property. $4 million is a significant amount to pay in bitcoin, but BitPay made direct bitcoin transaction easier. For the transaction, BitPay had to convert the funds into fiat currency. For perspective, in today’s market, (with the bitcoin averaging $950) that would be a total of 4,025 bitcoins.
How Did the Buyer Profit?
During the time of the transaction, the value of the bitcoin exchange rate was only $750. However, when time came to purchase the house in bitcoin, the tender value of bitcoin had increased to more than $1000 (the last time bitcoin surpassed the $1000 mark was in 2013). This meant the homebuyer made roughly $1 million profit from purchasing his $4 million house. The increase in exchange rate allowed the homebuyer to put out less bitcoin, resulting in a significant profit.
The good outcome for all parties involved is an example of how bitcoin can be a powerful asset. If the homeowner relied on the US dollar to make his purchase, he would not have realised any gains from the purchase, at least for now. He would have to wait with time.
Singh said “The buyer actually ended up making about 25 percent in the currency exchange rate, essentially, in the appreciation.” Basically, the buyer bought his house 25 percent cheaper. Numbers that Singh provided showed the homeowner got $1.3 million extra after purchasing his home. Singh added “With that extra money, he went and bought a Lamborghini at Newport Beach, Orange County, which also accepts bitcoin with Bitpay.”
The homeowner has visited such darknet markets as WallSt, the most advanced, modern marketplaces for both physical and digital goods in the darknet marketplace.
Use Bitcoin to Buy
Although, such a story is not mythical, it is surely rare. In the past, there have been connections between real estate and bitcoin, however this case of real rewards is unique since not every bitcoin enthusiast can attest to a successful return. Nevertheless, things improved significantly in the past months leading to the surprising profits for the California homeowner.
Normally, people buy property in bitcoin either directly or through profits gained after selling it. Buying a new property for most bitcoin enthusiasts may be out of reach, but it presents a golden opportunity for early adopters to consider cashing out their investments. For individuals who invested early on in bitcoin, it seems now is the opportune time to reap some rewards.
Although it is not too late to invest in bitcoin, we do not suggest that in all your future purchases use bitcoin in the hope that the exchange rate will benefit you. Even so, it seems bitcoin is increasingly accepted as a mode of compensation, which may be an opportunity for a shrewd buyer.