The American dream of owning a home and financial freedom has been killed by the inequality of our inherited system. But Bitcoin offers a new dream.
For decades, homeownership has been the driver of middle class prosperity. Unfortunately, with institutional and foreign investors driving up house prices and the banknote printer crumbling, the “American dream” is now out of reach for many. In fact, in 2017, there were more US renter households than at any time in the previous five decades.
It is for this reason that I am offering bitcoin as an alternative to home equity. While the American dream may be dying, the Bitcoin dream is just beginning. Using the lessons of history, I’ll outline eight reasons why bitcoin is far superior to residential real estate:
1. Bitcoin is digitally rare
There will never be more than 21 million bitcoins. Even though your grandfather may have said to you, “Buy land, they don’t do it anymore”, that is no longer quite true.
As technology advances and government regulations change, humans are able to “create” more land, thereby increasing the supply by building taller apartment complexes and developing areas that were previously uninhabitable. With Bitcoin, you opt instead for a network with predictable issuance and known money supply.
2. Bitcoin is divisible
Anyone can buy $ 1 billion or $ 1 billion worth of bitcoin. Divisibility makes bitcoin accessible to everyone and allows investors to cost on average instead of having to time the market with a large investment. Instead of having to spend a decade saving devaluing currency in the hopes of accumulating enough for a down payment, investors can start accumulating sats as soon as they earn their first dollar. Plus, by regularly buying small amounts of bitcoin, buyers don’t have to worry about buying the top of the cycle in the same way that those who buy real estate do.
History Lesson: In July 2006, tens of thousands of Las Vegas residents purchased homes that, 15 years later, just hit the breakeven point. These unfortunate residents took out loans at the height of the housing bubble and were then forced to devote the next 15 years of their income to investing in the service of their mortgage.
3. Bitcoin is fungible
A bitcoin in Canada is no different from one in El Salvador. The non-fungibility of housing complicates the purchase decision. Is the house close to a good school? Is it near the metro? Is it a good size? Is it in a growing city? These are just a few of the dozens of constantly changing factors that affect the value of your home.
What if the metro is moved, the school closed, or the zoning laws changed? While real estate as a whole may appreciate, your home may lose value for reasons beyond your control.
History lesson: In March 2020, the shift to working from home has caused a sharp drop in real estate in New York. As downtown apartment owners watched their savings evaporate, within 100 miles, Hamptons real estate owners experienced record appreciation and record price. In this case, a random set of owners were rewarded while others were overwritten.
4. Bitcoin is low maintenance
Bitcoin can be bought, stored, and sold for virtually no cost. For most American homes, maintenance, repair, and depreciation costs are estimated to be around 3% of property value per year. In addition, homeowners must pay significant transaction costs and property taxes. In contrast, bitcoin can be purchased safely for fees as low as 20 basis points (bps) and can be stored for free with a paper wallet.
5. Bitcoin is transparent
All market data is available on the channel for everyone to see. As institutional investors like Blackstone and tech companies like Zillow become increasingly important to buyers in the housing market, the asymmetry of market information is widening.
Now, in addition to very limited price data, everyday Americans are engaging in bidding wars with companies that manage hundreds of billions of dollars and thousands of transactional data points on which to base their decisions. Unlike the obscure housing market, the Bitcoin network allows any participant to access and analyze every historical transaction, dating back to its inception.
6. Bitcoin is liquid
Bitcoin can be bought and sold anywhere in the world, 24 hours a day, 365 days a year. This constant price discovery not only leads to less price anomalies, but is also of incredible value in an emergency.
History lesson: In 2013, when China established its first cryptocurrency ban, bitcoin owners were able to sell or transfer their holdings instantly. Conversely, in July 2021, when China seized the property of anti-communist demonstrators, the owners were helpless as their savings were confiscated.
7. Bitcoin is freedom
Bitcoin allows you to move when and where you want. Although it is often used with irony, the saying “the old ball” is appropriate when talking about housing.
Locking yourself into a 30-year mortgage that consumes half of your disposable income is a recipe for disaster. As the speed at which people change careers and geography increases, the ability to pack and leave with minimal friction is increasingly valuable.
History lesson: At the beginning of the 20th century, more than six million African Americans have moved from rural towns from south to north to avoid strict segregation laws and seek better opportunities. In order to move, these residents were forced to sell their homes and incur all associated transaction costs and inconvenience.
8. Bitcoin is hope
Bitcoin gives you a call option on the future. Bitcoin is an open source protocol that has a virtuous cycle built in: as the network grows, developers are incentivized to rely on it, which in turn makes the network even stronger. If you think the future of payments, investments, or even money itself could be built on the Bitcoin network, owning the asset gives you upside exposure.
The American dream is the Bitcoin dream
With the desire for homeownership so firmly entrenched in the American subconscious, influencing public opinion is no easy task. By arguing on first principles and drawing on lessons from history, I hope this article helps present bitcoin as a better, safer, and more accessible alternative to home equity. While the American dream may be dying, the Bitcoin dream has only just begun.
This is a guest post from Leo. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.