Two Asset Classes Meet: Why Crypto and Real Estate Are a Powerful Combination
I’ve written much about the Real Estate asset class on the pages of Data Hunters. The DH community has been appreciative of these articles so I continue to surface ideas around new ways to think about real estate and avenues by which we can collectively explore the connective tissue between real estate and other sectors of the economy.
It’s good to visit the data for a moment. With unprecedented frothiness in the housing sector in 2020 and 2021, the residential real estate asset class in the US alone has crossed the $40 trillion mark, landing in fact closer to $44 trillion as of this writing. This makes housing far and away the largest asset class in the world.
This buoyancy is matched by the excitement in Crypto currencies, which for the first time in January of 2022 exceeded the $2 trillion in total value. While real estate dwarfs crypto in total size, the strains that run through them both are quite alike.
For starters, both are seen as “havens” –though for different reasons. The world round, an investment truism has been that real estate is the most important investment for a family to make- it governs not only the qualities of life but also constitutes a fixed asset with both high use value and high exchange value. In that sense, real estate is a haven for families looking to lock-in value and manage risk.
Similarly, crypto is seen as a haven for those investors who feel that the traditional financial sector is imperfect, unstable, even rigged. Crypto is seen as a decentralized, democratic formulation whereas fiat currencies are seen as the province of government and government only. Oligopolistic tendencies are, in the minds of many crypto investors, too common in the traditional financial sectors; thus the flight to crypto.
While there are other similarities, this one common strain is sufficient to suggest that there ought to be more connective tissue between the two asset classes. As housing affordability problems are largely a result of constrained supply, emotional desire for the permanence of home, and what appears to be a “managed” land-grab (literally), the ethos of those who opt out of traditional models of real estate finance and those who invest in crypto is the same. Crypto investors resonate with the idea that normal, working families are being priced out of the market by the often predatory behavior of large financial institutions and concentrations of private equity- as they buy swaths of houses to either convert to rentals or to arbitrage over time. Storming the gates of tradition is the joint calling.
Finally, as both asset classes get bigger, the opportunities for natural interplay increase. It’s high-time these two asset classes meet and build a friendship.
I’m an accidental marketer. My skills are in building deep relationships, seeing markets before they burgeon, and in applying socio-political concepts to business. I have 3 pillars on which I pursue opportunities: People, Impact, and Autonomy.