Real Estate Vs. Bitcoin: A Comparative Analysis With Leon Wankum
Real Estate Vs. Bitcoin: A Comparative Analysis With Leon Wankum
In an interview with Andrew Kamsky, a Bitcoin research analyst from CCN, Leon Wankum, an expert in real estate and financial economics, shared his insights on the comparative value of real estate versus Bitcoin as a financial asset.
Wankum explains the role of real estate and how Bitcoin is a better store of value but highlights each’s strengths and weaknesses.
He is active in real estate and venture capital, specializing in developing Bitcoin strategies for real estate developers in Germany. This detailed discussion brings Wankum’s perspectives through direct quotes and thoughtful analysis.
“Real Estate Has Become Instrumental In The Global Market Pricing Structure,” Said Wankum
Wankum explains that real estate has played a role in financial markets, where it has acted as a hedge against inflation, a store of value, and a speculative financial tool in the past.
Wankum recounted his own journey in real estate, stating, “I got into real estate at a young age. After finishing university, I went into real estate development.” He highlighted how real estate has historically been a cornerstone of wealth and power, especially since the end of the quasi-gold standard in 1971, which shifted the store of value from gold to real estate.
https://x.com/kamsky_andrew/status/1795396665441935726
“The Nominal Value of Real Estate Has Grown, But It’s More Due To The Debasement In Fiat Currencies” Explains Wankum
When discussing the growth in real estate values, Wankum remarked, “Real estate has almost grown on par with the inflation of money.”
The apparent increase in real estate values is primarily due to the devaluation of fiat currencies rather than intrinsic growth in the properties themselves. Wankum outlines this by saying, “the nominal value of real estate has grown, but it’s more the debasement in fiat currencies.”
Wankum Asserts That Bitcoin is the First Commodity That is Absolutely Scarce
Wankum contrasted real estate and Bitcoin, outlining Bitcoin’s unique scarcity. He stated, “Bitcoin is the first absolutely scarce commodity.”
The scarcity-driven fundamentals in Bitcoin, combined with Bitcoin’s deflationary nature, position the digital asset as a potentially superior store of value compared to Bitcoin.
Wankum argued, “Bitcoin is going to grow in purchasing power much faster than real estate can because it is scarcer.”
In fact, over the years, less and less Bitcoin has been required to purchase real estate, even though real estate prices have been increasing. This increase in Bitcoin’s purchasing power is outpacing real estate due to Bitcoin’s superior properties as a financial instrument, including its effectiveness as a store of value and hedge against inflation.
Wankum Elaborated On How Bitcoin Changes The Way Humanity Interacts With Value
Wankum discussed the transformative potential of Bitcoin, comparing the Bitcoin impact to previous digital disruptions such as Amazon’s e-commerce revolution in retail and email transforming communication.
Wankum explained that just like e-commerce made it easier to buy and sell goods globally, and email made it possible to instantly communicate across distances faster, Bitcoin too offers a new way to store and transfer value better than real estate does.
Wankum said, “Bitcoin changes the way that humanity interacts with value, the way that humanity stores value, and the way that humanity sends value.” Bitcoins therefore has positioned itself as a revolutionary tool in financial markets, offering greater mobility and security that real estate simply cannot match.
Wankum Highlights Bitcoin’s Superiority Over Real Estate For Value Storage
Wankum further explained, “Try sending a house. It’s not possible. The physical structure of the house has very negative consequences for its ability to store value over time, including physical degradation, maintenance costs, and regulation.”
Bitcoin eliminates these above issues by being a purely digital asset that doesn’t suffer from physical wear and tear because it is not bound geographically or politically.
Wankum highlighted that a paradigm shift is already taking place in 2024. Bitcoin has begun to play a stronger role in the financial landscape over the last decade and a half. Leon suggested that as people recognize Bitcoin’s inherent advantages, Bitcoin will significantly reduce reliance on traditional assets like real estate for storing and transferring value.
The shift in mentality will lead to a new era in how humanity manages, stores and grows wealth over time, making value storage and transfer more efficient and accessible to everyone.
Wankum Predicts Shift From Real Estate to Bitcoin as Primary Store Of Value
Wankum predicted a shift away from real estate as a speculative asset. The economist explained, “there’s no reason to invest your money into housing to store its value if you can just save it in Bitcoin.”
This statement underscores the potential for Bitcoin to replace real estate as a primary store of value, particularly for younger generations who are priced out of the real estate market.
“Tokenization Of Real Estate Is An Oxymoron,” Explains Wankum
When questioned about the tokenization of real estate, Wankum explained his criticism of tokenization real-estate. He said, “The tokenization of real estate is an oxymoron. It’s completely senseless, in my opinion, because you can just buy Bitcoin.”
Wankum explained that real estate tokenization introduces unnecessary third-party risks and complexities, whereas Bitcoin offers a straightforward, trustless, and decentralized alternative.
At this point, a counterpoint question was asked, asking Wankum about the potential to generate a yield from owning a fraction of a building through real estate tokenization.
Wankum acknowledged that this idea of earning yield from tokenization might appeal to some investors looking for regular income but remained skeptical about its overall value compared to Bitcoin, explaining that Bitcoin is still likely to rise in value faster than the yield.
He also explained that “you can buy Bitcoin, hold it yourself, and have no third-party risk. With tokenized real estate, you face several layers of risk. You must trust the entity managing the property, the platform issuing the tokens, and the legal frameworks governing these transactions.”
Wankum elaborated on the complexities involved in tokenized real estate. “You don’t know if a bank will accept that token as collateral because if you think about it, Bitcoin is amazing collateral, right?”
“Bitcoin performs the functions of a store of value and collateral perfectly, without the need for intermediaries. It’s digital real estate that you can move around without the risk of physical degradation or third-party intervention,” he explained.
He also noted, “people might still engage in tokenizing real estate because of short-term market behavior, but over the long term, the simplicity and security of Bitcoin make it a more rational choice.”
Wankum Believes That We Are Witnessing the Burst of the Real Estate Bubble Today
Wankum provided an outlandish but hardly untrue assessment of the current real estate market, suggesting that we are witnessing the real estate bubble burst.
Wankum’s explanation simply states that “the cost of borrowing has gone up, and because of inflation, the construction cost has gone up. So, at this point, it’s uneconomical to build.” This has led to stagnating or declining real estate values, making the market increasingly challenging for developers.
Wankums Statement That “The Cost Of Borrowing Has Gone Up, And Because Of Inflation, The Cost Of Construction Has Gone Up. So At This Point In Time, It’s Uneconomical To Build,” Explained
Increased interest rates have significantly reduced the affordability of loans for both developers and buyers. Higher interest rates mean fewer people qualify for mortgages, reducing demand for new properties.
Additionally, inflation has driven up the costs of construction required in the form of materials and labor, making construction of real-estate much more expensive to develop new projects.
These combinations of higher costs and reduced demand are causing prices to stagnate.
The market is experiencing a slowdown, with fewer buyers able to afford new homes and developers facing higher expenses.
This stagnation is particularly evident in the luxury segment, which is often the last to feel the effects of economic downturns. Wankum observed, “The luxury segment is usually the last to feel the pressure from higher interest rates, but even this segment is now seeing a decrease in demand .”
Contractors Are Finding It More Difficult To Justify New Projects
Contractors and developers are finding it increasingly difficult to justify the construction of new projects. The economic environment has reduced profit margins on new developments. For the construction industry, this stagnation presents challenges.
Leon outlines a slowdown in new construction projects is occurring globally, which could further exacerbate the existing housing shortage.
Wankum warned that “if interest rates remain high, and the cost of construction continues to rise, we could see a prolonged period of stagnation in the real estate market.”
“The lack of new developments could also worsen the housing shortage, making it even harder for people to find affordable homes,” he said.
Due to the housing shortage, Bitcoin’s appreciation in price will continue to make it a more compelling store of value and investment vehicle over time.
“Millennials And Gen Zs Prefer Buying Bitcoin Over Real Estate,” Said Wankum
Wankum shared insights into the investment preferences of younger generations. He stated, “They don’t own real estate. They own Bitcoin because they have been priced out of real estate.” Bitcoin’s lower entry barrier and superior financial properties make it a more attractive investment for those unable to afford traditional real estate.
“Every Loan In The Future Will Have A Bitcoin Composition In The Loan Structure,” Explained Wankum
Looking into the future, Wankum suggested an innovative approach to financial loans. He proposed, “I think that every loan in the future will have a part of Bitcoin in the loan structure to hedge against failure.”
This concept could provide a safety net for borrowers and lenders, leveraging Bitcoin’s appreciating value to mitigate risks associated with traditional loans.
