Using Bitcoins

The real estate industry is on the cutting edge of many issues. Bitcoins included. While the use of Bitcoins may not be mainstream yet, they are being seen throughout the industry and it’s bitcoin mixer to understand the risk and rewards that Bitcoins present.

What is a Bitcoin?

Originally introduced in 2009, the Bitcoin (BTC) is considered as a crypto currency. While not widely accepted (yet), the use of Bitcoins is becoming more widespread as many Bitcoin enthusiasts believe that Bitcoin is a government-proof currency (note that the IRS announced last year that it considers bitcoin as “personal property” for tax purposes). Additionally, some banking authorities have a different viewpoint of the crypto currency as they believe that it can be a basis for criminal activity.

It’s not a formal currency. Rather, Bitcoin is made through ‘mining’ which is a computer process and unregulated internet-based exchanges allow for the crypto currency to be traded online. Because Bitcoin is not regulated by any federal government or central bank, the majority of merchants will not accept the virtual currency. While the Bitcoin may not be common practice just yet, there are a growing number of real estate listings that are beginning to advertise that they accept the virtual currency.

A few countries are leading the way in Bitcoin acceptance. China is currently experiencing the largest exchange of Bitcoin while Japan and Europe are also seeing Bitcoin usage growing in popularity.

The Bitcoin Market

The Bitcoin currency market can be volatile and has already experienced many highs and lows. As an example, a single Bitcoin could have been purchased for $13.30 on January 1st, 2013. Then on December 4th, 2013 the Bitcoin could have been sold for $1,150! Not a bad return on investment. But many haven’t been that lucky with the Bitcoin market.

The Securities and Exchange Commission has been keeping an eye on the Bitcoin and issued a warning in May of 2014 that stated the following: “the rise of Bitcoin and other virtual and digital currencies creates new concerns for investors. A new product, technology or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities.”

Many investors warn against investing in Bitcoins as it has great volatility and it is not considered as a functional currency. Because it has no intrinsic value, the Bitcoin is not a viable investment vehicle for most. For instance, a computer hacker can steal all of the Bitcoin currency from an owner. And, due to the price risk, many warn that the investment in Bitcoins should only be in small amounts, if any, so that a large swing in value won’t adversely affect someone’s livelihood.

A variety of online retailers are beginning to accept Bitcoin as an acceptable form of payment. Tesla.com is just one such business. In larger cities, some property management companies are also accepting Bitcoin as a form of rent payment for tenants with the advantage being that the currency can’t bounce like a check can.

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