A house in the fashionable London district of Notting Hill recently went on sale for £17 million (HK$177.6 million). The asking price did not raise any eyebrows among wealthy investors since the six-storey house is in an upmarket area. What was surprising was that the owner wanted to be paid in bitcoin, the digital currency which has been grabbing headlines all the world.
The owner wanted 5,000 bitcoin for the mansion, which in 2010 would have only been sufficient to have bought a pizza.
Property agents say this would be the first transaction of its kind in the highly liquid property market in London.
But the property isn’t the first ‘bitcoin mansion’ on the market. In 2013, a commercial developer asked US$7.85 million to sell a home Las Vegas, and was willing to accept bitcoin for the deal. Earlier this year, a Russian real estate firm, Kalinka Group, advertised the sale of an upmarket property for 3000 bitcoin in Rublevo-Uspenskoe. However, the Russian government has not finalised legislation and the regulatory frameworks regarding cryptocurrency.
Bitcoin’s value has increased more than tenfold this year alone. In January, bitcoin hit US$1,000 in designated trading exchanges. By May, it had doubled in value to US$2,000, and active currency investors began flocking to buy the digital currency.
By July, bitcoin had scaled the US$6,000 summit, one month later it had advanced to US$8,000. By the end of November, bitcoin was trading at a staggering US$16,000. At the time of publishing, bitcoin is trading at US$17,643.
But what is the main reason behind its rise this year, and can it be used to buy and sell properties?
Currency analysts say the main idea behind bitcoin and why it appeals to investors is actually very simple. Normal national currencies are controlled by governments, who are able to print money when they need it. By doing so, they can cause the value of their own currency to fall overnight, for example, when they need to repay a debt. Bitcoin solves this issue by removing government control from the equation, meaning, there’s no central bank or government which can print bitcoin.
Moreover, bitcoin was created with a mathematical limitation to the number of bitcoin that can be created, so it creates an economy where no government can intervene.
So analysts point out that with limited supply and rising demand, the more that people buy the more its value will rise.
Analysts say it will be years before Bitcoins can be used to buy and sell properties. They say bitcoin first has to be regulated by a government agency to stabilise its volatility. Only then could it be widely used by retail investors and in transactions.