A house that cost 1 517 bitcoin a decade ago can now be bought for 2.25 bitcoin

Written by Ciaran Ryan. Posted in Journalism

Proving once again the deflationary power of bitcoin. From Moneyweb.

Putting your money into bitcoin rather than bricks and mortar would however have been a better bet. Image: Bloomberg
Putting your money into bitcoin rather than bricks and mortar would however have been a better bet. Image: Bloomberg

A house that cost 1 517 bitcoin (BTC) 10 years ago can today be picked up for 2.25 BTC, even allowing for house price inflation over the last decade.

We took R1 million as the starting price for a house in 2011 and indexed that price to average house inflation over the subsequent decade.

The graph below tells the story of what happened to house prices in rands and BTC.

A year ago we ran the numbers and at that time (October 2020) the same house would cost 6.23 BTC. Bitcoin went on a rampage after that, so that same house today has reduced in price to a third of what it was a year ago in BTC.

Source: Moneyweb

“This chart speaks to the great rise in the value of Bitcoin. Value is relative. The one chart that looks worse than this is the chart of the value of the rand itself when measured in terms of bitcoin,” says Farzam Ehsani, CEO of crypto exchange VALR.

“It’s astonishing,” says Brett Hope Robertson, investment analyst with crypto company Revix.

“The power of bitcoin as an inflation hedge has actually been hard to fathom. Housing is one of the most trusted and sought-after inflation hedges in the financial world – then here comes along a geeky little Bitcoin and simply blows it out of the water. Yet people still question bitcoin’s ability as an inflation hedge, I mean you can’t not help but laugh.”

Another way of looking at things

There’s another way to look at this chart: putting your money into bitcoin rather than bricks and mortar would have been a far better bet.

While the average house appreciated in value by just under 50% over the last decade, bitcoin has gone up nearly 1 000-fold in rand terms over the same period.

As we previously reported, bitcoin’s supply is capped at 21 million coins, with 18.5 million currently in circulation. New coins are ‘mined’ at a decelerating rate that was built into the bitcoin protocol. That inflation rate is currently 1.56% today, and will decline every four years until it hits zero (at which point all 21 million coins are ‘minted’).

Read: Six bitcoin will buy you a R1.4m house

Fiat currencies like the rand and US dollar are subject to continuous expansion of money supply.

The chart below shows the increase in M2 money (cash and near cash) over 10 years.

M2 money supply over 10 years

Source: Trading Economics, SA Reserve Bank

Given this kind of money expansion in the rand against the fixed supply of BTC, the vision of Bitcoin founder Satoshi Nakamoto – who set out to cure the debasement of currencies worldwide – has been achieved and to some extent demonstrated in the graph above.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.