These are volatile times … From Moneyweb.
Bitcoin’s famed deflationary power took a hammering last year.
One way to measure this is to look at South African house prices – they increased 94% in bitcoin (BTC) terms and 4.7% in rand terms in 2022, as shown in the graph below.
We went back to the last crypto bear market in 2018 and assumed a starting house price of R1 million, inflated for average house price increases over the subsequent years to 2022. We end up with a house price that has appreciated about 15% over four years in rand terms.
Our R1 million house would have cost about 12 BTC in 2018, falling dramatically to two BTC in 2021, before succumbing to the market tempest in 2022 with a near doubling in price. In prior years, house prices depreciated massively in BTC terms. That trend was broken in 2022.
Source: Moneyweb, Ycharts.com
Going back further to 2011 shows BTC-priced houses in an extraordinarily kind light.
That year you would have paid less than R700 for one BTC, equivalent to 1 517 BTC for a R1 million house. This week BTC traded around R350 0000. Allowing for average price increases over the last 11 years, our R1 million house would have appreciated about 50% in rand terms, equivalent to 3.3 BTC in today’s terms.
Read:Six bitcoin will buy you a R1.4m house [Nov 2020]
A house that cost 1 517 bitcoin a decade ago can now be bought for 2.25 bitcoin [Oct 2021]
SA house prices measured in bitcoin increase for the first time in a decade [Apr 2022]
The exercise is a bit of fun with little practical value, since there are relatively few people around who bought BTC at R700 back in 2011.
Many of those who did couldn’t believe their luck when it hit R10 000 in 2016 and sold out at a handsome profit, only to watch it cruise past R1 million late 2020, before collapsing again to below R300 000 in 2022.
Source: Moneyweb, Ycharts.com
The chart above shows how big the price gains in BTC were prior to 2017, when the adoption rate and speculative frenzy drove prices above R300 000 for the first time.
The rate of gain for BTC since then has been far more modest, and will likely remain so going forward.
Buying a house with Ether (ETH), the second largest crypto by market cap, has been an even more volatile affair, with prices leaping five times between 2018 and 2019 before dropping to a tenth of this by 2022. A R1 million house in 2017 would have cost 242 ETH, rising to 520 in 2019 before falling to around 50 ETH in 2021. The same house today would cost 45 ETH.
Source: Moneyweb, Ycharts.com
What this proves is that the deflationary power of BTC and ETH remains more or less intact, depending on the time periods chosen.
Last year was disastrous for cryptos, but we’ve already seen a more than 20% gain for both BTC and ETH since the start of 2023. US stocks are also trending higher, and there are signs that global inflation is cooling, placing risk assets back on the buy list. Tweet
