The next bear market will shock everyone and it will be so severe because everybody is expecting
four-year cycle to stop and Bitcoin is usually always penalizing like this type of thinking but
I think if you're in real estate times will get very tough I think there's a possibility that the
housing market won't reach the levels it reached between 2019 and 2021 for at least the next five
to ten years you know I think we'll have a very severe bear market and I think people will be
shocked by how many bitcoin treasury companies will trade at maybe 0.3 to 0.5 m wow okay why do you
think what's up guys 70 000 of you guys keep coming back every single month but 71 are not
subscribed so you're gonna miss out on some of the great green candle content so make sure that
you're hitting that subscribe button with the bell notification so you get notified every time i drop
a video all right now let's get back into this great interview bing bong i am back with another
edition of the state of bitcoin podcast where i've got the man the myth the legend leon wonk
wonk him did i say that correctly my bad dude i've got him in the house who's uh has a great thesis
about everything with real estate and bitcoin but i think that this is a super timely conversation
because we're just starting to have real estate come down a little bit in the United States
after having it shoot up like crazy during the Cerveza sickness when the whole world shut down.
So Leon, I'm curious right now, what do you see in the housing market
and how do you see all this playing out?
Yeah, so three years ago when I started to share my thesis on Bitcoin demonetizing real estate,
I was a bit worried of the thesis actually playing out because I am still active in real
estate development.
But the way I look at it now is since we adopted Bitcoin in our business, I'm a bit more relaxed
and I see the thesis playing out in our favor.
Because once you integrate Bitcoin into an existing business structure, you're actually
benefiting from this switch or this paradigm shift.
But I think if you're in real estate, times will get very tough because if you really
think about what land is and what real estate is it's an inflation hedge and as interest rates go
down prices shoot up right because there's more demand there's more liquidity and doing COVID
we really saw how there were interest rates of you know it depends in Europe you even had
countries like Sweden with negative interest rates so people were really forced to invest
into property and in the US you had interest rates between 0.5 up to 2 percent so there was
So almost free money.
So people really went hard and invested a lot of capital in real estate.
And that capital is now leaving the asset class.
And if you ask me, I don't think it's coming back.
Yes, if interest rates go down, there's more demand, more liquidity.
But the difference is that now we have an alternative, which is Bitcoin.
And it's a superior store value.
It's easier to access.
And also now that we have credit Bitcoin and credit based instruments that allow institutional investors and high net worth individuals to gain regulated exposure to Bitcoin's price with less upside, but also with less volatility.
I think the demand for real estate in terms of receiving cash flow will also go down because you can now buy an instrument that strategy provides or some of the other treasury companies going forward.
And I think that is also a factor that will play into less demand for real estate because people that want cash flow, they can now buy Bitcoin adjacent preferred instruments.
yeah that's very interesting that you're you're putting it out like that but so basically do you
think that not only is it bitcoin but also kind of the shift into the fixed income market and you
know bitcoin's essentially taking over the the global bond market as well so are all of these
markets essentially converging on bitcoin right now and that is what's also contributing to
demonetizing real estate? Yes, 100%. That's what I believe. And that's what I can see as well.
Judging from the conversations I had, so I'm still active in real estate development. We are still
developing real estate. And most of the partners that I talk with, they do understand, of course,
that Bitcoin has certain monetary properties, especially the absolute scarcity that is superior
to real estate but they still think within the paradigms of the fiat system and the goal of most
investors within the fiat paradigm is to outperform inflation either by achieving a higher return or by
somehow receiving cash flow right and now these instruments especially strike which is a
convertible preferred instrument that strategy has introduced has gained traction amongst the peers
that i work with within the real estate world and i know some people who are very were very reluctant
to put in large amounts into bitcoin but they feel comfortable putting large amounts into either
straight up mstr the stock per se or the preferred instruments because it talks to their language it
kind of it's the way that they think about investing right because if they want to invest
what do they actually want to do they want to outperform inflation so outperforming inflation
with an instrument that they know and that they are used to is something that they feel more
comfortable with than buying bitcoin but i think over time as more people understand that there's
products that are based on bitcoin people also navigate or tend to holding bitcoin in self-custody
because the upside is higher but it takes time for people to get adjusted to bitcoin and if we look
into the early years of bitcoin we had cypherpunks we had libertarians we had different use cases
donations circumventing governments and different controls but i think now the new wave of investors
that are coming in are sophisticated high net worth individuals that so far had no trust in
bitcoin because the market cap quite frankly was too low and now they're looking to get and gain
exposure to bitcoin in ways that they feel comfortable with but over time i think both
the interest rates and the risk and the way that we assess opportunity costs it will all converge
on bitcoin's year on year increase in purchasing power because bitcoin is going to set a new
standard it changed the time value of money so if you work in real estate what happens is that over
time the risk increases especially if you as you gain more success because success in real estate
means you need to take on more debt more leverage and in bitcoin if you hold bitcoin over time the
risk decreases because bitcoin is absolutely scarce and it grows in purchasing power so fast
that the debt that you take on if you manage your debt correctly in relation to the bitcoin
in their purchasing power is getting smaller and smaller so the loan to value ratio
when you buy bitcoin on debt is decreasing so fast that the risk also compresses whereas in real
estate the risk does not compress over time because the risk is tied to the underlying currency which
is fear and that's the unit of account that real estate developers and real estate entrepreneurs
account their success in because that currency over time loses purchasing power risk increases
with bitcoin it's the opposite risk decreases over time and i think that's important to understand
and that's a huge huge benefit of bitcoin because you can use it as a treasury asset
to kind of anchor your business in and it doesn't matter what you do because if you think about it
what strategy is doing is actually something that real estate developers have been doing
since 1971 which is you take on debt in an inflationary currency you buy a hard asset
and over time you pay back the interest rates with depreciation of your asset and the income
and the income in real estate is cash flow the income in bitcoin is the increase in purchasing
power since the 31st of march 2024 with the new fast fee accounting rules the increase in
purchasing power of bitcoin is counted as income and that increase in purchasing power outperforms
the cash flow you can generate with real estate so if you take it to the logical next step if you
are a real estate entrepreneur actually the next logical step is to do what meta planet or what
strategy has been doing if you are a developer that is in real estate because you like the
build environment you don't see yourself as a speculator you see yourself as a builder
integrate Bitcoin into the real estate business.
But I think real estate investing, as we knew,
doesn't make sense anymore under Bitcoin standard.
Interesting.
So, yeah, I'm curious how you see it playing out
in the next couple of years in the short term,
because obviously we're seeing it start to get devalued.
But I saw an interesting stat here that home prices need to fall about 40%
or incomes need to rise 60% just to return to the housing market 2019 levels.
That's absolutely crazy just how inflated the housing market has become in six short years.
Obviously, we know what happened with the massive amounts of money printing.
But do you see that happening?
Are we going to have worse than a 2008 housing crash?
It's a good question.
I think about it a lot.
But I'm not worried because I've kind of I've been selling we've been selling assets and
we've been also putting cash flow into Bitcoin.
So we've been growing our strategy in order to be able to kind of withstand any pressures.
But to be honest with you, I think there's a possibility that the housing market won't
reach the levels it reached between 2019 and 2021 for at least the next five to 10 years.
Right.
And why?
Why am I saying that?
I'm saying that because there's a historical example, which is Japan.
So in the 1980s, the interest rates in Japan were extremely low,
and companies, individuals, and institutions funded most of the available capital into real estate.
Then in the 90s, there was a crisis, and real estate has not, in most areas in Japan,
reached the price levels it has reached 20 years ago.
And the reason for that is though the demographic change as well.
So if we think about it, the demand for real estate is actually artificial because in the developed nations, due to various factors, one of the factors being it's very expensive now to have a family because inflation has caused the cost of living to go up.
So young people are not able to support a family.
And also we have automation and there's less demand for human labor.
so in japan due to the japanese being very rigid on their culture they're very much opposed to
immigration so there was very little immigration in japan meaning less people less demand for real
estate higher interest rates so the housing bubble popped it never picked back up so if we look into
the us for example i think something similar is happening now as well the economy has understood
that productivity is not tied to human labor.
Productivity is tied to AI, automation, digital scarcities,
or different factors that are playing in.
So in the past, within the realm of the fiat system,
real estate worked as this better of the global financial system.
With increasing real estate prices,
people were able to increase the credit system as well, right?
Because people lend, an institution lend against real estate.
But now we reach the point where it's not a good form of collateral because its price
is artificially pumped up.
And culturally, we understand that human labor does not bring productivity.
So what brings productivity is AI.
And AI can't work with a physical store of value.
There's just a mismatch.
And Bitcoin fits into that mismatch and fulfills that role.
So asking and answering that question is that, yes, I believe that it will take at least a
decade for real estate prices to be where they are between 2019 and 2021.
But at the same time, Bitcoin is going to increase in purchasing power, right?
So maybe in five to 10 years, if you account for your real estate portfolio in fiat currency,
it will be worth the same amount of fiat currency.
but at that point of time the fiat currency will be worth less and Bitcoin will be worth more so
once you start accounting for real estate in Bitcoin you see how fast it is losing its monetary
premium so I personally don't think about real estate as a financial asset at all I think about
it as a business and the business is simple you provide housing to the market you receive cash
return it's a simple business strategy but the store value function that sit or still set in
real estate until 2009 now sits in bitcoin so i don't really think that real estate will see the
same returns that we saw over the past let's say 12 to 13 years interesting so as we we've seen it
Because so with this, is it basically all going to shift into Bitcoin?
Because, you know, the fiat currency, the underlying fiat currency is still going to be devalued.
And the interesting thing about real estate in the U.S. is there is still a lot of tax benefits, like all the millionaires, billionaires, even though a lot of high net worth are starting to move into the Bitcoin space.
A lot of them use real estate you know to avoid paying taxes or at least you know those strategies to avoid paying taxes Do you see that as like something that is changing as well
By the way, I believe that is one of the reasons why real estate is still a good business model because of the tax write-offs, the tax efficiency, and also the leverage that works in your favor.
So, as a business model, there's still relevance in real estate.
But I think the speculation that has happened in real estate will move over into Bitcoin because Bitcoin is the ultimate speculative market.
So I think also the tax advantages that exist for real estate, I can very much imagine that they will also come into existence for Bitcoin.
Because if you are a government that has at least the best interest for your people, you want them to hold an asset that is not negatively affected by you inflating the currency in order to keep the government going.
And judging by the statements of the current administration in the US, I do believe that some of the tax advantages that currently exist around real estate will also be rolled out for Bitcoin.
And if you really think about it, Bitcoin is money.
And there's no reason to tax money because if you tax money, you can't use it as a medium of exchange.
So as Bitcoin is being adopted as a store of value and eventually as a medium of exchange,
I think that freedom-orientated jurisdictions will ban or will lift all taxes on Bitcoin going forward.
I can't say if the U.S. will do it for sure.
It depends on the next administration.
administration. But if the next administration is as Bitcoin friendly as the current one, I can see
that within the next six years, there will be certain tax advantages existing around Bitcoin,
similarly to those existing around real estate. And then it's going to get really interesting.
Yeah. So, I mean, that is a very interesting point. I mean, I think once that happens,
that's all bets are off. The other interesting thing, you brought it up a little bit earlier
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proven you know bitcoin used as collateral uh you know not needing to sell your bitcoin it seems like
a lot of people are starting to get loans against them you know a lot of products are starting to
come against them obviously in the i mean at least in the united states that's one of the huge
benefits of owning a house as well is that the bank will essentially throw money at you for very
cheap interest rates just so you know you can can borrow against it now with that right do you see
these products in Bitcoin, obviously, they're pretty early in their infancy. But do you see
that kind of getting to the point where maybe we're starting to get, you know, maybe as low
as like a 3% interest rate on collateral of our while using Bitcoin as collateral?
Yeah, I do think I just yesterday, actually, I looked at the average interest rate on Bitcoin
based based loans and it was between 12 to 16 depending on the jurisdiction and i think that
is tied to the fact that the people that lend money to institutions that give out bitcoin back
credits there's little experience most of the companies that offer bitcoin backed lending are
pretty new so there's a high risk attached to it but over time if you think about it
if bitcoin is held in the multi-sig the risk is pretty low i guess the term risk-free rate is
misleading because nothing is truly risk-free but holding bitcoin in self-custody definitely has the
lowest risk component to it and then if you hold it into a multi-signature custodial solution
the risk is also considerably low so i think that interest rates on bitcoin-backed loans they will
come down as competition increases and as the the understanding of the risk associated with with
bitcoin also gets bigger and then i can see interest rates going down to four or five or six
percent because there are some um companies in switzerland that are offering bitcoin best loans
around 4.5 already today because in switzerland the knowledge within the banking system
on bitcoin is actually extremely good i think it's one of the jurisdictions in the in the world
that has understood that due to the oversight by the eu that makes it very difficult to still
store your wealth privately in switzerland a lot of swiss companies have now become bitcoin
companies because they see the pseudonymity of bitcoin as a way to preserve the privacy that
they were able to give their customers that use switzerland as a as a as a country to facilitate
both trade but also store store wealth and interest rates there on bitcoin backed loans in swiss
francs are around 4.5 to 4.7 already today and i think that will spread and then we have interest
rates on bitcoin backed loans converging with the existing interest rates but i think interest
rates over time have to move up because interest rates today are artificially set by central
planners but actually interest rates should emerge in the free market and it's the price of money
if money is abundant interest rates go down if money is scarce interest rates go up that is
because the opportunity cost that goes up as well bitcoin is a good example if i lend you my bitcoin
i will demand an interest rate that compensates for the yearly purchasing power of bitcoin which
is around 50 at the moment over time that will go down to like 10 15 i assume and then the interest
rates on bitcoin bank credit should converge with the interest rates set by the central planner
the year-on-year increase of bitcoin's purchasing power and then somewhere in the middle
i think we have a convergence of interest rates and over time
they will be set by the market and not by central banks
yeah and i think that that is uh that's going to be really interesting then to see because i mean
hey if you're you're offering like four percent now i think uh more people will be flocking to
that just as this development is starting to to go forward but i mean i guess with this loan to
value right we still have a lot of volatility in bitcoin so the the question i have with all of
this is do you think like we're still going to have those you know 40 50 60 drawdowns that would
essentially throw a wrench in a lot of this right now or as this asset class gets bigger uh you know
do you think the volatility is going to go down so i think volatility is coming down a bit but it
will remain an important component of bitcoin and the network and its ability to build resilience
Because if you think about it, let's assume there would be less volatility in Bitcoin.
People would not be penalized for taking on excessive leverage, for example.
And the system, every couple of months, every couple of years, needs to wash out the weekends.
It needs to wash out the leverage in order for the network to build resilience and in order for the price to find a higher low.
because the way that bitcoin works is as the price moves up people usually
act and leverage themselves with high risk right you can see it at the moment actually
the bitcoin price has already washed out significant leverage in the past couple of weeks
and i think a lot of people were anticipating a run-up to like four or five hundred thousand dollars
and I personally don't see that so we could very well have a drop of 40 to 60 percent next year
that wouldn't surprise me at all so I've been following the Bitcoin price for over a decade
and it has done the same thing every single time so the first time I've actively watched the Bitcoin
price was in 2013 I was at university at the time I was studying financial economics and I wanted to
who dived into the world of Bitcoin, so to say.
And it was the summer holiday.
I was sitting in my parents' apartment
and I was watching the news.
And Bitcoin at the time hit $1,000.
And the reason was that people from China
used Bitcoin to circumvent government control.
There was a banking crisis in Cyprus.
So a lot of Chinese and Russians
that parked their money in Europe
were using Bitcoin to get their money out.
And then Bitcoin crashed down to, I think, $150
or something like that and ever since bitcoin has been going to highs and to lows and it's this
movement of the price where it shoots up significantly which leads to more people
funding money into the network and then that's very important the hash rate goes up because the
security of bitcoin is tied to the hash rate the higher the hash rate the more secure the network
the more people are willing to put their money into bitcoin because a good form of money is a
good store value. So the hash rate of Bitcoin usually goes up in the bear market when conviction
is high. Because in the bear market, the people that stay, they have high conviction. And the
network grows with people that have high conviction. People that just want to trade Bitcoin, they
don't help the network. If you don't run a node, if you don't mind, if you don't have a high
conviction, you don't actually help the network. And I think that resilience is built in the bear
markets so i personally i expect the bear market the way that i manage uh bitcoin backed loans is
all always to be able to withstand 80 drawdowns because then you can just run the business without
thinking about when to buy bitcoin and how to hold it and things like that so i think that brings in
a certain mindset that you have to be able to withstand 80 drawdowns but then you can just
keep on buying keep on going you don't have to think about it okay that's interesting so uh yeah
i mean i i definitely think that there's you know the the bigger uh players are starting to come in
and the adoption is coming but uh you know with uh i guess this development right i mean we're
seeing governments we're seeing uh companies starting to put bitcoin on the balance sheet
You know, it's just the assets essentially changing. It's maturing over this last 12 months, to say the very least. And, you know, how do you think it starts to ingrain with real estate? Do you think it's just going to keep stripping away? Or is there something where, you know, there's going to be some sort of integration, maybe loans on top of using collateral with real estate, you know, as a combination?
Is there some way that Bitcoin combines with real estate or is it just going to swallow up this market?
I like that question because I do think they'll merge, they converge.
This bull run, I think everybody should focus on getting their Bitcoin in self-custody and off exchanges.
We all saw what happened last time with the huge blow-offs.
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Enough from me. Let's get back to the show.
I like that question because I do think they'll merge. They converge.
First of all, Bitcoin is a good store value if you're on real estate,
meaning you can use it to build maintenance reserves. That's very obvious.
And then if you think about real estate, it's a capital structure
where you have different people, the bank that lends the money.
you have to develop her maybe you have an investor you have an architect and you have a tenant
so there is a capital structure and bitcoin can be integrated into that capital structure
and i think for example the products that are emerging in the us right now like for example
horizon that allow you to refinance the illiquid equity and capital that sits in your property
and then funnel that into bitcoin i think that's very interesting like for homeowners
If you own large real estate portfolios, I think refinancing, because you talked about
the tax advantages that exist around real estate and the 1031 exchange where you, so
in real estate, what you can do, you can sell a property and then you can take the profits
and then you can reinvest them in a new property without paying taxes right You can also refinance the property without paying taxes to buy another property you can refinance not a property to buy bitcoin so
that's also a very obvious way to to drain the liquidity capital that sits in real estate into
bitcoin and then i think generally speaking the dual collateralization of bitcoin and real estate
is very very very important in order to build resilience in the global financial system because
because Bitcoin is pristine collateral for lending and it's going to be used as such.
And real estate is okay collateral for lending because it's true, it's relatively scarce
and it does have cash flow, but it's not good money.
So the reason for these extreme boom and bust cycles that we experienced,
especially since I'd say the 80s, is because in the 80s, a lot of the pension funds,
both in Europe and North America and in Asia they started to go into real estate because the returns
on real estate with leverage were higher than bonds and that caused a lot of misallocation of
capital because real estate is a good a consumer good with utility value right and now that it
became money and that it became collateral means that the global financial system is built on sand
it's very very shaky so yes bitcoin can kind of replace real estate but in order for to do that
i think it needs to be combined with real estate and dual collateralized meaning if you construct
real estate or if you're a bank that finances real estate development i personally if i would be the
bank what i would do is let's say a real estate developer needs 10 million dollars to construct
the property i would give 11 million dollars as a loan so you can take the 10 million dollars 91
of the loan you construct the property you take the additional million dollars and you hold it
in the same company that holds the real estate project and while you do that while you construct
a property which usually takes three to five years bitcoin will have gone through a halving cycle
meaning that the treasury has already grown significantly in value meaning that the financial
position that you are in no matter what the interest rates go down or go up it doesn't
matter because the bitcoin they go up over time right and then you also have a collateral base
to lend against to then maintain your property i personally actually think that it's not even worth
doing real estate without including bitcoin it also acts as an insurance let's assume you give
money to a real estate developer and they default on the loan, you have a problem.
But if you also finance Bitcoin and you hold the Bitcoin and a multi-custodial setup,
you have access to the Bitcoin.
So it's financing Bitcoin in line with the real estate development
is also insurance for the financing bank.
Yeah.
And so, I mean, how do you think that this changes not only just the lending process,
But, you know, seeing, you know, you mentioned changing the taxes, all of these capital structures.
And, you know, there's a lot of job industry going with real estate.
I mean, it's essentially, is that just going to flip the entire, you know, real estate industry on the head where, you know, instead of fundamentally just being priced and, you know, constantly kind of trucking up, real estate is going to be going down.
uh especially priced in bitcoin and thus like there's just going to be less demand less movement
uh and you know there's not going to be as much development and is there just going to be a change
in that perspective i think so because i can judge the industry by my own experience and we have
developed around 600 apartments since 2016. and we have another 370 apartments in development right
now so we have a like considerable size and at the moment there's no point for us to employ new
employees for because we were thinking how do we want to grow right how do we want to grow the
business do we want to grow the business by employing new people or do we want to grow the
business by integrating bitcoin and then benefiting by bitcoin being absolutely scarce and we've
decided we want to grow with bitcoin because the risk of no employing new people with higher
interest rates is very very high and there's no point to employ people because you can also use
ai now so a lot of the contracts in the past we had employees just for rent contracts and now
we do with chat gpt why it's wild right so the effect on an r and ai on the real estate industry
i think is quite big because think about asset management so managing real estate takes time
and employees but now you can both you can use ai and then you can use bitcoin to store capital
so you don't need to grow the business by employing new people and you don't need to grow the business
by developing and leveraging your business excessively so i think to be successful in
real estate now means to focus and it kind of it's the same thing what sailor is saying you need to
really be very very focused i think in real estate to be successful in the past you had to be at the
right time right you had to be able to to work smart but now you need to be extremely smart you
need to be extremely focused and i believe that the whole industry that exists around real estate
including brokers for example i think it won't go away but it will definitely become less important
and um that also has to do with look at all the treasury companies right a lot of the people that
work in treasury companies worked in real estate before i know numerous people i know more than 20
people that work in real estate that are now in the bitcoin space and they work in the bitcoin
treasury space because the speculation that they knew now develops on bitcoin but bitcoin is
absolutely scarce meaning that the money that can be made in bitcoin is is more than the money that
can be made in real estate. So naturally, this bull run, I'm looking for ways to stack Bitcoin
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enough from me let's get back to the show absolutely scarce meaning that the money that
can be made in bitcoin is is more than the money that can be made in real estate so naturally over
time i think people will kind of move from real estate into bitcoin and we can already see it at
the moment i think brokers are moving into bitcoin because at the moment there's very little sell of
real estate there's little money to be made in being a real estate broker then agents of course
which is very very similar sometimes you have differences between brokers and agents but they
are both usually making money when the interest rates are low when there's a lot of selling and
buying on the market and in bitcoin you don't make money by buying and selling you make money by
holding and you make money by issuing stocks and if you if you own bitcoin you can hold on to it
and if your company you can issue stocks constantly and the money that's being made on the issuance
of stocks against bitcoin outperforms the money that is to be made by selling and buying real
estate so i think brokers and agents those are the kind of like that's the niche that's being hit the
hardest and then i think banks as well so if your bank that financed real estate development now
maybe you finance bitcoin miners because bitcoin mining is also similar to real estate because
mining and bitcoin is a is a cash flow it's a cash flow based business and the cash flow that
you can generate is much higher per square meter than with real estate so if you go square meter by
square meter you have a residential unit and you have a mining site you make more money with mining
so mining is more interesting than residential and commercial properties because think about
commercial properties they're being hit the hardest i recently looked at the year-on-year increase
in the price of commercial property since 1971 and from 1971 till 2024 the increase in the money
supply m2 was around 6.7 percent year on year and commercial real estate grew around 4.4 percent so
it kind of followed the trend line of the money supply but what happened is that since 2024
the commercial real estate came down in price so much that now the average increase is not 4.4
percent it's four percent so in in a year and a half the average over 50 years went down 10 percent
because e-commerce bitcoin automation large language models it's it's it's affecting the
way that we shop it's affecting the way that we consume and commercial properties are hitting are
being hit the hardest and i have some uh some friends that were in commercial real estate in
the us and they were developing shopping centers and they were very very big and now they're on the
brink of uh going bust so i think commercial real estate is even more in danger than residential
real estate yeah and so i i think that's also like a combination of just uh you know obviously
we saw that everybody shut down and you know the the remote work a lot of companies are going
hybrid now they're actually pulling them back into the office so do you think that there's not
going to be any sort of i guess flip back towards that with commercial real estate where you know
people are going to be looking for office buildings or try to revert back to to the way that things
were i personally don't think so so we ditched all the commercial units what i think is interesting
if you have residential units if you have commercial units in the first floor supermarkets
doctors and stuff like that that pulls in uh residents so i think mixing commercial and
residential real estate that's very interesting but commercial real estate in a classical sense
i think is less important and i don't think that will revert back to the office culture that we had
in the past because people can work from home people don't need to commute as much anymore
that also means parking lots are not as interesting so i think that parking lots will be
also hit hard in the next 20 years shopping centers will are being hit very hard
office space is being hit very hard shared office space you know models like we work and you had
other shared office companies they don't work anymore so the industry is changing significantly
and i think the aspect of speculation that has shaped the industry and it has been really been
the driving force that is moving over to bitcoin very rapidly like very quickly i think also if i
ask you would you buy a house or would you buy bitcoin yeah i mean i was just like throughout
this entire conversation i've been thinking about it because uh you know i'm sitting in
in a rental property right now that i own and i have one more uh here in tampa where i live uh but
But thinking about it, it's like, all right, maybe I use these home equity lines of credits
or whatever to purchase something like an STRC, like a strike from MSTR, cash flow,
exactly what I'm kind of looking for with real estate and just move it towards there
opposed to essentially just buying another rental property.
Because I mean, one, I have Airbnbs.
Airbnbs have been down because travel's down.
and two, housing prices are starting to level out and go down.
I don't know if we're going to have a 2008 type of crash.
I think maybe it's going to be different for each area,
but it's unique because we've seen real estate prices just go up like crazy
in certain markets in the United States,
especially in the southern half of the United States,
like Austin where I grew up, Nashville,
some of the places where it's a little bit more tax-friendly,
a little bit warmer. But now everybody's starting to have to go back into the office.
And now they're like, all right, I can't go live in a cabin in the woods. I need to go live in the
city. But then interest rates are higher. So there's just not a lot of transactions going.
There's a lot of people just kind of sitting and waiting. And so it seems like the flight
and the smart investors are sitting on the sidelines. And everything I see from the real
estate market is. We haven't seen this little demand since 2008. All of these things are all
before the crash. This is why I think that we're essentially ripe for a crash because the
affordability of houses is just terrible. But I just see them printing money and starting to
lower interest rates. I mean, Trump talked about wanting to give people $1,000 to $2,000 STEMI
checks again. So if we do that, I don't see how real estate won't go up again. But I also see it
on the flip side, all right? Like $2,000 won't buy you a house. So I don't know. That's why I
think we in a unique environment where I think we kind of in an asset bubble but real estate it that one asset that not going to bubble up Why would you ever hold generational wealth on a piece of paper
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Enough from me.
Back to the show.
But real estate's that one asset that's not going to bubble up.
Yeah.
I mean, it's difficult to say.
I agree with you.
So let's say they push interest rates back down to 3%, 2.5%.
You'll definitely have more demand for real estate, more liquidity moving in.
But then if you think about it from the lens of a Bitcoiner, when you hold Bitcoin, even
if real estate goes up in fiat terms, it's still going down in Bitcoin terms.
And I think that mindset will penetrate the global consciousness, so to say.
And the way that it is happening is through Bitcoin-based credit products, I think.
Because people will start to see, okay, here are products that have a higher return than
the average bond, government bonds and corporate bonds, or the average real estate deal, they'll
buy these products. And then over time, they'll understand, oh, you can also buy Bitcoin. So maybe
people start buying Bitcoin. And then over the next 10 to 15 years, demand will really come down
for real estate. Yeah, so I think that the demand is already starting to come down already. So I
don't know if it's that 10 to 15 years timeline. Do you think that there's any way that that gets
accelerated war war okay yeah well we're already starting to see that so i mean is that is do you
think that's going to be the catalyst i believe so because here in europe will we are feeling it
more than i think you guys so i see like all sorts of refugees from different countries you know
actually three years ago was in berlin i was at a train station i kind of got a flashback i was
almost felt like the beginning of the second world war when we went through inflation as well i saw
that you know grandmas walking with like someone had like a chicken and in her hand she was coming
out of a train leaving the central station in berlin with a chicken in her hand and uh and i
think all her clothes and i was like wow she literally arrived from a war zone and her house
definitely doesn't exist anymore and then i had conversations with a few you know people in their
early 20s and some of them told me look i put my money into bitcoin and i just left and i was able
to take my wealth with me others told me my real estate is gone and that definitely had an effect
on me and i can see it having an effect on people like throughout my uh i guess my social circle so
to say and there's no same for the middle east i've talked with some people from the middle east
some places there your house definitely is gone by this point right so i think the cognitive ability
to kind of appreciate bitcoin has to do with increasing pain and the pain unfortunately is
being felt through inflation and destruction and bitcoin as a like digital store value is not
negatively affected by chaos actually benefits by chaos because it's made for chaos so yeah going
forward with this to tie it back with real estate then uh you know as uh this kind of chaos unfolds
do you ever see uh like real estate being as traditional as it is or do you think that
you know people are going to you know are we going to move to this like own nothing and be happy even
with real estate crashing because there's just so many better you know i mean i don't know why you
would buy a house at this point uh is that going to be the future where people just don't own homes
and, you know, maybe the state has to buy them up or kind of move in that direction,
even with the crash?
Because why would you do that when you could just buy Bitcoin?
I think it's already happening.
So I can tell you that in the large metropolitan areas, including New York,
and take cities in Europe like Berlin and London,
a sufficient amount of the rental space is being subsidized by the government so i'm going to give
you a statistic now on hamburg which is a city in northern germany most of the new developments have
a third subsidized by the government so a third of the apartments are being subsidized by the
government and the government is doing it for two reasons number one people can't afford rent anymore
and number two they want to inflate housing because it's the collateral of the central
banking system so it's actually kind of a scheme so i think it's going to increase over time and
i could very well imagine that going forward between 20 to 50 depending on the on the country
of the rental space will be subsidized by the government both in construction and the rental
money as well which basically means that a lot of money will have to go into circulation
so then the governments and and are trying to basically keep the ponzi going
in a way i mean it sounds kind of harsh right usually when i talk with real estate entrepreneurs
they'll ask me leon you talk like you hate real estate i thought you're like a real estate developer
i am so take this with a grain of salt i have i grew up on construction sites i still work in
real estate development, but you have to think by first principles. And getting into Bitcoin just
opened up this world to me where I kind of understood why real estate has become such an
important asset class. And it's basically what you said.
Yeah, the Ponzi is going to live on. So then, I don't know if you've answered the question fully,
are we going to get worse than the 2008 crash or is it just going to be a slow, gradual decline?
i think so i'm very reluctant to really give like i don't really have a thesis going forward it's
very difficult i'm always wrong right but i do i do believe we won't have a crisis like in oa
because the speculation that happened in housing in oa is now moving over into bitcoin and if
speculation is happening on bitcoin there's no negative effect on the housing market so if you
speculate on real estate there's a negative effect because the cost of housing goes up and it has to
to come down at some point. If you speculate on Bitcoin, you can burn yourself, you can lose money,
but there's no negative effect on the housing market. So Bitcoin is almost like an insurance
against a crash in the housing market because it absorbs the speculation over time and that
creates less risk in housing, meaning that the crash will be slow, but a short death over time.
Now, where do you think this Bitcoin market is going? I know we've talked a lot about
real estate but obviously you're a bitcoiner and you've seen the light and uh you know you see that
the things crash and obviously things are moving very fast in the bitcoin space so things can change
and who knows by the time we put out this episode it could be you know drastically different but uh
you know where do you see this uh this cycle going do you think we still have the four-year cycles
and uh yeah where are you where are we going from here yeah personally i'm kind of like an observer
when it comes to the markets i don't try to plan too much and it feels pretty much like every bull
market felt to me price is kind of in line with the power law i pay attention to the power law
um and price is kind of in in line with the power law i expect the breakout towards the end of the
year and i expect the bear market following i don't know what's when it's going to happen but
i think nothing changed to be honest uh so you don't you think this is like you're not uh subscribed
to the theory that this cycle is different no no okay interesting so do you well i mean the the
question i have then is because we've seen the volatility go down a little bit so do you think
like these are just going to be the diminishing returns and that's going to be like the flight
to safety so to speak is going to be more into bitcoin i think so i think we have uh we have
less volatility as the market cap of bitcoin is increasing volatility is going down but i still
believe that volatility will stay significant i do believe a correction is important to build the
resilience that the network needs we need more hash rate we need diamond hands we don't need
you know tourists so i kind of actually you know i think we'll have a very severe bear market
and i think people will be shocked by how many bitcoin treasury companies will trade at maybe 0.3
to 0.5 m now wow okay why do you think that look they're trading below some of them are trading
below one m left now and we are in a bull market so imagine the bear market is sitting strategy was
trading at ten dollars in the last bear market right so very few people in a bear market are
actually able to see the trade that a company like meta planet or a company like strategy is actually
doing so i think that the the next bear market will shock everyone and it will be so severe
because everybody is expecting the four-year cycle to stop and bitcoin is usually always
penalizing like this type of thinking because we as humans we we forget even inflation why does
inflation exists i mean the chinese inflated their paper currency already hundreds of years ago
and the english did it the italians did it the french did it the germans did but we are doing
it again and again and again and the same as with the four-year cycle every every cycle people are
like oh this cycle is different and they always forget that it's going to be the same and i have
the thesis that nothing will change and nothing has changed except volatility coming down a little
bit of course due to the increasing market cap so then all right so outside of that what do you
think are some of the biggest risks here going forward with the the emergence of bitcoin and
real estate uh just in general because you think that the cycles i mean it's going to be the same
but you know we've had a lot of these regulatory hurdles kind of come off uh in the bitcoin space
at least over in the united states uh but you know globally it seems like there's a lot of craziness
going on especially where you're at you know in the eu the uk the digital ids all of this craziness
going on what do you see as some of the potential hurdles as uh as we develop here in this uh
bitcoinized world yeah so i think that by holding bitcoin you kind of ensure yourself against all
the madness that the bureaucrats are at the moment facilitating especially in the eu i mean it's
It's wild.
So I try actually not to pay too much attention.
But within the business, I do because I have to pay attention to regulation.
And at the moment, it's very difficult to integrate Bitcoin into real estate financing
due to regulation.
So I hope what is going to happen in the EU as the US is taking a bold stance,
it's kind of telling the world what needs to be done.
So even though the Europeans always like to criticize the US,
at the end, they kind of follow the lead of the US.
So at the moment with Bitcoin being now collateral that can be used to lend against for mortgage, I think that the regulation will kind of favor Bitcoin as a collateral that can then be integrated into real estate financing because the biggest risk is regulation.
Let's say the bureaucrats, for whatever reason, say,
we don't want to allow Bitcoin to be integrated into real estate
because it's such a volatile asset.
It's too dangerous.
That's the biggest risk for the real estate industry and for the housing market.
Personally, I can always buy Bitcoin.
I can leave the EU.
But I think for the housing market, that's the biggest risk.
I got you.
Well, Leon, you've been very generous with your time,
and I appreciate you coming on the show.
Why don't you tell people a little bit about where they can find you
and find some of your work.
Yes.
Brenton, thank you for having me on.
Great conversation.
I really enjoyed it.
You can find me on my website,
leonvancum.com,
leonvancum.substack.com.
That's my newsletter
where I share also sheets
on integrating Bitcoin
into the real estate business.
And I have a book coming up
with Bitcoin Magazine next year,
Digital Real Estate,
which will be out in Q1 or latest Q2.
There we go.
And I'll link all that in the show notes.
And then, yeah, man,
You'll have to come on shortly after the book comes out.
I'm excited to read it.
And thanks so much for all you do.
And opening my eyes to all of this,
because I was always thinking,
hey, you know what, real estate,
it's always going up and to the right.
But I appreciate this unique thesis.
And I think it's starting to play out.
Thank you.
Thank you guys all for tuning in
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