MARCH 27, 2022 | Issue 08
WE'RE NOT HARDWIRED TO THINK LONG TERM, BUT IF WE DO, BIG THINGS CAN HAPPEN
This morning, I listened to Tim Ferriss interview Mark Zuckerberg. While I'm not a fan of either Facebook or Zuckerberg, I am a huge fan of Tim Ferriss.
I knew Tim would find the right questions to elicit worthwhile insight.
In discussing Meta's commitment to building out their piece of the metaverse, Zuckerberg talked about his 15 year time horizon. He elaborated on the details of technological challenges that can only be solved over time.
Putting aside real estate in the metaverse and focusing on real estate here on planet Earth,
there are far more problems with crypto in real estate transactions than there are benefits.
Yet, looking out into the future (certainly, not as far out as 15 years), I predict crypto will be commonly used in real estate.
This assumes that crypto and blockchain continue to be embraced by individuals, institutions, and regulators.
As I get involved in crypto real estate deals and talk with agents, challenges are discussed.
It's our job to find the solutions.
It doesn't matter if a crypto deal is more challenging than a traditional deal, the client decides how they're going to pay or get paid. We provide advice, but the decision is theirs.
We're agents, not principals.
Looking ahead, it's clear to me that bitcoin adoption will continue and more buyers will pay with bitcoin and use their bitcoin wealth to secure a mortgage.
Creative sellers are already announcing in their listing material that they accept cryptocurrency. This sets them apart from the sellers who shy away from crypto buyers. It's a smart strategy, even though it is far from frictionless.
As I report on crypto, I will not whitewash the dark side of our industry's attempt to adopt crypto payments, NFTs, and blockchain.
The crypto real estate ecosystem is evolving. Don't be discouraged by the challenges.
If you need any advice or want to work through a crypto issue, please reach out. If you have handled a crypto transaction, I'd love to hear about it. Enjoy this newsletter, share it with your colleagues, have a great week, and stay crypto curious! Rich Hopen richard.hopen@compass.com 908.917.7926 PS. You can find all CNR newsletters here.
CRYPTO & REAL ESTATE
▸ While Real Estate Brokerages Plan a Potential Move Into the Metaverse, A Virtual Real Estate Firm Is Already There
Metaverse Properties offers services to buyers and sellers of virtual property. They also develop virtual land, consult, manage, find rentals, and market businesses.
▸ Propy Selling Another House NFT in Tampa The 1 bedroom, 1 bath condo is owned by Propy and was purchased in January 2022 for $215,000. Propy is auctioning the property as an NFT with opening bids starting at $185,000. The winner will obtain ownership of a corporation that has the property as an asset.
▸ Mike Cagney, Co-Founder & Former CEO of Student Loan Refi Company, SoFi, Launches Crypto Mortgage Firm – Figure
Cagney's Figure will offer 30 year loans up to $20M with crypto (bitcoin or Ethereum) as collateral. They will finance up to 100% including closing costs. They opened up a waiting list, but no details are available. Cagney answered some questions on LinkedIn. It appears that Figure holds custody of the crypto and releases it as the loan is paid off. Borrowers pay their monthly mortgage in cash. This service is similar to Ledn.
CRYPTO NEWS
▸ Former Federal Prosecutor Katie Haun Raised $1.5 Billion Web 3.0 Fund
As a Department of Justice prosecutor, Haun pursued criminals who used crypto to launder money. In 2014, she created a government cryptocurrency task force.
She left government and joined venture capital firm Andreesen Horwitz as a general partner. In January she created Haun Ventures to focus on Web 3.0.
On March 22, 2022, Haun announced that her firm raised $1.3 billion to back early-stage Web3 startups.
According to PitchBook Data, this is the largest new venture fund ever raised by a female founder. Her fund will invest in digital tokens, NFTs, decentralized finance (DeFi), and decentralized autonomous organizations (DAOs).
[Note: Tim Ferriss spoke with Haun in 2021 and it's a fascinating interview.]
▸ BlackRock Sees The Rise of Digital Currency
BlackRock’s CEO, Larry Fink, said in his shareholder letter that his global investment firm is studying digital currencies. Fink attributes the Russian invasion of Ukraine for accelerating interest in digital currency.
While Fink seemed to focus on central bank digital currency, his language was broad enough to include all cryptocurrencies.
"A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption. Digital currencies can also help bring down costs of cross-border payments, for example when expatriate workers send earnings back to their families."
As more global financial companies study cryptocurrency and launch products, investor interest will rise.
Also this week, investment bank Goldman Sachs surveyed its clients and found that 60% expect to increase their digital assets in the next one to two years, 51% currently hold crypto.
▸ Powell Discussed Digital Dollar
The Federal Reserve is studying whether or not to issue a digital currency. Powell said this week that user privacy is paramount while also stressing the importance of the currency being "identity verifiable." It will be interesting to see how the Fed will ensure privacy while verifying a user's identity.
▸ Bitcoin Miners Get Creative
CoinDesk profiled how some bitcoin miners are using their rigs to capture the excess heat generated from their computers and how others are finding energy sources to power their operations.
● MintGreen partners with Shelter Point Distillery in Vancouver to heat barrels of whiskey. It helps the aging process.
● PRTI in North Carolina developed a process to heat rubber tires and convert the gas into liquid fuel. The fuel is used to power their bitcoin mining servers.
● Upstream Data works with oil companies to capture natural gas that escapes from oil fields. They set up 250 small shacks in Texas and Wyoming oil fields that use the gas to power their mining computers.
● El Salvador is building a bitcoin mining operation on Conchagua volcano to use geothermal energy.
CRYPTO CLASS - Crypto Remittances
Remittances are payments of money from one party to another. In the crypto space, remittances typically refer to people sending money overseas to relatives who live in a less wealthy country.
The International Monetary Fund estimated that the total total remittances to low- and middle-income countries was $597 billion in 2021.
Some countries rely upon remittances. In El Salvador, 23% of its gross domestic product come from remittances.
Sending money through a service such as Western Union has much higher fees than a crypto-enabled service. For example, sending $500 via a credit card could cost up to $26 with Western. Using Remitly, it's only $7.99. That is a 70% savings.
One reason why El Salvador adopted bitcoin as its currency was to lower remittance costs.
INFLUENCERS - People to follow
Gary Gensler – @GaryGensler
Gensler is the 33rd Chair of the SEC (US Securities & Exchange Commission). I became familiar with Gensler when I jumped into my crypto education. I watched his entire semester blockchain and crypto class at MIT. He's brilliant and I can't imagine any cabinet member knows more about crypto than him. However, knowledge of blockchain and crypto doesn't equate to support.
Gensler started as SEC Chair somewhat adversarial to the crypto industry. It appears that his wings may have been clipped a bit after the crypto executive order was published two weeks ago. Once the executive order's reports are submitted to the administration, we'll see what regulatory power Gensler seeks for the SEC. RESOURCES – Books, websites, podcasts, articles CoinTelegraph This online crypto publication is a terrific free resource and is comparable to CoinDesk. I look at both websites throughout the week. Also, I'm awed by CoinTelegraph's cover art for their articles. The art below is an example. ↓
CRYPTO WORDS – Rug Pull
A rug pull is a scam when creators of a project pump the value of their token and then disappear with the funds. There are three types of rug pulls: 1) Liquidity stealing – token creators withdraw all the coins and price goes to zero. 2) Limited sell orders – developers write code, making them the only party able to sell tokens. 3) Pump-and-Dump is an old school scheme where heavy promotion on social media drives up the price and developers sell their large supply of tokens. The sell-off drives the price down.
Bloomberg reported on March 24, 2022 that federal prosecutors in New York charged two 20-year old men with bilking investors out of more than $20 million dollars. (See Bloomberg article.)
The men created NFTs called "Frosties" which would have provided giveaways and access to a metaverse game.
Frosties are still for sale on the NFT marketplace OpenSea.
Hours after selling the tokens, they de-activated their website and transferred $1.1 million of cryptocurrency into their wallets.
OH, ONE MORE THING –
Thanks for reading! See you next week.
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