It’s no secret that Bitcoin is known for its extreme volatility and adding zeros. There is a narrative within the Bitcoin community that this is a quote unquote “Super Cycle” and this time there won’t be a steep correction. While the argument sounds plausible, markets simply don’t work this way. It is true that the magnitude of the correction could be lower than -84% and -86% of the previous two cycles, make no mistake – there will be a significant correction.
With many Bitcoin models projecting market top price anywhere from $100k to $400k USD and market top timeline from 2021 to 2023, how can you tell when it is a good time to take your Bitcoin profits and invest into Real Estate?
Bitcoin Metrics to Watch
In order to answer this question, we need to look into what happened during the previous bull cycles. Using TA (or technical analysis) can be of some value, I would suggest paying attention to two insightful metrics: amount of Bitcoin available on exchanges and Bitcoin network transaction fee.
It’s important to realize that markets are mainly driven by emotions, such as Fear of Missing Out during the Bull Run and Panic Selling during the Bear Market. In December 2017, when Bitcoin maxed out at $20k USD, buying pressure was exhausted and Bitcoin price collapsed. But was it possible to predict and time it beforehand and the answer is yes.
Immediately prior to Bitcoin market top and price collapse, the amount of Bitcoin on exchanges began to rise rapidly. As Bitcoin holders rushed their Bitcoin to exchanges to take profits, they flooded the Bitcoin network with transactions and drove the network fee to an all-time high of $55 per transaction.
Bitcoin Network Fees Explained
Bitcoin network has a limited throughput and can only process roughly 2500 transactions per block, or approximately every 10 minutes. As the network usage increases, so does the transaction fee, since miners are picking the most expensive transactions to include in their block in order to maximize their profits. Essentially in order for your transaction to be included in the next block, your transaction fee has to be within the highest 2500 transactions within a given 10 minute period. Normally that is not an issue, with the fee at the time of the writing at around $20 USD.
However, it is a near certainty that the Bitcoin transaction fee will be MUCH higher than what we saw in December 2017. Because of increased adoptions, there will be millions of people transferring their Bitcoin to the exchanges to take profits and/or panic sell. Bitcoin network will have hundreds of thousands (if not millions) transactions sitting in mempool (queue) to be processed. It is only a matter of time until people, desperate to move their Bitcoin to the exchanges from the cold storage, will be willing to pay fees in excess of $500, just to get their transaction included in the next available block.
You do NOT want to be one of those people stuck paying massive network fees and possibly waiting days before your Bitcoin makes it to the exchange.
Real Estate Purchase Plan using Bitcoin
As with most Bitcoin holders, you likely want to sell only a portion of your Bitcoin. Whether it’s 10%, 20% or half – it doesn’t really matter – the idea is you want to decide how much of your Bitcoin holdings you want to take profit from beforehand.
The next step is to watch for the Bitcoin network fee and exchange balances. Once the network fee starts exceeding $100 and the exchange balances start to rise sharply, this is a sure sign that a selloff is coming. This would be a good time to transfer whatever predetermined amount of Bitcoin from your cold storage to the exchange.
The last step is to watch for the network fee and once it starts going exponential, this is a good indicator that the selloff is imminent at which point you should convert your Bitcoin into a stablecoin, such as USDT or USDC.
As with Bitcoin, BTCHome.ca accepts stablecoins as payment for real estate transactions. Unlike Bitcoin however, stablecoins have no short term fluctuations, which then can be used as payment for ANY real estate, including properties that are listed for sale and priced in fiat (Canadian Dollars).
While holding Bitcoin long term has proven to be a good investment, taking some profits along the way is a sensible strategy to improve your lifestyle. Buying Real Estate with Bitcoin allows you to avoid sitting on constantly depreciating cash or stablecoins and parking your money in a continuously appreciating hard asset.
Founder and CEO
Real Estate Bay Realty, Brokerage