It’s a fun but increasingly irrelevant historical fact to recount the most expensive pizza ever purchased: in 2010, programmer Laszlo Hanyecz completed the first documented commercial bitcoin (BTC) purchase when he paid 10 000 BTC for two Papa John’s pizzas, then worth just $41.
In today’s terms, those two pizzas cost R6.3 billion.
In 2012, entrepreneur and author Andreas Antonopoulos reportedly paid five BTC for one pound of coffee beans. That’s R3.14 million in today’s terms.
There are hundreds of stories out there of people who bought BTC early and cashed out when it doubled or trebled in price, missing out on the extraordinary gains that were to follow.
Bear in mind that in rand terms, one BTC could be purchased for R659 in 2011. So when the BTC price shot up to R10 000 in 2016 (this week it was trading at R628 000), those early investors couldn’t believe their luck and cashed out.
What about house prices?
As Moneyweb reported in 2020, a R1.4 million house could be purchased for six bitcoin. And in 2021 we reported that a house costing R1 million in 2011 could be purchased back then for the equivalent of 1 517 BTC. In today’s terms, that’s a pretty expensive house: 1 517 BTC is currently worth R960 million.
Today, a R1 million house would cost just 1.6 BTC, proving the deflationary power of bitcoin.
To make it more realistic, we took that R1 million house in 2011, inflated for average house price increases over the subsequent years, and we end up with a house now valued at R1.52 million.
While house prices have climbed roughly 50% in a little over a decade, bitcoin is up nearly 950X.
But there’s a catch: for the first time in a decade, SA house prices actually increased when measured in bitcoin. Not by much, but an increase nonetheless.
Our original R1 million house had appreciated in value to R1.46 million in 2021, the equivalent of 2.25 BTC back then. A year later, in March 2022, that same house is worth R1.52 million, the equivalent of 2.3 BTC.
Morgan Stanley ran a similar exercise for US house prices and here’s the graph.
A US home costing 993 BTC in 2015 had dropped in price to 8.27 BTC by February 2022.
To keep the time scales consistent, an average-sized home in SA worth say R1.16 million in 2015, would have cost 371 BTC back then, falling in price to 2.3 BTC today, even allowing for house price inflation.
What’s noticeable from the above charts is that the big price gains in BTC were achieved in the years prior to 2017. Since then the gains, while still impressive, are at a much slower rate than in the early years.
House prices in Ethereum (ETH)
The second largest crypto by market cap is Ethereum (ETH), which has a much shorter history than BTC. If we bought a R1 million house in 2017, it would have cost 242 ETH – which at the time could be purchased for a little over R4 000 per ETH.
Allowing for average house price escalations over the subsequent years, that house today would be worth about R1.17 million, or a little over 26 ETH (one ETH was trading at about R47 000 this week).
What’s noticeable in the graph below is the volatility of ETH, which dropped 80% in price between 2018 and 2019, before reversing direction and clocking up a 2 200% gain by March 2022.
The message is clear: the deflationary power of ETH, measured in rands, has far outstripped that of BTC since 2019.