Everything here is referencing this chart (make sure to expand the timeline to show the full history back to the 1950's):
https://dqydj.com/historical-home-prices/
Been doing my own research to see how various assets have behaved relative to inflation, but also relative to various changes in monetary policy in the US.
This chart showing US home prices both in nominal and CPI-adjusted values tells a striking story:
Notice that housing prices generally trend lower against CPI up until around 1968.
You then see the first bump against CPI peak right around 1971, where Bretton Woods takes us off the gold standard.
A lot was happening behind the scenes leading up to Bretton Woods so it makes sense that the housing market started to respond a few years ahead of 1971.
After this first CPI-adjusted peak, you see median housing prices go down against CPI but the entire move is upward in nominal terms.
People knew housing prices should be going up but didn't realize by how much. This represents the first mis-pricing of the housing market.
What follows is a sequence of larger and larger housing bubbles where the lows never return to previous values, even in the CPI-adjusted scale.
This rise in value against inflation shows that housing was clearly being monetized as a store of value.
This monetization results in an increase in volatility as price discovery takes over the utility value of property.
Before all of this started the CPI-adjusted value of homes hovered around the $190,000 range, which means home values today would need to drop ~50% to remove the monetization component.
That's 50% of a ~$7 trillion dollar US housing market just to reach parity with historic CPI changes (in other words, to make housing a perfect store of value rather than an appreciating asset).
How does this relate to Bitcoin?
Bitcoin is also being monetized.
Bitcoin is highly volatile as people struggle to price it.
Bitcoin represents a store of value tool which can more reliably (and with less maintenance) keep your purchasing power.
Bitcoin can simultaneously suck the monetary premium out of real estate and other properties which have intrinsic utility people need making life more affordable for everyone.
That's ~$3.5 trillion from the US housing market alone.
Disclaimers:
I'ver heard some people argue that Bitcoin will take a lot more value out of real estate, but due to its utility and scarcity I believe it's justified that housing keep up with the CPI basket. Also, because CPI under cuts the reality of those other things in the basket as well (like swapping out types of food, energy etc.) it could even be less than ~$3.5 trillion once you adjust for "real" inflation whatever that is.
Still, it's clear that housing has undergone a monetization and financialization that should be sucked into Bitcoin. We can't really expect housing to become deflationary in fiat terms so Bitcoin will not fix an ever increasing housing market. But it can vastly reduce both the rate and volatility of the housing market if it were to take off in a much bigger way.
That said, watching the housing market increase in volatility so rapidly despite being rather illiquid gives me some concern over whether Bitcoin can actually reduce in volatility over time. It certainly will to some extent, but with how liquid it is I don't think anything sub $10 trillion is likely to be any less volatile than it is today. Even above that it may just be that Bitcoin remains volatile as long as we have fiat playing a significant role in the global economy (because at the end of the day the volatility is a result of monetizing something that isn't the denominator of value).
In other words, volatility is the result of pricing becoming more difficult. Fiat is making pricing of everything, including Bitcoin, increasingly difficult.
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