This is how the meme goes:

At the time of writing this post, Bitcoin is up ~129% YTD. One Bitcoin is now US$101,256.70, which is a big deal in that it's a nice round milestone and it sounds like an impressive number to most people, including me. The result is that more people now want to buy Bitcoin, hence the above image. Now, this may turn out to be a good time to do this, or it may not be, I really have no idea. But as a crypto believer and long-term holder, I'm certainly happy to see this momentum.

At the same time, the current crypto market makes me want to buy less of it. Ethereum, which makes up the majority of my holdings, is also up this year. But I was dollar-cost-averaging more of it over the past few years when it was dropping and sentiment seemed to be against it. That, to me, felt like a better time.

My favorite investing framework is one that I have written about many times before on this blog and one that people far more successful than me like to talk about. It goes something like this: you want to be right about things that most people think are wrong. Said differently, you want to aim for non-consensus bets, and that's because it's pretty hard to find value when everyone else is chasing the same thing. Markets are competitive.

So as a general rule of thumb, if you can find opportunities that you believe wholeheartedly in, but that many people think are dumb, then directionally, you're probably getting warmer. Obviously, you can't believe in something and then be wrong about it. That's not productive. But if you start with something that many/most people are critical of and then work backwards, you might find something interesting.

I am reiterating all of this today because of our current market dynamics: crypto is way up, as you know, but many real estate markets are way down. For example, here in Toronto, few people are buying pre-construction homes, whereas a few years ago, they were lining up and banging down the doors of sales offices. We have moved from consensus to non-consensus.

This is making for a challenging development environment. But at the same time, I think it's a wonderful opportunity for people looking to buy/rent a home and for real estate companies willing to grind it out and be creative. Legacy deals will need to get worked out and competition is only going to lessen as groups leave the market to focus on other things, like buying Bitcoin above $100k.

More specifically, this is what I'm excited about right now as a developer:

• It is significantly easier to buy wonderful real estate. There's far less competition, and so the opportunity is there to structure creative deals. This is especially valuable for smaller companies like ours.

• You have to know what you're doing to be successful. The market isn't going to bail you out. You need to roll up your sleeves and execute on your strategy.

• Creativity and new ideas are now being rewarded. A red hot market only strengthens our bias toward the status quo. Everything is working, so why change? Except now it's not. So what are we going to do?

Market cycles are a healthy phenomenon. And I think we'll start the next cycle in a better place. Housing will be more affordable and projects will be better tailored toward end users, among other changes. But in the interim, there is now this great opportunity to be right about things that most other people think are wrong. And that's because so much feels wrong. But that's okay. Because it's actually the exact precondition you want.

Disclaimer: Nothing in this post should be construed as investment advice. I am long Ethereum and Toronto housing, and I don't plan to change this, but you should do your own homework.

Cover photo by Saad Salim on Unsplash

If you happen to have made boatloads of money in crypto (which sadly isn't me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.

According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you've managed to accumulate a bunch of crypto and don't want to convert it. It can also be easier when it comes to moving the funds around:

Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”

But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be -- at least right now.

To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”

There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.

Maybe all of this becomes commonplace or maybe it doesn't. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.

Last year Jaco Joubert set out to estimate the number of condos in Toronto that are potentially sitting vacant. It was a response to the ongoing speculation that too many investor-owned condos are sitting empty across the city and thereby limiting the supply of housing.

To accomplish this, he photographed 15 different buildings at night (and at different times of the year) and monitored who had their lights on. He then turned these photographs into heat maps and compared the lighting pattern to the floor plans of each building in order to determine the unit demising.

This month Jaco published his findings. All in all, he estimates that he surveyed some 1,362 units. And of these units, 76 are believed to be vacant (when in doubt he erred on the side of occupied). So a vacancy of 5.6%. Is that more or less than what you were expecting?

Now, the buildings he "surveyed" are all located downtown and they are all roughly the same vintage. So you could easily argue that these aren't necessarily representative of the city's broader condo stock, assuming that's where you want to take this. Still, an interesting study.