Bitcoin has had a wild ride, declining over 50% in over a month plummeting from a high of 120k to 60k. Check out the chart above. Why the sudden drop in cryptocurrencies? What does this mean for real estate prices? Looking at the chart below, how will interest rates be impacted? Can Crypto cause a contagion effect in the economy?
Before getting into the discussion of Bitcoin and Cryptocurrency it is important to discuss if Cryptocurrency is really a currency.
What is currency?
First, it is important to define what a currency is. Currency in its most basic form is “a system of money in general use in a particular country.” Furthermore, for a currency to be widely accepted the value of the currency must be relatively stable. For example, a dollar today is worth a dollar tomorrow. Therefore, many emerging economies exchange for dollars to ensure the “buying power” of the currency.
What is cryptocurrency?
“a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.” Bitcoin is just one type of cryptocurrency.
Is this a misnomer to classify bitcoin and others as currency?
Yes, values of bitcoin and other cryptocurrencies have recently had wild swings in value. One-day bitcoin might be worth 30% less or more than it was the day before. Traditional stable currencies do not have wild swings in value. The commodity future trading commission classified bitcoin as a “commodity”.
Why the huge drops in cryptocurrency now?
The market was caught off guard by the almost 50% decline in Bitcoin in a very short period of time. This begs the question of why? Here are three possible explanations:
- Hedge for stocks like gold: Originally many buyers of crypto thought that crypto would be a hedge for stocks and gold. The theory goes if there was a stock market correction, then crypto would react similar to gold with a flight to quality. We are seeing today that this correlation is not holding true as bitcoin has greatly diverged from gold.
- Risk off sentiment: Crypto has always been a “risky” asset in a portfolio, as volatility increased in the market there was a run to the exits and crypto sold off big time.
- No intrinsic value to prevent wild swings: If you think of most stocks, there is an intrinsic value in their assets that basically sets a price floor. Unfortunately the same is not true for crypto as there is no intrinsic value for a floor as we have seen with a 50% drop in one month even though nothing fundamentally changed with crypto.
Is the drop in cryptocurrency foreshadowing a broader market correction?
This is the million dollar question, does the “risk off” sentiment we are seeing in crypto foreshadow a larger market change. We are already seeing a selloff in many tech stocks whether this is caused by crypto or the inverse is definitely debatable.
My gut says that we will see a market correction with a heavy concentration in tech stocks that were trading at lofty valuations. There will be some companies that get destroyed as a result of the bitcoin plunge that were highly leveraged and all in on the cryptocurrency bandwagon.
How will real estate be impacted by the drop in cryptocurrency values?
The two big impacts I would watch are stock market prices and how the bond market reacts to the drop in crypto:
- Stock Market: if there is a larger stock market correction then real estate prices could adjust downward as the “wealth effect” keeps prospective buyers on the sidelines. Furthermore, if property owners are heavily invested in crypto there could be some forced selling for liquidity.
- Interest rates: take a look at the chart below, we have seen yields fall a little based on the market volatility. If there is a broader correction interest rates could fall a bit further which would help the real estate market.
Unfortunately we have two opposing forces that are pulling the real estate in different directions. Lower yields would equate to lower interest rates which is a huge bonus, but on the flip side a market correction is going to keep many buyers on the sidelines and could push more inventory on the market as sellers need liquidity. At this juncture we do not know which of these opposing impacts will win out and therefore the impact on real estate is still a question mark in my mind.
Will cryptocurrency reset cause a recession?
Michael Burry, who rose to prominence for his wager against the US housing market ahead of the 2008 financial crisis, warned that Bitcoin’s plunge could deepen into a self-reinforcing “death spiral,” inflicting lasting damage on companies that have spent the past year stockpiling the token.
I’m not certain Bitcoin unto itself would cause a recession, but that does not mean a recession will not happen. At the same time Crypto is plunging there are other events happening in the market: a softening labor market, a reset in AI valuations, a risk off sentiment, etc…. all of these items are interplayed and could easily cause a recession or they cause a market reset but a recession is avoided, or this whole bitcoin crash becomes a non event and the market continues along.
What happens now with the crypto meltdown and what should you do
Regardless of whether there is a recession in the immediate future, there is considerable risk in the economy with lofty valuations, huge leverage in companies, huge debt loads of consumers, and many investors moving from investing to gambling in highly risky assets. All these factors are not good for the economy but they can work themselves out without a major recession. Long and short nobody knows, but the risks to the economy are definitely pointed towards the downside.
Real estate is also tilted towards the downside in most markets due to greater economic trends and uncertainty but that does not mean there is a huge reset in prices coming for real estate although you could see declines in the 5-10% range which is my base case for the coming year.
The most important question we will get to see answered at some point is how does the huge leverage in the economy unwind. Both companies and consumers are carrying huge debt loads that ultimately will need to be paid, with a small economic hiccup highly levered people and companies are at much greater risk of the contagion impact. Although, currently it doesn’t look like Crypto is the trigger for a greater market correction, it is a warning that the ride ahead is going to get extremely bumpy so now would be a good time to exit if you don’t have the stomach or buckle up for the ride.
Additional reading/resources
- https://finance.yahoo.com/news/michael-burry-warns-cascading-effects-001910407.html
- https://www.cnbc.com/2026/02/06/bitcoin-price-today-60000-in-focus.html
- https://coloradohardmoney.com/what-does-colorados-debt-mean-for-real-estate-prices/
- https://www.fairviewlending.com/what-will-be-the-average-30-year-rate-in-2026/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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