While the euro was trading at around 1.18 dollars a year ago, it is now at near parity with the American currency. To protect against this exchange rate risk, which devalues the savings of Europeans, the RealT tokenization platform offers an innovative solution, while allowing you to generate returns by exposing yourself to the American real estate market.
This article is written in partnership with RealT (find out more)
The dominance of the dollar against the euro
Since 2021, the euro rate is trending down against the dollar.
The recent parity between the two currencies will not have escaped anyone and this results in a fall of the euro by more than 18% since its last weekly high:
Figure 1: EUR/USD price
The reasons for this devaluation are multiple and complex. The fact that many raw materials are exchanged for dollars and that the prices of these have risen sharply in recent years is, for example, an axis of reflection. The difference in strategies between the US Federal Reserve and the European Central Bank, with regard to key ratesalso has its part to play in the current result.
For European citizens, this creates a vicious circle. Indeed, the cost of living continues to increase with galloping inflation and to make matters worse, it is more and more expensive for industries to exchange dollars to supply themselves on foreign markets. Thus, savers see the value of their savings melt away.
The question then arises of diversifying into currencies. Just as with the various financial assets, the possible fall in one or the other thus makes it possible to reduce your exposure to risk.
In the world of cryptocurrencies, stablecoins are a possible solution to get through such periods. But there is an even more versatile alternative: RealT.
Indeed, the operation of the platform allows exposure to the dollar, but also to the American real estate market. This provides protection in the event of a fall in the eurowhile generating a more than decent return from the dollar rents that investors can collect.
Protect yourself from a fall in the euro thanks to RealT
RealT is a platform mixing blockchain and real estate founded in 2019 by Rémy and Jean-Marc Jacobson. After many years of investing in real estate, they used their expertise to create a tool to easily invest in real estate, starting at $50.
Figure 2: Preview of a property for sale on RealT
RealT buys properties through companies specially created for the occasion. Platform users then buy tokenized shares of these companies who own the property in such a way that: a company is equivalent to a specific property. Thus, by owning a share of the company in the form of a security tokenan investor actually owns a share of the associated property.
The goods being rented out, a user of the RealT platform then receives part of this income. He can thus expect a return of 10% per year on average. The advantage of this is that these real estate investments are made on the American market and therefore, by extension, in dollars. Thus, someone who started investing in January 2021 with a euro equivalent to approximately 1.2 dollars, would realize a 20% capital gain if it were to switch back to euros now. This additional capital gain is then added to the average 10% basic return.
If you want to know how the platform works in more detail, here is a complete tutorial on RealT.
The wise choice of American real estate
Of course, there is no guarantee that after such a fall the euro will continue to fall against the dollar, the trend might as well reverse.
Nevertheless, it is important not to underestimate the currency risk and the impact it can have on the economy on a daily basis. In this, it is wise to diversify your capital on foreign currencies.
The interest of this approach will depend on everyone’s expectations regarding the need for liquidity. This strategy will obviously not be suitable for someone wishing to be able to return to the euro within the hour to recover funds. But it will be quite relevant for an investor expecting a attractive returncombined with the low volatility of the real estate market.
In this, the American market is an interesting choice. Especially since RealT does not select the geographical areas of its investments at random. A large proportion of his assets are actually concentrated in Detroit, Michigan:
Figure 3: RealT Properties in the City of Detroit
It is an industrial region that suffered greatly after the subprime crisis in 2008. This led to a major fall in purchase prices real estate. The subtlety in this state lies in the fact that rental prices have not been impacted as much, which has generated significant returns on investment.
Rémy and Jean-Marc Jacobson as well as the RealT teams were able to take advantage of these opportunities. While the region is enjoying renewed appeal, the price of real estate tends to rise again. In general, RealT will always seek to make investments with similar strategies, in properties with long-term promise.
The platform has its assets reassessed every year. So, although there is no guarantee, it is not surprising that the value of the tokens held by an investor climbs after each re-evaluation.
Beyond protection on the euro/dollar pair, RealT therefore also makes it possible to aim for the long term by exposing itself to American real estate. the whole staying on the blockchainwhich allows cryptocurrency holders to diversify their portfolio very simply.
A more complete strategy than with stablecoins
Those accustomed to decentralized finance (DeFi) protocols will certainly be able to find more attractive returns than those offered by RealT. However, this translates to increased risks such as hacks, smart contract bugs or possible loss of stablecoin pegs (as with Terra’s UST).
RealT tokens have on their side a legal recognition. It is also necessary to sign a contract during their purchase in order to record the sale of the portion of the property in question. Although this does not eliminate all the risks, it is at least a good compromise between performance and safety.
On the other hand, RealT makes it possible to generate an additional return thanks to its RMM platform. Built in partnership with the Aave protocol, it allows deposit its fractions of real estate as collateral to be able to borrow liquidity, while continuing to collect rents.
Thus, it is a capital optimization that has nothing to envy to other strategies with stablecoins. This financial package is then added to the three variables that we have mentioned above, on which RealT makes it possible to grow your capital :
- Protection against falling EUR/USD;
- Valuation of the price of the property;
- Long-term rental yields.
Of course, as with any investment, an asset can move in both directions. In this, it will therefore be necessary to manage your risk according to the criteria of your investment plan. Nevertheless, the RealT platform offers a real opportunity for anyone who wants to maintain a store of value capable of generate returnswithout being as volatile as the cryptocurrency market.
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