Should I invest in Bitcoin or Whisky Casks?
The value of Bitcoin has been on a rollercoaster over the last few months, with tides of money moving in and out of the market’s most popular cryptocurrency like water washing up on the shore. Once the preferred choice of tech-savvy millennials, many previously skeptical institutional investors are now dipping their toes into the crypto market, adding exposure through crypto funds, futures and other emerging investment options. It’s now clear that despite the uncertain outlook presented by future regulation, cryptocurrencies are here to stay.
But, what’s the best way for investors to hedge against the inherent volatility of crypto and maintain a healthy portfolio that protects their wealth, while taking advantage of the opportunities that can come from these new forms of investment?
Diversifying your portfolio
The key is, of course, diversification. As any successful investor knows, finding the right balance between risk and security is the secret to peace-of-mind investing and a healthier portfolio. But with a range of investment options out there—now increasing further with the various cryptos competing for attention—it’s important for investors to weigh up all the options before choosing where to put their wealth. The recently released end-of-year BC20 Cask Report tracked the performance of a range of investment options over the past 12 months, providing an interesting insight into where the smart money is going.
Bitcoin spiked suddenly towards the end of the year while growth among the three major stock markets was modest, or even negative, in the cases of the FTSE and Hang Seng. In an unusual year for global markets, investors moved their funds to safer havens like tangible assets, particularly gold. However, the best performing asset on the list was the BC20 Whisky Cask Index which saw growth of 12.76% in 2020.
Clearly the nature of whisky casks, which build steady value as the spirit matures in the cask, makes them particularly attractive to investors looking to moderate risk in their portfolios. Whisky casks are the definition of a stable asset: they may not offer the triple digit potential of crypto, but instead have delivered extremely reliable growth historically, which is the cornerstone of any medium to long term investment strategy. And, unlike bottled whisky or other luxury investments which burden an investor with logistics, whisky casks are safely stored in bonded warehouses, providing a further level of security for risk conscious investors.
Why Investors Are Flocking to Scarcity
It may seem counterintuitive, but there is actually an important similarity between a block chain generated cryptocurrency like Bitcoin and a cask of rare whisky. Both Bitcoins and Casks are limited assets, which gain value due to their increasing scarcity. Just as there is a finite amount of Bitcoins left to be mined, every day there are fewer rare casks available to be bought. Therefore, both investments conform to the golden rule of value generation: demand outpaces supply. The rise in the value of both Bitcoin and casks against other conventional investments may not be so surprising in a market that is now looking for opportunities that go beyond traditional strategies.
In other ways, of course, the markets in crypto and casks look very different: the whisky cask market is highly regulated and has been for many years, which provides stability to investors. The crypto market, on the other hand, is unregulated, notoriously volatile and not for the faint-hearted.
Crypto or casks? Perhaps both.
For investors who are prepared for the ups and downs, an appropriate level of investment in cryptocurrency could provide a good source of portfolio growth. The next few years will almost certainly see dramatic swings in prices, giving investors the chance for a big win.
But, if you’re an investor planning to sink money into a cryptocurrency, it’s important to make sure first that your portfolio is adequately diversified. There are plenty of options to spread your investment to other assets that can provide the steady growth you need to hedge against the uncertainty of Bitcoin.
And that’s where investing in whisky casks could make all the difference to the future of your investments.
Discover more about the keys to whisky investment here.