The meteoric rise of Bitcoin, and the cryptocurrency sector as a whole, has been one of the bigger stories of the past year, with the idea of blockchain and digital currencies making the leap from being a fringe topic among experts into the mainstream.
A key factor in Bitcoin’s bumper 2020, which saw its value rise 341% during the year, was its status as an ‘alternative’ investment, an asset that is usually removed from the day-to-day volatilities of markets like stocks and currencies.
Volatility may be the Bitcoin killer
Despite Bitcoin serving as something of a ‘golden child’ for alternative investments in recent months, its wild price swings could ultimately lead to a downfall of its popularity among investors.
“The main risk to the [crypto] asset class is its high volatility…it is very dramatic and very hard to track”, Scott Sciberras, co-founder and chief executive of cask whiskey investment firm Whiskey & Wealth Club (WWC) told Proactive.
He adds that the crypto is also “very rumour-based”, a fact that appears to have been borne out in several incidents involving niche crypto Dogecoin, which saw its value soar dramatically in late January and early February on the back of several cryptic tweets from Tesla Inc (NASDAQ:TSLA) boss Elon Musk that appeared to be backing the internet meme-inspired token.
Sciberras also noted that the security of crypto investments also remains a risk.
“[Crypto] wallets are subject to cyber-attacks and are usually uninsured”, the CEO said, adding that should an investor lose the access code to their wallet this will also leave them with little recourse to access their investment ever again due to the still largely unregulated nature of the sector.
Whiskey and other alt investments offer more stable alternative
For those unwilling to take the plunge into crypto, Sciberras says that alternatives such as cask whiskey, WWC’s main business focus, offers a tangible asset class that investors can “touch and feel”, as well as being insured by the British and Irish governments while it matures in wooden barrels.
While whiskey may not offer the fast returns that Bitcoin and other cryptos can potentially bring, Sciberras highlighted that whiskey’s value builds up consistently as it sits in the cask.
“Whiskey is a very steady increase [in value]”, the CEO said, adding that even before market volatility fully took hold last year, whiskey as an investment was seeing a large upswing in demand.
This trend was reflected in the WWC’s cask whiskey buyer report for 2020, which saw the company’s sales in the first quarter of 2020 jump to over 1,100 casks, equivalent to around 230,000 litres of whiskey, from around 330 casks in the prior year.
“Whiskey was a great alternate choice prior to COVID-19, and it has been getting stronger day by day under current conditions”, Sciberras said.
Meanwhile, other assets in the alternative investment space have also been drawing investor interest, even before the pandemic.
In its luxury investment index 2020, consultancy Knight Frank reported that over 2019 the value of luxury handbags rose 13%, followed by rare stamps with 6% growth and art and rare whisky with 5% value growth each.
Other sources of value growth over the year were rare coins at 3% followed by luxury watches at 2% and wine at 1%. However, rare whisky was by far the winner over the decade, notching value growth of 564%, well above the second-highest growth figure of classic cars at 194%.