Fine Wine Vs Cryptocurrency: Which Is A Better Alternative Asset?

Fine wine and cryptocurrencies may seem like two distinctly different assets. 

Crypto is grabbing headlines and shaping the global monetary landscape as people strike it big. 

While fine wine investing doesn’t sound as alluring as cryptocurrencies, it has a long history of providing reliable returns and minimizing volatility. It’s also a physical asset that you can uncork and relish! 

Let’s compare fine wine vs cryptocurrency and how crypto and fine wine can complement each other. We’ll also show you how Vinovest can help you with fine wine investment.

Fine Wine Vs Cryptocurrency: 6 Key Differences

These are the differences between fine wines and cryptocurrencies: 

1. Volatility

Volatility is perhaps the defining characteristic of Bitcoin and many other cryptocurrencies. It’s more volatile than the S&P 500 and most big tech companies listed on Nasdaq. However, volatility is also one of the most significant contributors to the impressive returns of digital currencies. 

Although volatility can result in massive gains, it also causes large swings in the value of your investments. 

So, it’s important to diversify with another alternative investment that offers more stability. 

Fine wine is an alternative investment offering remarkable stability, with only about a third of the volatility of the stock market. And, for the past 15 years, fine wine has outpaced the Global Equity Index by 1.88%, regardless of market conditions. 

When the Covid-19 pandemic struck in early 2020, the downturn suffered by the wine industry was shorter and less severe than most other assets, alternative or otherwise. The Liv-ex 1000, one of the broadest fine wine indices, declined by 2.7%, where Bitcoin dropped by almost 11%. 

2. Returns

Fine wine has a history of providing solid returns. Between the Liv-ex 1000’s inception in January 2004 and December 2021, the index has appreciated by more than 324%, climbing 16.5% in 2021 alone. 

Further, fine wine prices have appreciated by 127% over the last decade, outperforming handbags, colored diamonds, new chip art, and rare furniture. 

The Fine Wine 100 index has appreciated by 299% from July 30, 2001, to September 29, 2021. For comparison, the S&P 500 returned 261% over the same period, while the Dow Jones rose 221%. Interestingly, the Dow Jones launched a series of digital currency indices in May 2021, expanding on it in July of the same year.

Data from LiveTrade, which runs the Bordeaux Index, showed that champagne was also a top earner in 2021, highlighted by Salon le Mesnil's 2002 surging over 80%. That’s five times more than the big tech stocks held in the NYSE FANG+TM Index. 

However, cryptocurrency also has a track record of providing solid returns. In fact, Bitcoin may have made more than 100,000 millionaires since its launch in 2009. 

Through 2021, Bitcoin appreciated by 59.8%. However, many other digital currencies surpassed this. Ethereum, for example, climbed just under 400%, while Cardano saw a 621.3% price hike.

While these returns are undoubtedly appealing, wine investing is tough to beat for those looking for a low-stress, high-returns investment. 

3. Regulations

The crypto space is notorious for its lack of regulation, leading to scams, pump-and-dump schemes, hacking, and theft. It’s all too easy for new crypto investors to fall victim to shady practices. 

Digital currency regulations are slowly being introduced, but this will change the crypto landscape. Different countries implementing different regulations can disrupt cross-border transactions, while stricter legislation may dampen some of the returns that drew so many investors to the space in the first place.

Fine wine investors have also suffered from fraud throughout the years. 

But with fine wine investing, reputable wine investment firms like Vinovest can verify the authenticity of each wine bottle, giving the investor peace of mind. 

4. Intrinsic value

Fine wine is far easier to value than cryptocurrencies. Fine wine is a real asset produced by a global industry that contributes to economies, supports international trade, and employs thousands of people. 

In contrast, digital currencies are tough to value. Without physical comparisons, it’s challenging to know when a cryptocurrency is overbought or oversold. 

As a result, crypto’s value is more speculative and based on sentiment. For example, in a Twitter thread on inflation, Elon Musk said he wouldn’t be selling his crypto holdings, which includes Dogecoin. Minutes later, the digital currency spiked 7%.

5. Market simplicity 

Many cryptocurrencies are capped by a mathematical limit, which helps drive demand and raise prices - just like fine wine. 

However, the cryptocurrency market is far more complex than the wine market. Plus, the market is fickle, and crypto investors should be ready to make a move quickly. 

With a fine wine investment, the investor doesn’t need a ton of prior knowledge. 

This is especially true when investing with a company like Vinovest, which takes care of authentication, insurance, storage, and more. In fact, with Vinovest, you can build an entire wine portfolio without learning the lingo. 

There’s also no rush with fine wine. 

If anything, fine wine investors should have patience. It’s recommended to hold a physical vintage wine bottle for at least five to ten years to optimize returns. 

Further, the fine wine market is far more resilient to global events than many other assets, especially cryptocurrencies. 

6. Environmental impact

Many investors are casting a stern eye on the impacts of their investments on the natural environment. 

The wine industry is susceptible to climate change, so it’s making strides in reducing its effect on the climate through sustainable farming. 

On the other hand, cryptocurrencies are a notoriously energy inefficient asset class. Since no more than 21 million Bitcoin can be mined, the closer we get to that figure, the harder computers have to work to solve the algorithms. 

The specialized cryptocurrency mining equipment requires intense processing power and consumes a considerable amount of electricity. 

In May last year, Elon Musk announced that Tesla would no longer accept Bitcoin payments over concerns about its environmental impact. 

For perspective, the Cambridge Bitcoin Electricity Consumption Index states that Bitcoin mining operations consumed more electricity in a year than the entire country of Norway. 

Now:

Wine lovers interested in adding an asset class like fine wine to their portfolios may wonder how to easily invest in fine wine.

Here’s how:

Invest In Fine Wine Easily Through Vinovest

Vinovest is a leading wine investment platform that offers the easiest way to source, manage, and grow a portfolio of investment grade wine. 

How Vinovest works: 

Step 1:Sign up with the platform. The process takes only a few minutes - all you need is your name, email address, and password. 

Step 2: Fill in a short questionnaire. Answering a few questions will help Vinovest’s wine experts determine your investment style. 

Step 3: Fund your account. You need a minimum of $1,000. 

Step 4: Using the answers from your questionnaire, Vinovest’s AI will suggest investments for you. Simply click on the wines to learn more about them. 

Step 5: Enjoy a glass of wine while watching your portfolio grow. 

On a similar note, whiskey also has long-term data of outpacing inflation and a minimal correlation with the stock market. Whiskey also maintains its quality if left unopened, making it a perfect long-term investment. 

Now, here’s another key question:

Can Fine Wine And Cryptocurrency Co-Exist?

Although fine wine and cryptocurrencies seemingly share more differences than similarities, they can co-exist. 

Allocating even a 10% of your investment portfolio to wine can make all the difference. Wine can steady Bitcoin’s volatility without comprising the impressive potential returns digital currencies offer. 

Fine and vintage wine can reduce the volatility of your investment portfolio while minimizing the overall potential losses. 

Additionally, several wineries and auction houses have begun accepting various crypto currencies as payment, including Bitcoin, Bitcoin Cash, Gemini Dollar, and more. Even major auction houses like Christie’s and Sotheby’s have begun taking steps on accepting crypto as payment.

Other wineries have taken things a step further and begun experimenting with non-fungible tokens (NFTs). In April last year, Yao Family Wines, founded by retired MBA player Yao Ming, announced it would be auctioning its smallest production wine alongside a limited edition NFT. 

Yao Family Wines released four images of Yao Ming along with a one-of-a-kind NFT created for bottle 11 - the number he wore during his NBA career. 

For wine investing, the appeal of NFTs may go beyond the bragging rights. Every time an NFT is sold, its traction is forever recorded in the blockchain, adding provenance for wine lovers. With time, NFTs may help clamp down on fraud in the fine wine market.

Meanwhile, Algodon Wine Estates announced that it accepted cryptocurrency as payment for a piece of luxury real estate it sold last year. (Algodon Wine Estates is a luxury real estate development in Argentina.)

Ready to add some wine to your portfolio?

Fine Wine: One Of The Most Stable Alternative Assets

When diversifying your portfolio, you don’t necessarily have to choose between cryptocurrencies and fine wine. Where crypto offers the potential for outsized rewards, fine wine acts as a stabilizing force, offering inflation-beating returns over the long term. 

For the simplest way of adding investment grade wine to your wine portfolio, check out Vinovest. Simply sign up with the platform to get started.