Before I start this post, I want to explain this is just a theory I have. It is not investment advice and I personally invest in more than just Bitcoin and Wine. During 2022 a large portion of my investments have been and will continue to be in these two investments.
I want to explore why I think only investing in Bitcoin and wine could work as an investment strategy if someone wanted to avoid being attached to any government investments or if they did not have access to a stock, bond, or housing market.
These two asset classes should also be inflation resistant according to historical data, but that could always change. There is always risk so talk to a professional about what is right for you.
These are the two asset classes I really enjoy learning about and they also happen to complement each other quite well, in my eyes.
Bitcoin, high volatility (some say high risk), 150%+ returns annually over the past decade, less than 15 years old, the future of money (or at least store of value) in my opinion.
Wine, low volatility, uncorrelated to the stock market, physical ownership, thousands of years of history, about 10%+ returns over the last 15 years, almost no chance of going to zero (unless people stop drinking… like that’s possible).
Bitcoin is a digital currency that is completely decentralized and can be transported very well across time and space due to its properties.
The reason Bitcoin is one of the two pillars in this portfolio is because it cannot be taken from you. The government cannot seize it, it cannot be stolen from your house, it won’t be stolen from a company or person committing theft or fraud. It is the hardest money ever discovered.
Fine wine is a historical asset that has been beloved for thousands of years. It is tangible and gets scarcer each year after it’s harvest and bottling.
Domaine de la Romanee-Conti is known to be one of the rarest produces of wine in the world. A bottle of their wine produced in any year will NEVER be produced again, because the time has passed, and the quantities of bottles are also reduced constantly. Due to consumption, spoilage, bottles breaking, etc. there will be less and less bottles available to enjoy (or invest in) each year.
When thinking about assets I find it important to purchase the investments and goods that the wealthiest people want.
Wine fits this description, it is an investment that the wealthiest people will always want to purchase for a variety of reasons. One of course is because being the owner and consuming the finest wines is a major status symbol. The other is that these wines are thought to be the most delicious and unique experiences a wine lover can have.
Both investments have a scarcity factor. They both become rarer due to either people losing their Bitcoin password (private keys) or by people drinking/breaking bottles of wine.
Neither of these investments are companies that rely on people to make good decisions, and neither are income producing. They cannot go bankrupt.
Bitcoin is a decentralized currency that is fixed at 21 million coins. It is a currency that can travel around the world in your head, and if you please it will disappear with you when you die if you memorize your private key and never share that information with anybody.
Wine is a real asset that has historically had high demand, and once produced its fate is sealed. Bottles can last decades or longer, they get scarcer with time, and if you choose the correct wines their value will go up with time. Diversification is important in wine investing.
The future of wine looks to be quite good. Many developing countries like China and the rest of Asia have been consuming record numbers of wine in the past few decades.
As the countries become wealthier, they want to indulge in fine products, like wine, art, and other real assets.
The world is only getting wealthier, poverty is becoming less and less of a problem each year thanks to technology and good people.
Fine wine will continue to rise in demand with this increase in wealth and these old bottles of wine have a higher demand with a fixed supply. (I think Bitcoin also follows this supply and demand curve)
Based on basic economics as demand rises and supply decreases, price must go up as well.
If there are wealthy people, there will be demand for rare and fine wine.
Another benefit of wine is that it is typically uncorrelated with the stock market. Naturally if an economy is in complete collapse there will be less people purchasing fine wine, but historically this correlation is very minor, and the demand will still be there.
It turns out that people would rather have a real asset like wine that they know will not go bankrupt during a recession or depression, instead of owning a speculative stock.
Plus, you can drink your sorrows away.
Bitcoin is currently sold as a ‘replacement’ of gold. It has all of the same characteristics that make gold valuable, plus more.
Gold has most of its value because it is rare and difficult to produce. Bitcoin is infinitely rare (because there are 21 million coins, at a fixed supply) and it is also very difficult to produce (thanks to the mining process). Bitcoin can be transported across the world for nearly free, gold is extremely expensive transport.
Bitcoin can be verified as real between 10-60 minutes; gold must be melted down and re-casted to be verified as real which is very expensive.
Bitcoin can do anything gold can do, but better. It’s clear that younger generations are not fixed upon the belief that “because it’s not physical it has no value.” Many young people have lived most of their lives in the digital world and we believe that digital things are just as real (or more real) than physical things.
For example, younger generations never use cash, they use credit and debit cards. Younger generations will pay hundreds or thousands of dollars for digital items in a video game but wouldn’t care if it was a real replica of the object (something that comes to mind is skins in the game Counter-Strike GO, which can sell for thousands of dollars with no real world use case).
I have extreme confidence in bitcoin as a superior money, and in a decade, I believe the world will agree. Will it replace the dollar, I’m not sure? Will people buy it and save it as a hedge against governments to have an asset that cannot be seized, I think yes. Will it be a hedge against inflation? I also think yes.
If you live in Venezuela in 2022, your money is going to be devalued to an extreme level by your government. If you live in many African countries, you may not even have access to a bank. If you live in a dictatorship, you may want a way to leave your country and take your money with you.
Bitcoin solves all these problems better than anything else in the world.
It’s very volatile and risky, but that’s where the money is made. By the time Bitcoin is no longer volatile, it will be mass adopted. All tech goes from volatile to the norm. (Think about early days of Apple, Amazon, Google, the internet, cars, or any other life changing technology)
Bitcoin. High risk and high reward. But, even if it just tracks inflation, as gold is supposed to do, I will still invest in it.
Wine, low risk and moderate reward (sometimes high reward). This is the money that I can use to retire in a few decades if Bitcoin turns out to be the worst decision I could have made, which it won’t be. (Not advice)
To summarize this, Bitcoin is a scarce asset that is becoming more and more accepted and is slowly becoming a global currency (it is already an official currency in El Salvador). It can’t be seized and can be taken anywhere your brain can go.
Wine is a physical asset that also gets scarcer with time. It can be consumed, enjoyed, and stored for decades. Its rarity gives it much of its value, and as nations become wealthier, older wines will increase in price with global wealth (so in some sense, you’re investing in the global economy and becoming wealthier by purchasing real assets that people want).
Can bitcoin and wine work as a portfolio? I think yes.
There are many people who just invest in wine for a living. There are also people who trade and invest in Bitcoin for a living. Almost any investment can work if you understand what you are buying and do the research.
I personally use Strike to buy my bitcoin. It uses bitcoins lightning network, meaning there are 0 fees on purchases (I’ve personally never paid even 1 penny of fees when buying bitcoin through them).
I personally use Vinovest to purchase my wine. They have a trading platform as well as a management platform. You can either choose the wines you want to buy with the trading platform, or you can give them money and have them use their professional experience to choose for you. You also own the physical bottles of wine, it’s not a wine fund where you just own a share that represents wine. You can sell the wine at any time, or you can have them shipped to your home for you to enjoy or do with as you please.
Once again, none of this is investment advice. It’s just a theory I have and I think could work if someone didn’t want to be involved with companies and would prefer owning just real assets (I consider bitcoin to be a real asset).
You could also invest in things like art, trading cards, stamps, watches or pretty much anything that has a collector’s market.
Thanks for reading!
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Once more, none of this is investment advice.
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