Bitcoin competes even with passionate investments

It was already known that Bitcoin was a high-risk investment, but that it could end up competing even with so-called “passion investments” might be news to many. 

Then again, however, crypto markets are full of amateur speculators who choose what to invest in on the wave of emotion or in light of sometimes somewhat superficial considerations. 

To be sure, Bitcoin is not always a passion investment, but apparently in some cases it can undergo curious competition. 

The research on passion investing

Comparing Bitcoin to passion investments was recent research by ExpressVPN, devoted precisely to the rise of the latter. 

“Passionate investments” refers to investments in, for example, rare whiskies, paintings, art objects, luxury items, and automobiles. These are generally considered assets to invest in due in part to the relative stability of their market value. 

Bitcoin, on the other hand, does not have a stable value, but makes up for this lack through its potential to generate high returns.

So there are other motivations behind investing in Bitcoin than those behind passion investing, but it appears that BTC could provide an alternative to the latter. 

What makes Bitcoin need to be considered something different is that it is an asset with a decentralized nature and limited supply, as well as volatility. 

Instead, in the category of passion investment, in addition to the ones mentioned before, NFTs and even Legos may fall into the category, while gold and stocks are losing popularity instead. 

Bitcoin

The popularity of passion investments is mainly due to the fact that they can outperform traditional investments while also offering good stability.

Bitcoin does not offer stability, but its remarkable potential to outperform traditional investments makes up for this shortcoming. 

Actually, the research also reveals that the crypto winter of 2022 has made many investors cautious in this respect. 

Indeed given that a sought-after characteristic of passion investments is stability, in the event of large losses in a relatively short period of time the outperformance compared to traditional investments, and thus the attractiveness of the investment itself, is lost. 

However, given that the crypto winter now seems to be behind us, in the event of a new bull run everything could go back to the way it was, and Bitcoin could once again be considered attractive by those seeking such investments. 

In other words, Bitcoin competes with passion investments when the trend of its value is upward, while it loses appeal in this respect when the trend is downward. 

For example, the research cites a CNBC poll that revealed that about 60 percent of Americans consider crypto investments high-risk, and 26 percent consider them moderately risky. 

The stability issue

In light of this, it is not at all strange that several well-known faces in the investment world have compared Bitcoin to gambling. 

From this point of view, however, personal sensitivity, that is, the degree of risk aversion, which changes from person to person, matters a great deal. This is why there is also a minority who do not consider BTC a high-risk investment. 

ExpressVPN’s research also reports that current regulatory uncertainties in this regard are contributing significantly to this risk, such that any change in government regulations may have impacts on the sustainability of the asset.

Added to this is the potential negative impact that can come from traumatic events globally, but also from cultural shifts, changes in sentiment, social media trends or even possible celebrity endorsements.

For those who speculate in the financial markets this is all within the norm, but for those who invest for the long term it can be much more difficult to endure all these things. 

Since passion investing tends to be preferred by long-term investors seeking stability, when sentiment on Bitcoin is negative and there is volatility this type of investor tends to flee. 

Returns 

One commonality, where the competition is direct, however, is the potential for high returns, especially over the long term. 

Passionate investments in fact attract investors precisely because of their impressive growth potential, as well as their unique appeal. 

So just as is true for speculators, here too it is the expectation of strong returns that attracts capital. 

And this is precisely why Bitcoin can compete with passion investments when the trend is positive. 

For example, the research cites the Knight Frank Luxury Investment Index (KFLII), which during 2022 saw an increase of 16%. 

In the KFLII, rare whiskies are the undisputed leaders, with a 373% growth rate over 10 years. 

He also cites a “forgotten” cask from 1988 from the Macallan distillery purchased for £5,000 and later sold for more than £1 million at auction.

In contrast, fine arts soared 29%.

Luxury cars are also mentioned, with a 1962 Ferrari 250 GTO selling for $60 million, or a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupe recently sold for $143 million. Or a rare Hermès Birkin Himalaya bag sold for over $300,000.

In reality Bitcoin over the medium/short term can produce even higher returns, but with a significantly higher level of risk. 

Physicality

Where Bitcoin cannot compete at all, however, is in physicality. 

In fact, it is considered a significant advantage by most passion investors to be able to physically own these objects so much that they can even enjoy using them. 

In reality, physicality also has a disadvantage, because it means that over time these objects can also perish, or spoil. 

However, passion investors seek physicality, so from this point of view there are more advantages than disadvantages. 

It is probably this aspect that does not make Bitcoin a true passion investment, and that creates a real caesura with the other investments mentioned in the research. 

It’s hard to imagine that anyone who invests in a car, a luxury purse, or a rare bottle would trade for BTC. 

Legos

Finally, a note of color. 

The research reveals that collectible Legos have outperformed stocks, gold, and bonds, and by a significant margin. 

It mentions rates of return ranging from 150% to 250%. 

The research cites as examples the Lego set of the Space Command Center, which reached over $10,000, and the 1978 Lego Castle, which reached $9,900. 

What is interesting is that while there is limited supply, there is huge demand globally for these products. 

However, this is a volatile industry, because demand can drop at any moment. 

It also takes a long time for a Lego set to become collectible and appreciate, so it is more of a curiosity than a truly important area of passion investment.