Should Bitcoin be part of the luxury index? As the Bitcoin price starts to regain its strength following the short dip it experienced in the past week, the latest Knight Frank’s Luxury Investment Index, which has risen in value by 5% over the past year, shows that certain luxe collectibles have been plummeting in value.
While this may not directly point at Bitcoin as the next and the most appropriate option to be embraced (it was not mentioned in the Index), the ranking which is based on third-party data that tracks the performance of a representative basket of high-end collectibles, rules out safe haven options such as residential property and gold as the best options for investment in recent times.
Tide is changing
Rather, the tide seems to be changing in favour of non-conventional collectibles like art or wine, based on its assessment of the performance of 10 key luxury investment sectors – cars, art, wine, coins, stamps, jewelry, colored diamonds, Chinese ceramics, watches and antique furniture.
Since early 2016, the value of wine has accelerated rapidly and has now overtaken classic cars which have seen lacklustre sell-through rates with a number of cars not fetching their low reserves at some recent high-profile auction sales, the report says. Wine prices grew by 25% in the last year and 231% in the past decade.
From dominating the rankings over the past few years, classic cars have only appreciated in value by 2% in the last year despite prices have risen by 362% over the past 10 years, while prices of watches have appreciated by 4% and 65% in the past 12 months and over the past decade respectively.
Using data from sources including AMR, Stanley Gibbons, HAGI, Wine Owners and the Fancy Color Research Foundation, the Knight Frank Luxury Investment Index, launched in 2013, calculates inflation like a consumer price index.
Compared with what?
It puts, for example, prime central London property as having depreciated by 6% in the last 12 months despite the market having risen by 38% during the last 10 years. It also puts gold prices as having fallen by 5% though bullion prices have risen by a massive 362% since 2007.
Chinese ceramics have been down by 12%, continuing the downward trend over the past five years owing to the slowdown in the Chinese economy while prices of antique furniture fell by an average of 3% within the same period.
Colored diamonds have stagnated in price overall though blue diamonds have risen in value by 5.5% over the past year and since 2007, prices of stamps have risen by 103%, according to specialists Stanley Gibbons.
Fine art appreciated by an average of 7% and collectible coins rose by 4% over the past year though their prices have increased by 182% since 2007, with rare coins from Islamic countries cited as among the biggest risers.
Bitcoin prices, on the other hand, have risen more than 400% in the past 12 months. They started the year at about $968 and have increased to the current rate of over $4000. This is due to the various advantages digital currency brings over the fiat monetary system which imposes capital controls on the amount of money that can be transacted at a given time in some cases, and daily limits by banks and freezing of accounts in other instances.
Bitcoin also enables global reach, which is especially important in those countries with high inflation rates who fall back on it as a store of value.
Several other factors make Bitcoin a better and more attractive investment option including the liberty it gives the users to create their own banks through secure Bitcoin wallets. Hopefully, the reality will sink deeper with time and Bitcoin will become the darling of those seeking a viable investment alternative.