Cryptocurrency vs. Farmland: Exploring Two Alternative Investments

Cryptocurrency has been a hot topic among investors, especially during periods of rapid price increases. In early 2021, Bitcoin and other altcoins reached new highs, prompting many to consider how crypto might fit into their portfolios. However, with the volatility and potential for speculative bubbles in the cryptocurrency market, some investors may be looking for alternative options that may offer more stability—such as farmland.

Investing in Cryptocurrency

Cryptocurrency investing has evolved from a fringe activity to a mainstream option in recent years. When Bitcoin’s price surged, many investors flocked to the asset, and even large financial institutions began exploring opportunities in the space. Despite Bitcoin’s volatility–such as the Bitcoin bubble burst in February 2018–and the occasional market downturn, investors continue to see potential in cryptocurrency, although it comes with its own set of advantages and challenges.

Here’s what you need to know before entering the market.

The Pros of Cryptocurrency Investing

• Accessibility: Investors can purchase fractions of a cryptocurrency, allowing flexibility in how much they choose to invest.
• Variety: With numerous cryptocurrencies available, investors have options beyond Bitcoin, often at different price points.
• Growth potential: Blockchain technology, which underpins cryptocurrencies, has gained the interest of major financial institutions, indicating potential for future growth.

The Cons of Cryptocurrency Investing

• Volatility: Cryptocurrency markets are still relatively new–first cryptocurrency debuted in 2009–and speculative, with prices subject to significant fluctuations.
• Uncertainty: With a short history compared to other asset classes, cryptocurrency remains less predictable and more prone to risk.
• Complexity: The variety of cryptocurrencies can overwhelm new investors, making it difficult to identify opportunities with strong long-term potential.

Investing in Farmland

Farmland investing offers a more established alternative to cryptocurrency. By investing in farmland, investors can own a portion of a farm and potentially earn returns through rental income and profits from agricultural production. Farmland, like other real estate investments, has a history of generating stable returns, even during economic downturns.

The Pros of Farmland

• Proven demand: The agricultural sector remains a crucial part of the economy. In 2019, U.S. agriculture contributed $1.109 trillion to the national GDP, representing 5.2% of the total. The consistent demand for food production supports the value of farmland.
• Stable returns: Farmland has generated double-digit returns for decades, even during periods of recession and inflation.
• Inflation resistance: Farmland provides exposure to commodities, which tend to perform well during inflationary periods. Agricultural commodities such as grains and livestock are essential goods, adding to farmland’s resilience.

The Cons of Farmland

• Long-term investment: Farmland investments often have hold periods of five years or more, making them less liquid than other asset classes.
• Accreditation requirements: Farmland investments may be limited to accredited investors, with minimum investments often required.

Farmland vs. Cryptocurrency: Which Is Right for Your Portfolio?

Both farmland and cryptocurrency offer unique ways to diversify a portfolio, but they cater to different investment strategies. Cryptocurrency offers accessibility and the potential for rapid growth, albeit with high volatility and risk. Farmland, on the other hand, provides steady, inflation-resistant returns with a long-term focus and proven demand.

For investors seeking reliable, long-term value, farmland stands out as a stable alternative asset. Cryptocurrency may appeal to those looking for more speculative, high-risk opportunities. Ultimately, the best option depends on your investment goals, risk tolerance, and time horizon.