Bitcoin attracts many people for varied reasons. However, due to its increasing value, most people want to own or use Bitcoin. And that’s natural since people want to increase their wealth. Over the years, this cryptocurrency has proven it can help individuals and enterprises grow wealth. However, its volatility has made many people skeptical about its ability to serve as a store of value. Bitcoin is such a gem that you can hold in your portfolio and you can use Qumas AI for fully automated trading options.
What is a Store of Value?
A store of value maintains its purchasing power, and people can readily exchange it for other things. Thus, a store of value retains the same worth or increases it over time. Also, it should be easy to trade with something else.
Traditionally, people have used fiat currencies like the US dollar, yen, and euro as the store of value. Precious metals like silver and gold have also served as stores of value during human history. That’s because they are relatively scarce, easy to transact with, and have high liquidity and utility.
Does Bitcoin Qualify to Be a Store of Value?
Primarily, Bitcoin was to serve as a digital currency. However, many see it as digital gold or a store of value. Here’s what qualifies Bitcoin to be a store of value:
- Acceptance: Bitcoin’s wide acceptance globally makes it a store of value. You can pay for items or services in various locations using Bitcoin.
- Durability: Despite being younger than other assets serving as stores of value, Bitcoin has proven successful when serving this purpose. It has existed for over a decade now.
- Liquidity: This cryptocurrency has a liquid market, with some financial institutions accepting Bitcoin.
- Scarcity: Bitcoin’s protocol limits the number of coins that can ever exist to 21 million. That means Bitcoin is scarce like the other stores of value.
- Portability: A Bitcoin wallet allows you to carry your digital coins everywhere. And you don’t have to depend on a bank or payment process to access and use your Bitcoin.
- Divisibility: You can divide a Bitcoin unit into 100 million satoshis. Thus, you can pay for daily transactions with this cryptocurrency.
These attributes qualify Bitcoin as a store of value. Also, they make it a digital currency that you can use to complete daily transactions, such as paying for coffee.
Comparing Bitcoin with Gold and Fiat Currencies
As a store of value, Bitcoin compares to gold and fiat currencies. Here are the primary attributes that make Bitcoin comparable to gold and fiat money.
- All of them are scarce
- All of them are durable
- All of them are easy to use when completing transactions
- They are portable domestically and internationally
- They can trade in significant amounts without impacting the price
- They are resistant to confiscation or seizure
- Low barrier to entry as anybody can purchase them at any amount
On the other hand, each store of value needs to catch up in some cases. For instance, Bitcoin’s volatility makes many people argue it doesn’t qualify as a store of value. On the other hand, fiat money doesn’t guarantee users that its value will increase over time. For gold, the only drawback is that it is challenging to verify its authenticity.
Parting Shot
Unlike fiat currencies and gold, Bitcoin is relatively young. Therefore, it’s challenging to determine whether it’s genuinely a good store of value. Nevertheless, Bitcoin has proven its worth by increasing its value over the last two decades. Despite being volatile, the cryptocurrency has made millionaires from people that invested in it early. However, it remains uncertain whether it will become a mainstream store of value.
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