Breaking: The Truth About Bitcoin's Store of Value Status Revealed!
When you think of safe havens, precious metals like gold and silver probably come to mind. These are investments that individuals flock to prevent traditional market disruptions.
Debate rages on whether or not Bitcoin will follow in the footsteps of these assets. This article will examine the main arguments for and against Bitcoin as a store of value.
Key Takeaways
- Bitcoin can be considered a store of value because it has limited
- Finite supply makes it scarce, and its value is determined by market demand.
- Unlike fiat currencies, Bitcoin is not subject to inflationary pressures.
- Bitcoin has shown resilience.
- Sustained value over the years, even amid market volatility and bearish cycles.
What Is A Store Of Value?
A store of value is an asset that can maintain its weight over time. If you buy a good store with value today, it’s almost certain that it won’t depreciate over time. In the future, the value of assets is expected to be the same (if not more).
When you think of “safe havens” like this, gold and silver probably come to mind. There are several reasons these have traditionally been valuable, which we’ll get into later.
What Is A Good Store Of Value?
To understand a good store of value, let’s first examine what a lousy store of value is. Of course, if you want something to last, it has to be durable.
Consider food, Apples, and bananas have a specific intrinsic value because humans need food. If you are short on food, these items are precious. But that doesn’t make them a good store of value, as they’ll degrade if kept in a vault for a few years, so their value drops significantly.
But what about the intrinsically valuable and lasting ones? Dry pasta? That’s better in the long run, but there’s no guarantee it will still hold its value. Noodles are cheaply made from readily available resources. When supply exceeds demand, the noodles in circulation lose their value. Scarcity is also necessary for something to maintain its value.
Some consider fiat currencies (dollars, euros, yen) an excellent way to store wealth as they retain their value over time. But they aren’t inferior stores of value. Because purchasing power drops significantly as more units are made (like pasta).
The Case For Bitcoin As A Store Of Value
Since the early days of Bitcoin, proponents have argued that cryptocurrencies are more akin to “digital gold” than simple digital currency. In recent years, this story has been repeated by many Bitcoin enthusiasts.
As CZ Binance tweeted recently;
Bitcoin’s store of value theory claims that it is one of the most solid assets known to humanity. Proponents of the paper believe Bitcoin is the best way to store wealth in a way that does not depreciate over time.
Rarity
Perhaps one of the most compelling arguments for the store of value theory is that the supply of Bitcoin is finite. As you may have guessed from our article, what is Bitcoin? Remember, there are no more than 21 million Bitcoins. The protocol ensures this with hard-coded rules.
The only way new coins can be created is through a mining process similar to gold mining. But instead of digging holes in the ground, Bitcoin miners must use their computational power to solve cryptographic puzzles. This will give you new coins.