Around the world, some assets can retain their worth over time, known under the name of a store of value. Assets that are considered stores of value have the ability to increase their value over time instead of declining as happens with fiat money, for example. Gold is one of the best stores of value, as it has been present for many years, and it has managed to maintain its worth in the last three thousand years. Gold has all the attributes that define a store of value, and only digital currencies could be able to surpass its popularity. It isn’t for nothing that Bitcoin is regarded as the “digital gold,” as crypto has quite everything a store of value should have.
The notion of cryptocurrencies appeared for the first time when Bitcoin took its first steps into the world back in 2009, and since then, this sphere has evolved fantastically, making people interested in how to buy Bitcoin. And because Bitcoin has grown so much over time, the concept of a store of value has also started to be explored more. Satoshi Nakamoto, the creator of Bitcoin, designed the digital currency to mimic the properties of gold, which is why Bitcoin has managed to increase its worth over time.
In this article, we will explore more about a store of value and why the crypto king is considered one.
What exactly is a store of value?
A store of value is any commodity or currency that can keep its worth over an extended period and is not likely to decrease in value. Initially, people didn’t want to invest in those assets with higher risks, so they only opted for investments with low volatility, a stable demand, and an enduring lifespan. However, things have changed over the years, and cryptocurrencies have attracted worldwide interest.
Fiat money is viewed as a weak store of value, as inflation could depreciate its value over time. Instead, precious metals, like gold, and cryptocurrencies, like Bitcoin, have better store-of-value attributes, as they are more likely to maintain their value because they have a limited supply. Scalability is one of the features that make an asset maintain its value over time, and it also offers the property to sell it quickly.
People need a store of value in their lives to help them preserve a better future both for themselves and their families. Money is used as a tool for purchasing and trading services and goods, but it is not really a good store of value, as its worth can depreciate in time due to inflation. Over the years, a lot of countries have experienced hyperinflation, including Venezuela, Zimbabwe, and South Sudan, where the prices have increased very much.
Why is Bitcoin a good store of value?
Even though Bitcoin was initially viewed as a speculative asset because of its frequent price fluctuations, it has since started to be seen as a store of value because it has managed to maintain its value over time. Not only does Bitcoin have the attributes of a store of value, but it also has the ability to increase its worth. This is why many people have turned to Bitcoin, as in this way, they have something appealing that could maximize their returns.
One of the main reasons people perceive Bitcoin as a good store of value is that it is a scarce asset. Bitcoin has a limited supply of 21 million coins, so it is more resistant to inflation than fiat money, which has an unlimited supply. New Bitcoins will no longer be issued once Bitcoin reaches its limit, making people more interested in holding something that will not be issued anymore at some point.
Bitcoin is also durable and will exist in our lives for many years to come, as it is an immutable form of money. Additionally, no one has the ability to alter the Bitcoin blockchain, as for a change to be adopted, it needs the consent of almost all participants, which is not something that happens often. This is why, even though it might also adopt innovations over the years, it is very probable that the main features of Bitcoin will still remain present.
Another factor that makes Bitcoin a good store of value is immutability. Immutability is a feature that allows a transaction to remain recorded and confirmed on the platform without the possibility of being reversed or altered. Immutability is an important feature, as it ensures that Bitcoin remains an integral blockchain and that no one will have the ability to falsify or modify data about it. This is even more important today, when people experience everyday hacks and data breaches. This poses significant challenges to the security of participants online, so trust and security will always improve the features of an asset.
What are other good stores of value assets?
Besides Bitcoin, precious metals, real estate, stock market, and index funds are also seen as good stores of value assets. Precious metals like platinum, palladium, and gold are good stores of value because they have many industrial use cases and a limited supply, which will appreciate their value in time. Real estate is also a good choice, as its value will always be able to increase, and in this category can be any physical property land. However, real estate has a downside in that it is not very liquid, which can be challenging for those in urgent need of cash.
Conclusion
As you can see, many store-of-value assets can increase their value over time, and Bitcoin is one of them. Bitcoin was created in 2009, and even if, at first, it was seen as an asset that was perfect only for tech enthusiasts, now it is appealing to the entire population.
