One would think that one of the compelling use cases of Bitcoin in this age would be as a store of value. In some cases, it has been likened to gold which has been the primary store of value. However, opinions have been varied maybe because of Bitcoins volatility, whether it can be used as a store of value. Should we consider Bitcoin as a store of value?
Questions have been lingering for a while now as to whether the usage of BTC can lead to higher prices. Reaching an agreement over the issue has been somewhat impossible at this stage. Several arguments have been put across, ranging from the bubble argument, the economic argument and definitely the store of value argument.
For starters, for something to qualify as a store of value, it should be an asset that can be stored for future use at the same time it should be tradeable. Hence a store of value should maintain a level of stability over a certain period of time. Going by the features above then an argument arises, whether Bitcoin’s volatility disqualifies it as a store of value.
Matt Hougan of Bitwise Asset Management supports the argument. According to him, by using the Blockchain technology cryptocurrency is increasingly penetrating several facets of life. Thus, it is actually becoming a store of value. He went ahead to predict that Bitcoin has a high chance of increasing by 500% in a decades’ time.
Since cryptocurrency’s launch, a decade ago the digital currency has been likened to gold. Some people have even referred to it as the digital gold. However, others have stated that the two do not even come close in comparison.
Critics argue that gold is physically solid and that it has maintained a significant level of price rigidity.
Those supporting the argument are quick to counter this by stating that President Richard Nixon dropped the gold standard for the USD in 1971. Hence, the price of gold and the value of the dollar ceased being tethered. A wild volatility was experienced in the price of gold in the years preceding 1971.
Despite its volatility then, today gold is universally accepted as a store of value. This, Hougan states, is because gold has some industrial utility although that is not enough justification. He says that gold is worth $1300 per ounce because people are willing to pay that amount for it as a store of value.
Bitcoin is only about a decade old, and thus, it is not expected to perform like a full asset since it is still developing. Bitcoin is experiencing a two-stage process of appreciation linked to a declining volatility. As such, the current state of Bitcoin experiences speculative volatility and allows for Bitcoin as a store of value.