Bitcoin, along with other cryptocurrencies, can be thought of as a store of value. Many people find themselves asking, should I invest in crypto? Is it worth it? Well, it’s a bit of a tricky subject…
As you might imagine, Cryptocurrencies are quite unlike other stores of value. From collectibles to fiat currencies, stores of value differ in shape and size. But what they have in common is that they are able to retain value over time.
Ideally, anything you buy as a store of value will not be worth less in the future. If it can be worth more, then it’s an investment. However, if it’s more likely to lose money than stay at its value or go up, it’s not a store of value.
So, is Bitcoin a store of value?
Bitcoin as a store of value
The first thing to note about Bitcoin (BTC) is that there’s a finite amount of it. There are 21 million coins in total, with them being “mined” every day across the world. While BTC has increased in value over time since its first appearance in the late 2000s, its value has gone up and down many times.
This is in contrast to something like gold, a traditional store of value due to its finite abundance. However, the actual amount of gold still to be mined is unknown. The fact that physical gold has a value and can be used in physical things makes it an attractive store of value. Bitcoin can’t be held, as it’s digital. Plus, its price fluctuates much more than gold’s price.
This frightens a lot of investors. However, more important is the fact that many people are hoarding their Bitcoin (as an investment) rather than spending it. This makes it harder for new people to get a hold of Bitcoin. If you were to spend it, you’d be putting that money into circulation.
Thus, if nobody is spending their Bitcoin, and instead they’re hoarding it, its value will eventually stop rising. This is because it won’t have much utility, and instead its price will only vary due to market speculation.
Traditional stores of value
The case of Bitcoin is rather unusual when considering traditional stores of value. These include things like gold as we’ve discussed, but collectibles also fall into this category. Not only are collectibles more interesting than a digital currency you’ll never be able to hold, they’re also more fun.
Collecting coins is an exciting, rewarding and potentially lucrative hobby. You might consider getting started in coin collecting, or maybe start scooping up gold bouillon just for fun.
Another classic example of a collectible investment is a stamp collection. Not only are stamps small and lightweight, but they’re also often released in limited batches. This helps to drive the value up over time, making them excellent investments – if you know which ones to buy.
Other examples include toys. These could be anything from baseball cards to model trains, and the market for collectibles in the USA is huge. It’s estimated to be worth $3.75 billion by 2023. With toys, the older they are, the better they tend to be at storing their value.
However, collectibles can be almost any physical object. While Bitcoin is technically as lightweight as you can get (it’s digital after all!) and its value may increase over time, Bitcoin’s fate as a store of value is not as secure as collectibles or hard coins – and not as fun!
Sources
https://academy.binance.com/en/articles/is-bitcoin-a-store-of-value
