Bitcoin as a store of value despite being held as a speculative investment

Likened to gold, the primary store of value, can Bitcoin be used like gold and as such, be used as a store of value? Can we expect an increase in the real-world use of BTC to project higher prices? These questions are arguably open for debate and efforts to reach a consensus seems almost futile.

However, the different arguments on the economic aspect and use of BTC as a store of value are open for discussion. According to Matt Hougan of Bitwise Asset Management, the price of Bitcoin has higher chances of increasing by over 500 percent, but in a period of not less than ten years! His prediction is based on the fact that Cryptocurrency is becoming an actual store of value as Blockchain the primary technology behind its success is permeating in several facets of life.

Since its inception almost a decade ago, the digital currency has been likened to gold. Some of the proponents have been calling the crypto, “digital gold.” other critics, have disputed the idea saying the two, does not come any closer to one another. However, respect to the high volatility of Bitcoin, it cannot be used as a measure and store of value.

However, what qualifies a defined medium to be a store of value? From the basic definition, for Bitcoin to be used as a store of value, it has to be readily tradable and be stored for future use. Therefore, it has to exhibit a high level of stability for a specific period. That said, there is no doubt that Bitcoin is highly volatile. However, it turns out that the volatility is not exhibited by a number one cryptocurrency, a preference in the financial world. The use of real utility apps such as the best bitcoin wallet should positively influence the adoption of BTC.

Comparing gold to BTC is somewhat misplaced since gold is not only solid based on its physical attributes, but it has also maintained a significant level of price rigidity. However, past experiences on the use of gold as a measure and store of value have been alienated from the US dollar. Based on the universal acceptance of this metal, it makes it a perfect medium of exchange and store of value.

Conversely, gold has industrial uses, which cannot be enough to justify its stable prices. Matt Hougan said, “Gold is worth $1,300 per ounce because people are willing to pay $1300 per ounce for it as a store of wealth.” Therefore, the prices of BTC is dependent on individual’s acceptance to spend on it.

Bitcoin is less than a decade old, meaning it is yet to be fully formed and expecting Bitcoin to behave like a fully formed asset lacks economic merit. According to Hougan, Bitcoin is passing through a two-stage process of appreciation coupled with declining volatility. The crazy rise in Bitcoin prices at the end of 2017 has finally plateaued at $6,000 in the first months of 2018. However, this volatility is considerably high but should be expected to decline over time.

Do you believe that Bitcoin has higher chances of increasing its prices over time? When stable, can it be used as a measure and store of value? Will the speculations of stable prices be predictable?

Photo via Shutterstock.

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