Key Takeaways:
- Bitcoin is also known as digital gold. In this article, we get into the details of how Bitcoin compares to physical gold and other assets as a store of value.
- A store of value is an asset that retains its purchasing power over time and can be readily exchanged for something else, such as fiat currency, precious metals, real estate, and property.
- A good store of value should be durable, portable, fungible, divisible, scarce, and verifiable.
- Bitcoin’s digital scarcity and decentralised nature have made it an attractive store of value that is now a top 10 market cap asset.
- Learn how Bitcoin compares to gold in durability, portability, and other characteristics.
Introduction
As technology advances, the conversation around what makes an asset a reliable store of value has evolved to include digital assets like Bitcoin. This article dives into the characteristics that could make Bitcoin a potential store of value and compares it to traditional assets like gold.
Understanding Stores of Value
A store of value is an asset that retains its purchasing power over time and can be readily exchanged for something else. Some common stores of value include fiat currency, precious metals, real estate, and property.
A good store of value should be:
- durable
- portable
- fungible
- divisible
- scarce
- verifiable
Learn more about these criteria and what money is here.
Bitcoin as a Store of Value
Bitcoin’s decentralised nature, scarcity, and global accessibility make it an attractive option for those looking for a store of value and an alternative to traditional assets. At the same time, Bitcoin’s volatility and current limited use as a means of exchange are challenges.
Below we take a look at how Bitcoin measures up against the criteria for a store of value:
1. Durability
Bitcoin, as a digital asset, is not subject to physical wear and tear or degradation. It will exist as long as the decentralised network supporting it continues to operate, making it a durable store of value.
2. Portability
Unlike gold, which can be expensive to transport and store, bitcoins are easily portable: They are stored digitally and can be sent across the globe quickly — a more convenient option for many users.
3. Fungibility and Divisibility
Every bitcoin is interchangeable with any other bitcoin, making it a fungible asset. Additionally, bitcoins are highly divisible, with each capable of being divided down to 1/100,000,000th of a unit, also known as a satoshi.
4. Scarcity
The supply of Bitcoin is capped at 21 million coins, making it a scarce asset.
5. Verifiability and Censorship Resistance
Transactions made using Bitcoin are recorded on a public, transparent blockchain, making them easily verifiable. Moreover, Bitcoin’s decentralised nature theoretically makes it difficult for any single entity to control or censor transactions — although this risk does exist (e.g., 51% attacks, where a group of miners gains control of more than 50% of a network’s mining hashrate).
6. Liquidity and Utility
Bitcoin’s liquidity and utility have improved exponentially in the last few years, making it more accessible for users, where global crypto ownership reached 580 million by the end of 2023. More countries and jurisdictions are accepting Bitcoin as legal tender — a large and growing number of businesses worldwide accept Bitcoin — while Bitcoin exchange-traded products (ETPs) have appeared in the US: strong signals of BTC’s growing liquidity and utility, increasing its strength as a store of value.
7. History
Gold has a long history as a store of value, dating back thousands of years. Bitcoin, on the other hand, was created in 2009 and has a limited history in comparison. Yet, it already earned itself the moniker of ‘digital gold’ and entered the list of top 10 market cap assets in 2023.
Conclusion
As Bitcoin adoption grows and use cases emerge — including countries accepting the cryptocurrency as legal tender, more businesses accepting it as a form of payment, and BTC entering the list of top 10 market cap assets — it continues to demonstrate strong potential as an alternative to traditional stores of value like gold and fiat currencies.
How to Buy Bitcoin With Crypto.com
The Crypto.com App offers a user-friendly and secure platform for buying and trading Bitcoin. Download the App, create an account, complete the necessary identity verification steps, and link to a preferred payment method.
Once set up, users can easily purchase Bitcoin and 250-plus other cryptocurrencies within the App.
Due Diligence and Do Your Own Research
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.
Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.
