Bitcoin is often described as digital gold. This is because it is said to bear many of the same economic attributes as gold, despite the fact that it is digital in nature. The defining characteristic of gold is that it tends to retain its value over time, and that it acts as a hedge during times of collapse.
In the most technical sense, it is hard to define bitcoin as a store of value. The bitcoin price is notoriously volatile. From this perspective, it could be said that it bears more resemblance to a penny stock that shoots up and down. Moreover, the asset is only 10 years old, so it is hard to judge whether it really is a store of value. We don’t know what it’s really worth, and its price is unstable.
In order for it to be classified as a store of value, we need a baseline to compare it to. We also need to see how bitcoin price fares during the coming financial crisis. It is currently best described as a hedge than a store of value. Should other systems collapse, we can look forward to an appreciation in bitcoin price.
“So, until such a time when it is stable over a long period of time and is recognized by the largest amount of organizations and governments, I think it won’t be able to be any gold or a stable asset class.” – Jonathan Reichental, CEO of Human Future & UC Berkeley professor.
While it might not exactly be classified as a store of value, that does not mean that it should be avoided. It does not have to be exactly like gold. And most would say that it is far better.
“Bitcoin is not gold. Gold is heavy, hard to carry around. Bitcoin is better.” Changpeng Zhao, Binance CEO.
It is worth noting that bitcoin cannot be confiscated and it is difficult to track users – the government does not have the appropriate spying mechanisms in place for this new asset, and it would prove difficult to implement this on a large scale.
The bitcoin price is not correlated to the price of gold. Both of them serve different functions and have different advantages. But it is bitcoin that arguably has the most upside potential. It has the benefit of being able to be used to pay for things online and can be sent to other parties quickly and cheaply. It is like gold that can be spent, with more upside potential, and less chance of being confiscated.
Bitcoin cannot be called a store of value right now due to its volatility. This is because it is being traded for speculative purposes as opposed to having any real-world use. But with increased adoption, bitcoin could reach a point of mass usage. This would lead to a stabilization of the bitcoin price, which could finally cement its position as a store of value.