Bitcoin has gained immense popularity as a store of value in recent years, with many investors seeing it as a digital version of gold.
Gold has long been a popular store of value. But a new alternative has emerged: Bitcoin.
Both obviously go up and go down. Both are somewhat limited in supply, and inelastic.
When demand goes up for either, the supply really doesn’t for gold and does not for Bitcoin. Whereas governments just pump out more cash, can you quickly make more gold? And Bitcoin is on a fixed release schedule with a maximum cap circulation of 21M, a number that will be reached in the next lifetime.
But yes, Bitcoin is volatile. It’s new. It will move and be subject to upswings and downswings, and crashes and pops. But over the long run, and it gains in usage that volatility will decline.
One of the primary features of Bitcoin that makes it an attractive store of value is its scarcity. This finite supply means that as demand for Bitcoin increases, the price can rise rapidly. Or drop.
Another factor that makes Bitcoin an attractive store of value is its decentralized nature. Bitcoin is not controlled by any central authority making it immune to inflation caused by government policies or economic factors.
Bitcoin’s decentralized nature also makes it resistant to censorship and confiscation. Because Bitcoin is stored on a decentralized network of computers, it is nearly impossible for anyone to seize or freeze to have singular control. Or be able to manipulate the market. It’s, as they say, everywhere and nowhere at once.