Setting aside a store of value is an important way to protect your assets from economic fluctuations. So in situations where money depreciates rapidly, you have a guarantee that the value you have set aside, usually in the form of goods and assets that are not eroded by the economic climate, is preserved.
What is a store of value?
That is the store of value concept – keeping your capital protected from economic devaluation by preserving its purchasing power.
This is precisely why bitcoin has been considered one of the main alternatives for a store of value. Like gold, its scarcity feature makes it prone to appreciation in the long term. After all, since the issuance of the cryptoasset is restricted to 21 million units, the more people enter the market, the more limited its supply becomes and, consequently, the higher its value.
Conventional currencies (fiat money), on the other hand, can be printed by their respective issuers in unlimited quantities, which creates inflation. Even currencies such as the dollar and euro run this risk, which is not the case with bitcoin.
What is bitcoin, and why is it a good alternative?
Bitcoin is a decentralized digital asset, or cryptocurrency. This means that its users do not need third parties, such as banks, to perform transactions.
According to Transfero’s Asset team, against a risk aversion scenario, such as political and economic crises, bitcoin, as a store of value, tends to strengthen.
“In addition, we see an increasing adoption by the international community and large institutions bringing to the market more liquidity, accessibility, and reliability. As an example, we have the case of El Salvador, which classified bitcoin as a country’s legal tender, showing its international liquidity”, pointed out the experts at Transfero.
Even with volatility, can bitcoin be a store of value?
Yes, provided it is analyzed over a more extended period. As we explained, the limited supply characteristic guarantees that it appreciates over time, even with volatility at certain times.
Even Goldman Sachs believes that bitcoin can become a store of value. According to the bank, bitcoin’s capitalization is expected to expand in the coming years as the adoption of cryptoassets in the world increases.
Is gold also a store of value?
Over time, gold has been used as a store of value due to its natural scarcity characteristic. However, it is worth noting that gold had a 4.43% return in 2021; meanwhile, bitcoin had a 7.39% return, resulting in the best investment of the year.
Besides El Salvador, two more countries use bitcoin as a store of value
According to Bitcoin Treasuries, in addition to El Salvador, which has adopted bitcoin as legal tender, two other countries have the cryptoasset, which is used as a store of value. Ukraine tops the list, with 46,351 bitcoins. El Salvador has 1,391 bitcoins, and Georgia only has 66 bitcoins.
In addition, you can also check out the list of companies that have chosen bitcoin as a strategy for capital preservation – with MicroStategy and Tesla leading the way, with 125,051 bitcoin and 43,200 bitcoin, respectively. It undoubtedly shows the growing adoption of cryptocurrency.