Is Bitcoin a store of value?
Many people invest their money in Bitcoin. This is because the value of Bitcoin is increasing, so there is also a lot of money to be made with Bitcoin. On the other hand, there is also money to lose. But is Bitcoin a store of value? The value of gold, for example, is very clear. Because Bitcoin
is virtual, it is a lot harder to determine.
When is something a store of value?
It all depends on what you consider valuable. However, it is a given that gold is for sure a store of value. Therefore, we will use gold as an example so that we can then compare it to Bitcoin.
For an investment, something is valuable when it can maintain its value over time. This means that it should not have already lost its value after one year. If it does, it is not particularly valuable. So, durability is a very important factor.
In addition, it must have an intrinsic value. Gold, for example, definitely has an intrinsic value. The gold must first be mined, after which the dirt is removed to get it as pure as possible. Next, you can have the gold forged into a bar, bracelet or watch. So, a lot has been done to be able to obtain gold.
Finally, it is important that there is scarcity. When something is available in abundance, it loses its value. This is determined by the supply and demand in the market. When there is a lot of demand but little supply, the price rises. For example, there is only X number of pounds of gold available in this world. When all the gold has been mined, it is gone, and it is no longer possible to mine more gold (until nature makes gold, which takes a very long time).
Is Bitcoin a valuable investment?
Now the question is whether Bitcoin meets the above requirements. You can then determine if Bitcoin is a valuable investment that you will not regret in the future. However, it is important to note that this is a long-term investment. Something can be incredibly valuable, but still, decrease or increase in value from day to day. So, the important thing is that it will increase in value over the long term (years).
In order to obtain new Bitcoin, miners must start mining Bitcoin. For this, they have to do work, and a lot of energy is used. This whole process ensures that Bitcoin has an intrinsic value. In fact, the value of Bitcoin is actually determined by something: the energy that people put into mining the Bitcoin.
Every few years, there is a Bitcoin halving. Halving extends the processing time of a block and reduces the rewards for miners. As computer power increases every year, it is possible to add Bitcoin blocks to the blockchain
at an ever-faster rate. However, for security reasons, it should always take about 10 minutes to add a new block to the blockchain.
Because miners will receive an increasingly lower reward, it means that fewer and fewer new Bitcoins will be added as well. This causes more and more scarcity to occur. At some point, we will reach a point where no new Bitcoins will be created, and we will have to make do with the Bitcoins that are already in circulation.
We can say that Bitcoin is a store of value for sure. It is very likely to be a sustainable investment, given its intrinsic value and scarcity. These factors ensure that the value of Bitcoin will continue to increase. The demand for Bitcoin is growing as more and more businesses accept payments in Bitcoin. For example, you can buy a car from Tesla by paying in Bitcoin. At the same time, the supply is decreasing, due to Bitcoin halving.
Other factors that make Bitcoin valuable
There are also other features that make Bitcoin valuable. These features make it easy to use as a means of payment. This means that the demand for Bitcoin will also increase, given that it can be used in a variety of situations.
Bitcoin is easily portable
We can store Bitcoin in different ways. To do this, you use a hot wallet or a cold wallet. A hot wallet is an online wallet that is connected to the Internet, and in which you can store cryptocurrencies
like Bitcoin. So as long as you have a phone or laptop with you, you can make payments with Bitcoin. However, when you have a cold wallet, you only need to have a piece of hardware with you.
This provides ease of use, making it easier for people to switch to making payments with Bitcoin. This causes the demand for Bitcoin to increase.
It is divisible
It is not that you have to have a whole Bitcoin to make payments, or simply to own it. The lowest amount of Bitcoin you can own is 0.00000001 BTC. One Bitcoin can be divided into 100 million units. No matter how high the value of Bitcoin will rise, it will always be possible to divide it. This also allows people to make small payments with Bitcoin.
It is replaceable
A Bitcoin is always the same. It is not that one Bitcoin has a greater value than another Bitcoin. Because it is fungible, it is easy to use.
The similarities and differences between Bitcoin and gold
Many people find gold to be a stable value investment. Yet gold also has many similarities to Bitcoin. In some cases, Bitcoin is even better than gold. For example, gold and Bitcoin are both durable, have intrinsic value and are in short supply. Also, both investments are fungible. Gold, like Bitcoin, is always the same, although of course, you can convert gold into a unique object yourself.
Bitcoin, however, is better in terms of portability and shareability. It is much easier to take Bitcoin with you and divide it up than it is with gold. As a result, the ease of use of Bitcoin is a lot greater than that of gold.
The security of Bitcoin is also greater than that of gold. There are many ways you can protect Bitcoin. For example, you can put it on a cold wallet, which you can then secure in different ways with cryptography and keys. Someone who has the cold wallet in his possession is not yet able to steal Bitcoin from this wallet. Gold, on the other hand, is much more sought after by criminals and is also much harder to secure. If you have a lot of gold in your possession, you need a large vault to store it. Even if you have 1 million Bitcoins, they can all be stored on a piece of hardware.