Is Bitcoin a Store of Value? And Is It Really Digital Gold

Hello, this is Bitpunk. Today I'd like to talk about whether Bitcoin can really store value, that is, whether it can become something like digital gold and serve as a store of value. To give you my conclusion up front, I think these claims are getting way ahead of themselves at this point.

What Is a Store of Value?

First, let's look at what a store of value, or a means of storing value (Store of Value), means. You can understand it through precious metals like gold and silver, which preserve value. There's no need to overthink it: you can think of it simply as a place or means for storing the value of things like fiat currency. Of course, conversely, the money we use every day is also a store of value. The difference is that its value [purchasing power] declines due to ongoing inflation.

So, Is Bitcoin a Store of Value?

To become a store of value, an asset needs to meet a few conditions. First, it must be able to hold value stably over a long period. Second, it must be scarce, so that its value doesn't plummet due to excessive inflation. Third, the belief that the asset is a store of value must be continuously shared, and it must offer price predictability.

Now let's apply this to Bitcoin. Today's decentralized Bitcoin network can be said to be sufficiently stable. In other words, Bitcoin itself can be called stable and robust as a store of value. The problem lies in the related storage methods and the possibility of issues like a 51% attack. Bitcoin is usually kept on an exchange or in a personal hardware wallet, but exchanges can be hacked or shut down, and you could lose your personal wallet and with it all of your Bitcoin. Also, someone could pour in massive resources to attack the Bitcoin network. In that process, the Bitcoin network could take a heavy blow, the price of Bitcoin could crash, and yet another hard fork could occur. In other words, Bitcoin is not an asset that can hold value more stably than gold or silver.

Second, Bitcoin is extremely scarce. Thanks to its supply being capped at 21 million coins, you don't have to worry about inflation with Bitcoin. This is a very big advantage that could make Bitcoin a store of value.

Third, as the number of Bitcoin advocates steadily grows, Bitcoin could become an increasingly trustworthy store of value. The problem is that, unlike the current decentralized network, Bitcoin holdings are not decentralized. Just like the ownership of wealth in the real world, less than 1% of holders own more than 99% of all Bitcoin. The issue is that even if more people come to advocate for Bitcoin and more capital flows into the market, whales could still end up controlling the price. As a result, price volatility could become very large, and the price could still remain unpredictable regardless of external factors. Because of this, all the belief that had been painstakingly built up until then could turn into a bubble in an instant. Some may disagree on this point, since ownership of other precious metals also follows a pyramid structure, but considering how wildly Bitcoin's price has swung so far, its value could genuinely converge to zero.

In conclusion, it is clearly premature, at least as of now, to call Bitcoin a store of value or digital gold.

Bitcoin as Digital Currency

In contrast to the view that Bitcoin is a means of storing value like gold, some people see it as a currency. As Satoshi Nakamoto mentioned in the white paper, they view Bitcoin as a "peer-to-peer electronic cash system." The problem is that using Bitcoin as currency means paying hefty fees and putting up with excessively slow speeds. Thanks to the "revolutionary" experience of having to pay a fee bigger than the cost of a cup of coffee just to buy one, and then only receiving it after about 30 minutes, using Bitcoin as a digital currency is a stretch. Also, whether you like it or not, every transaction is publicly visible, so personal information you'd rather keep private could leak. Of course, a degree of anonymity behind transactions is guaranteed, but tracing them isn't impossible either.

However, Bitcoin may actually be well suited for sending large amounts. No matter how much you send, you only pay a fee of a few dollars. Of course, even then, it would be better to use a stablecoin like Tether than Bitcoin.

Conclusion

For the reasons above, Bitcoin has many problems both as digital gold serving as a store of value and as a digital currency. As the leading coin of cryptocurrency and blockchain, Bitcoin may be able to keep its symbolic status, but my conclusion is that, objectively speaking, it is by no means more efficient than fiat currency or other cryptocurrencies, and is a virtual asset with clear limitations, one that could even be said to be poorly designed. So while you may choose to buy Bitcoin and HODL, I intend to consider holding and selling flexibly depending on market conditions.