Store of value usually refers to a commodity or asset that would normally retain purchasing power into the future where it can be saved, retrieved and exchanged at a later time. In crypto, the same applies, but the definition of certain cryptos as a store of value is still debated.
One of the best examples of a traditional store of value commodity is gold. It is a precious material that has a few key facets that make it such a prime example of a store of value. It is rare, has different uses, valued and demanded, and has a market where it can be traded and exchanged.
However, the notion of a store of value can be extended to other examples such as bonds, collectibles, currency notes and coins, and even livestock and fine wines. Therefore, it is not a stretch to say that cryptocurrencies can be called a store of value, but some would still debate otherwise.
When it comes to a cryptocurrency being a store of value, there is also debate internally. Some coins are purpose-built to be store of value coins, such as Bitcoin, whereas others retain value as a by-product of their primary goal — such as Ethereum.
If we use Bitcoin as an example towards a crypto that is a store of value, the debate is an interesting one because the coin has been called digital gold on many occasions. Bitcoin’s own designation and how it has been used in recent times has been more towards a store of value, rather than a medium of exchanges, as was laid out in the whitepaper.
Bitcoin has scarcity; it is capped at 21 million coins that will ever exist, and these are being released into circulation at a slowing rate. Moreover, many of these coins have already been lost forever, making Bitcoin an even more scarce resource.
In compression to gold, Bitcoin has known scarcity whereas gold is continually being physically mined out of the ground. It is entirely possible that huge deposits could be unearthed, making the resource no longer scarce and damaging its reputation as a store of value.
More on Bitcoin; it is also valuable. The price of one Bitcoin has fluctuated from a few cents to its high of over $65,000. Like gold and its value per oz, that changes, Bitcoins price and thus value fluctuates on a market. However, some say this value is baseless.
Many feel that Bitcoin’s value is zero as there is no real use case for the cryptocurrency and because it has no value it can not be a store of value. Of course, this is debatable because the value of something is how much a person is willing to pay for it.
Additionally. Gold’s use cases, such as electronics and jewellery are not the primary reason for its value. It also has to do with desire and demand from an open market which is what Bitcoin has.
Looking deeper into what makes bitcoin a good store of value, you can also start adding its other properties to the list.
Bitcoin is fungible, which means that units are indistinguishable. With gold, you can take any two ounces, and they’ll be worth the same. This is true of things like stocks and cash as well. It doesn’t matter which particular unit you’re holding – it’ll hold an equal value to any other of the same kind.
It is also portable. Cash and gold, for example, make large values easy to move around. $10,000 in $100 bills easy enough to move around. But, $10,000 worth of oil? Not so much.
Gold has traditionally been excellent in this regard. A standard gold coin holds almost $1,500 in value. It’s unlikely that you’d be making purchases worth a full ounce of gold, so smaller denominations take up even less space. However, Bitcoin is even more superior as it doesn't even have a physical presence and $10 of Bitcoin or $10 billion of Bitcoin would all fit on one hardware wallet.