Why Bitcoin Might Serve Better as a Store of Value

Will you consider using Bitcoin to store your wealth?

Since Bitcoin was invented 10 years ago, it has been established as a digital currency that can change the way we live. It can be used as a form of payment, to send money around the world, to trade other cryptocurrencies and many more. But have you ever considered that it can be a safe haven for storing your wealth?

What is a store of value?

A store of value is worth what people are willing to pay for it. Gold has always been considered as a tool for store of value because it is finite, universally regarded as valuable, and you can be sure that there will be someone who is willing to pay a high amount of money to buy your gold. Although gold is not a form of money, it has value and can be seen as an asset.

Yet for cryptocurrencies, the debate of whether they were created as a store of value or a medium of exchange has been going on for years. Taking Bitcoin as an example, it was invented and marketed as a new digital form of money, a peer-to-peer electronic monetary system, with one of its major functions being to serve the needs of people who want to transfer money to the other end of the world efficiently. But Bitcoin is not cash (not yet), you cannot use it virtually at all the stores, thus not a lot of people has adopted it as a store of value, worried that their money might be gone due to its volatile nature.

Does that mean gold is a better option?

Traditionally, people invest in gold to protect their wealth against inflation. But gold is difficult to liquidate. Finding a place to keep them safe is another challenging task one needs to tackle. That is probably why more people are turning to cryptocurrencies as an alternative today. With the continuous improvement of blockchain technology, cryptocurrencies are much more secure to store and easier to access than gold. All you need is internet connection and your private digital signature.

Cryptocurrencies are especially useful for those living in financially-challenged countries (such as Venezuela and Zimbabwe, etc.) where locals have to face hyperinflation every year, making it impossible for them to purchase daily necessities with the depreciated money. It’s not like cryptocurrencies don’t face inflation, and that their price might also plunge, but people would have still secured more money holding cryptocurrencies than holding fiat currencies in these regions, as the current annual inflation rate for Bitcoin is only around 3.8%.

It is expected that Bitcoin’s inflation rate will further decrease in 2020, dropping to around 1.8% after the halving of Bitcoin block mining reward according to BitcoinBlockHalf.com. Comparing to the annual inflation rate of the US dollar (2%), will you start to consider using cryptocurrencies to store your wealth?

Risk Warning: Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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