As the resident bitcoin skeptic at CCN.com, it’s my job to make logical and reasoned arguments against holding bitcoin. Today I argue that bitcoin is not a store of value as some claim, and never will be. It's not even a hedge. "Store of Value"…
As the resident bitcoin skeptic at CCN.com, it’s my job to make logical and reasoned arguments against holding bitcoin. Today I argue that bitcoin is not a store of value as some claim, and never will be. It’s not even a hedge.
The concept of a “store of value” means that a given object can be exchanged with another person.
That person must value the thing they are receiving more than the thing they are giving away. The same must be true on the opposite side of the transaction.
This is very different from a “means of exchange” aka money and gold and bitcoin.
Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, tells CCN:
“A true store of value is something that retains its usefulness and real-world purchasing power regardless of circumstance.”
If I own a piece of farmland, and I have the ability to harvest food from that land, it remains a store of value as long as I produce food, using seeds to plant food, and water to irrigate. Water is a store of value. It’s required for humans to live.
That’s why there’s water price gouging in supermarkets during natural disasters.
Steel is a store of value. Not only is steel essential in everyday manufacturing around the world right now, but if you watched “The Walking Dead” you’d also know that steel was essential to create bullets for the means of defense.
Money is not a store of value. It’s a means of exchange. Money will not retain value regardless of circumstance, and we’ve seen this in various hyperinflation scenarios.
The same even goes for gold and precious metals.
So why isn’t bitcoin a store of value? Ed Butowsky points out that the key to understanding why bitcoin can never be a store of value lies in the phrase “regardless of circumstance”.
“Bitcoin is nothing. You can’t even hold it. In civil unrest, nobody will trade for a bitcoin because in that circumstance the only things that matter are survival assets.”
Ed Butowsky also notes that bitcoin’s volatility makes it impractical to hold and not a hedge.
“A true asset in which one parks value has minimal volatility. Bitcoin’s entire value could vanish in a matter of minutes”.
Last modified: January 11, 2020 1:00 AM UTC