Bitcoin’s unique attributes make it a powerful long-term store of value, attracting individuals and institutions seeking wealth protection. Keep reading to learn why it outshines traditional assets in an investment portfolio.
First, let’s start with the classic definition of store of value (SoV). For traditional finance (TradFi), a store of value refers to a hard asset, currency, or commodity that preserves its purchasing power while maintaining its value in the future without significant depreciation, or even increasing it over time.
To better understand the meaning of a store of value, consider an asset like gold, which has historically been regarded as the ultimate safe haven due to its scarcity, resilience during economic crises, constant demand, and easy convertibility. Or consider your currency: when you deposit a paycheck in your bank, you rely on the money’s value to remain stable until you need to spend it on goods or services.
Therefore, when you ask yourself "What is a store of value?", the answer lies in safeguarding wealth and protecting the purchasing power of your money. These are essential economic functions that ensure the reliability and stability of a monetary system. It’s a real cornerstone of personal financial security.
Now, let’s try to answer other important questions directly linked to this big topic: What asset classes are a good store of value? And why is Bitcoin seen as the best one?
The short answer is that Bitcoin is a brand-new asset class on its own, but to understand why it excels as a store of value, we first need to highlight its key qualities and properties:
1. Scarcity: Unlike fiat currencies prone to currency debasement, Bitcoin operates on a fixed supply of 21 million coins. Its quantity and issuance are mathematically programmed to be deflationary over time.
2. Portability: Transfer across borders is easier and faster than traditional assets. Compared to gold, for instance, it has no weight, making it perfect for large settlements. Gold’s weight increases the cost of transportation, whereas Bitcoin remains easily transferable.
3. Security: Its cryptography and decentralized blockchain ensure that transactions and ownership are tamper-proof, trustless, transparent, and verifiable.
4. Durability: Bitcoin exists only digitally, making it immune to physical deterioration or unexpected third-party risks (unlike assets such as art or real estate).
5. Divisibility: Bitcoin’s smallest unit, the satoshi (sats), allows transactions of any size, ensuring accessibility to all. There are 100 million satoshis in each Bitcoin. In contrast, investing in art or real estate requires substantial wealth.
6. Accessibility: Bitcoin is the “money of the internet”. Anyone can access the network with a simple internet connection from a PC or smartphone. A bank account is unnecessary, making Bitcoin particularly attractive to users worldwide, including those in third-world countries.
Additionally, Bitcoin’s utility as a medium of exchange (used to enable the buying and selling of goods between parties) strengthens its perceived value. Because of all these qualities, Bitcoin acts as a reliable medium-to-long-term investment and store of value, suitable for diversifying a traditional portfolio to safeguard wealth and protect against inflation.
In the next paragraph, we will discuss Bitcoin’s fixed supply, why it’s crucial for its success, and how it makes Bitcoin a secure alternative to money (fiat currencies) affected by currency debasement and inflation dynamics.
Let’s start with inflation and currency debasement.
Inflation occurs when consumer prices rise over time, typically due to economic growth, supply disruptions, or excessive money printing. On the other hand, currency debasement refers to the decline in a currency's value, often caused by poor monetary policies leading to a loss of purchasing power.
Currency debasement and inflation are directly linked to monetary policies that governments and central banks implement. There are several ways institutional bodies can create fiat currency debasement:
1. Excessive Money Printing: Central banks create new money to finance government spending or bailouts. Printing money without corresponding economic growth increases the money supply, reducing its value and leading to inflation or hyperinflation.
2. Quantitative Easing (QE): Central banks purchase government bonds or other financial assets to inject liquidity into the economy. By increasing the money supply, QE can dilute currency value, leading to inflation and reduced purchasing power over time.
3. Low or Negative Interest Rates: Low interest rates reduce returns on savings, incentivizing spending, borrowing, and money printing. This policy can weaken the currency in foreign exchange markets, making imports more expensive.
4. Debt Monetization: This happens when central banks buy government debt directly to finance deficits. This creates inflationary pressure as more currency chases the same amount of goods and services, reducing the currency's value over time.
Considering these monetary policies—led by human decision-making—we can safely state that Bitcoin's algorithmically enforced scarcity, capped at 21 million coins, ensures it cannot be inflated or devalued like fiat currencies. Furthermore, no central authority can decide to “print more Bitcoin”, as it is controlled by no one and its hard cap cannot be changed without a thorough network-wide consensus.
This fixed supply is crucial to creating a deflationary dynamic, which works as follows: as demand and mainstream adoption increase, Bitcoin's value tends to rise. That’s why the BTC price has skyrocketed over the past 16 years, proving its store-of-value case.
Over-reliance on money printing or artificially low interest rates has always led to skepticism about a currency’s long-term stability, and consequently, trust in the government and authorities who manage a country's financial system. Instead, by operating outside government control, Bitcoin is robust against monetary debasement, serving as a strong hedge against inflation and a superior digital store-of-value asset.
That being said, let’s now dig into a few comparisons between traditional assets vs. Bitcoin, learning their pros and cons as a store of value.
To answer this question, we need to set clear definitions of money and fiat currencies.
Money is a tool that facilitates the exchange of goods and services, providing a shared standard of value within an economy. In contrast, fiat currency is a specific type of money issued and regulated by governments or central authorities. It is a government-issued legal tender and serves as the standard for debt repayment.
Fiat currencies fulfill the three essential properties of money:
1. Medium of Exchange: Currencies are universally accepted within their issuing countries. They enable highly liquid transactions, assuring quick and easy exchanges.
2. Unit of Account: Currencies provide a clear and consistent system for pricing goods and services, facilitating comparisons and evaluations across markets.
3. Store of Value: Currencies generally retain value over short to medium timeframes, allowing individuals to save and plan for the future.
But does this last property truly apply to fiat?
What gives value to modern currencies, such as the U.S. dollar or the euro, is the trust in the issuing government rather than backing by tangible assets. In the past, until 1971, when President Nixon ended the dollar's convertibility to gold—effectively taking the U.S. off the gold standard—national currencies were backed by national gold reserves.
Today, central banks can print money “out of thin air” without any underlying collateral, triggering a never-ending spiral of spending, deficit, and national debt that grows exponentially. This is further compounded by fractional reserve banking, where banks are only required to keep a small fraction of deposits on hand while lending out the rest—effectively creating money, amplifying debt, and increasing financial instability.
As we have seen, money printing and other monetary policies can “break the trust” in money and fiat currencies, leading to inflation, currency debasement, and loss of value. Many economists still consider money a store of value because its purchasing power tends to decline gradually rather than sharply, and it remains the most liquid financial instrument. However, calling fiat currencies a reliable store of value is debatable, as cyclical expansive monetary policies consistently erode their value over time.
To give a solid example, the world’s number one currency, the U.S. dollar, has lost 97% of its purchasing power over the last 100 years.
In wealthy nations, Bitcoin is often viewed as a speculative asset, driven by the desire for quick wealth, with little immediate need for an alternative store of value. However, in countries facing hyperinflation and currency devaluation, like Argentina (where the Peso loses 30% of its value each year), Bitcoin has become a lifeline for preserving the purchasing power of savings.
Similarly, in parts of Africa, Bitcoin enables daily transactions and financial inclusion, allowing people without bank accounts to access a global digital economy. As the “money of the internet”, Bitcoin only requires a smartphone and an internet connection, making it a powerful alternative to traditional banking.
Therefore, the theory of fiat currencies as a store of value collides with reality. The money we use today is fundamentally “broken”, and we live in a rigged monetary system that prompts individuals and institutions to explore alternatives such as Bitcoin for long-term wealth preservation.
Throughout history and across centuries, gold (as well as silver and other precious metals) has served as a primary form of money due to its scarcity, durability, and global recognition. Its “almost finite” supply and resistance to corrosion made it a trusted store of value and a reliable medium of exchange, even during periods of economic instability.
However, gold’s physical nature presents limitations: it is hard to transport in large amounts, lacks divisibility for smaller transactions, is difficult to store safely, can be mixed and diluted with other metals, is not easily accessible for most people, and is seizable by governments.
Instead, Bitcoin, often called “digital gold”, builds on gold’s strengths while addressing these weaknesses. With its mathematically guaranteed supply capped at 21 million coins, Bitcoin eliminates the risk of supply dilution that gold faces from the discovery of new mines and deposits. It is easily divisible into Satoshis, seamlessly and digitally transferable across borders at the speed of light, and securely stored by its decentralized network, offering unmatched convenience.
In the debate of Bitcoin vs. gold, Bitcoin’s detractors argue that its high volatility prevents it from being a good store of value. Critics also claim that BTC lacks intrinsic value and does not have the tangible utility of gold, which is widely used in jewelry and industry.
However, while gold’s worth is rooted in its historical role and physical utility, Bitcoin derives value from its superior properties and native digital form. In today’s digital economy, investors are increasingly viewing Bitcoin as a more effective long-term solution for wealth preservation, redefining the concept of value itself.
As adoption increases, it is just a matter of time before Bitcoin eventually absorbs gold’s market cap, which is valued at approximately $18 trillion today.
Bitcoin is an asset that has delivered an average annual return of around 50% over the last five years, making it the best-performing asset of the last decade. It is also extremely liquid, meaning it can be easily bought or sold at any time. However, this high liquidity also contributes to its price being highly dynamic and volatile, with significant price movements occurring regularly.
For many years, real estate has been seen as a reliable store of value, offering stability and consistent returns. It is a tangible, hard asset tied to fundamental human needs, such as housing and commercial property, which ensures consistent demand.
Its value often appreciates over time, particularly in urban or touristic areas, and rental income provides a steady cash flow, further reinforcing its role in wealth-preservation strategies. Moreover, real estate is often seen as a hedge against inflation, as property values and rents tend to increase alongside consumer prices, offering partial inflation protection. For all these reasons, real estate is considered a good investment for those seeking long-term wealth preservation.
However, all that glitters is not gold. Real estate as a store of value is not without limitations.
This asset class comes with several challenges, particularly when compared to the groundbreaking technology and asset that is Bitcoin. One of real estate’s biggest limitations is its illiquidity: buying and selling properties is a time-consuming and expensive process. In contrast, Bitcoin can be bought, sold, or transferred instantly online with minimal fees.
On top of that, real estate requires high maintenance costs, property taxes, and is subject to regulatory changes, which can erode returns over time. Last but not least, the real estate market is not immune to risk. It remains vulnerable to economic downturns, natural disasters, and political instability, all of which can significantly impact property values.
Bitcoin is emerging as a revolutionary alternative for storing wealth in the long run. Its nickname, “digital gold”, reflects how it combines scarcity with modern technology, making it immune to inflationary pressures that can affect real estate.
Bitcoin is truly scarce, as we have established, while new artificial land can always be developed to build more properties—something that is happening worldwide. Additionally, Bitcoin offers unique advantages in terms of portability, divisibility, and accessibility. Unlike real estate, which is geographically bound and requires significant upfront capital to invest in, Bitcoin can be divided into Satoshis and accessed by anyone with a simple internet connection, lowering the barrier to entry. And unlike real estate, Bitcoin cannot be seized.
So, is Bitcoin a better store of value than real estate?
Many argue that the choice between Bitcoin and property investment ultimately depends on individual priorities: tangible assets and steady income generation versus digital assets, high performance, and global accessibility.
However, people often overlook the fact that Bitcoin inherently provides a form of yield. This yield is reflected in its annual percentage growth, driven by the collective advancements and innovations of humanity, fueled by ongoing technological progress and development.
In contrast, holding fiat currency, which constantly loses value due to inflation, forces individuals to seek yield elsewhere. Since fiat is not a reliable store of value, people often take on risk by investing in assets like real estate or stocks, hoping to preserve or grow their wealth—but ultimately only profiting if they are fortunate.
Probably a concern for the ultra-wealthy millionaires and billionaires, fine art has long been positioned as a prestigious shield to hedge against inflation and currency debasement.
For centuries—like gold and real estate—investing in art to store value has been a strategy for those seeking to diversify an investment portfolio. In fact, for the few with access to this asset class, paintings, sculptures, and collectibles are considered real assets due to their physical nature, scarcity, and appreciation over time. In today's digital economy, it is worth comparing fine art with Bitcoin.
However, art’s illiquidity as an investment poses a major challenge: transactions are time-consuming, costly, and subject to regulatory barriers. Additionally, the maintenance costs of art highlight its inefficiencies: this asset class demands secure storage, insurance, and specialized care, all of which erode returns over time.
Can you imagine how complex it would be for an art collector to sell his David of Michelangelo? Additionally, art’s value depends on subjective factors, including market trends and collector preferences, leading to challenges in art valuation.
So, how does Bitcoin compare to art as an investment?
Unlike art, Bitcoin is not constrained by physical limitations or subjective valuations. Its scarcity is guaranteed through its hard cap of 21 million coins, while the art market continually expands with new creations.
Furthermore, Bitcoin’s liquidity and portability underscore the cryptocurrency’s advantages: Bitcoin is globally tradable 24/7, whereas selling art can take months or even years. Art is also not easily movable and lacks divisibility into smaller, tradable units.
In contrast, Bitcoin can be transferred instantly worldwide and is divisible into Satoshis, allowing for fractional investments.
To conclude, while art retains its status as a symbol of cultural and financial prestige, it faces significant limitations as a store of value in the digital age. The risks of investing in art, combined with its illiquidity, high maintenance costs, and subjective valuations, make it less practical as a store of value compared to Bitcoin.
Furthermore, Bitcoin is globally accessible, unlike fine art, which is typically purchased as a store of value only by elites and millionaires.
Unlike thousands of other cryptos, Bitcoin’s design is based on decentralization, true scarcity, and security, making it a trusted, real alternative to traditional finance.
This is why Bitcoin is considered the king; it stands apart from other cryptocurrencies due to its unique properties. At its core, Bitcoin’s value lies in its fixed supply of 21 million coins, which offers a level of scarcity unmatched by many other cryptocurrencies that lack reasonable supply limits.
This scarcity positions Bitcoin as a deflationary asset, preserving its purchasing power over time. This clarity of purpose has won the trust of both retail and institutional investors, who buy BTC instead of other cryptos to diversify their portfolios and hedge against inflation.
Bitcoin operates on a global network of independent nodes and miners, meaning no single entity can control or manipulate it, ensuring true decentralization. Running a Bitcoin node is accessible to anyone with a basic computer and an internet connection, allowing individuals to verify transactions and enforce the network’s consensus rules independently.
In contrast, many cryptocurrencies are governed by centralized entities or development teams, making them more akin to startups or corporations. This centralization exposes them to risks such as bankruptcy, regulatory crackdowns, or asset seizures.
Bitcoin’s blockchain is also the most secure in existence, backed by over a decade of proof-of-work mining and unparalleled computational power. This makes it highly resistant to attacks, unlike smaller cryptocurrencies that lack the network strength and security that Bitcoin commands.
Moreover, Bitcoin's stability is maintained by a balanced interplay between miners, investors, and developers. This triad of entities ensures that Bitcoin remains unchanged and resistant to arbitrary modifications.
Since all parties benefit from Bitcoin’s status quo, hard forks or radical changes to its code are highly unlikely, preserving its core principles of decentralization and scarcity.
Some people do not consider Bitcoin a store of value due to its high volatility and relatively short track record. While it has shown significant long-term growth, its price fluctuations make it unpredictable in the short term, leading many to doubt BTC as a store of value—especially when compared to assets like gold or real estate.
While Bitcoin is scarce, critics note that its open-source code allows for exact copies, raising questions about the authenticity of its scarcity. Others believe Bitcoin is outdated technology and will eventually be replaced by a more advanced cryptocurrency that is better suited as a store of value.
Let’s use the S&P 500 as a benchmark. Historically, Bitcoin has outperformed the S&P 500 in terms of annual returns over the last decade. While the S&P 500 represents the broader stock market and offers steady, relatively low-risk returns, Bitcoin’s higher volatility has led to greater performance over time.
As traditional fiat currencies face challenges such as inflation and currency debasement, Bitcoin offers a stable, transparent, and secure alternative. Its properties make it an appealing store of value and medium of exchange for individuals, businesses, and even nations looking to preserve wealth and hedge against economic instability.
Bitcoin is increasingly viewed as a safe haven asset, similar to gold. During times of financial turmoil or geopolitical uncertainty, Bitcoin provides an alternative for preserving wealth. Its decentralized nature makes it less vulnerable to government intervention or confiscation.
Additionally, Bitcoin’s global accessibility ensures that anyone with an internet connection can use it to safeguard their assets, regardless of local economic conditions.
Bitcoin’s qualities as a long-term investment make it an excellent tool for portfolio diversification. Allocating even a small percentage of Bitcoin (e.g., 1-5%) in a traditional portfolio can significantly enhance risk-adjusted returns, as measured by the Sharpe ratio.
This is due to Bitcoin’s asymmetric return profile, meaning its upside potential far outweighs its downside risk over time, while maintaining a low long-term correlation with stocks and bonds.
Unlike fiat currencies, Bitcoin’s supply cap ensures that it cannot be devalued through excessive issuance from central banks. Over the past decade, Bitcoin’s increasing adoption and demand have consistently outpaced its supply growth, helping it maintain and even increase its purchasing power.
Bitcoin is considered deflationary because its supply decreases over time due to its halving cycles, which reduce the rate at which new coins are minted. Additionally, millions of Bitcoin were lost in the early years due to the lack of knowledge among early adopters.
As demand increases and supply remains limited, Bitcoin’s value tends to appreciate, making it a reliable medium- to long-term store of value.
Currently, the top 1% of the world's population controls half of the global net wealth. Meanwhile, the top 10% collectively own 85%, leaving just 15% for the remaining 90% of adults.
In terms of asset classes, global wealth is distributed as follows:
Bitcoin is a groundbreaking technology, a revolutionary store of value, and an alternative to traditional financial systems. Whether used as a hedge against fiat currencies or as a new asset class in a traditional investment portfolio, Bitcoin has proven itself a top choice for individuals and, recently, institutions looking for long-term stability and growth.
It’s a game changer with numerous benefits that remain unknown to most, while a long list of detractors continue to spread FUD (fear, uncertainty, and doubt).