Is Bitcoin a Store of Value? An Insight To Find It Outby PCEX Member India's Most Trusted Crypto Trading Platform
There are a wider school of thoughts revolving around validating anything like a store of value. If you see many previous references like US T-Bills or Treasury Bonds, or Gold, they have shown scarcity but stability at the same time to validate as a store of value. No matter whether you talk about gold or currency like fiat, even during the global financial crisis, price steep was not unprecedented, could you say the same for cryptocurrencies like BTC. Though validating itself as digital gold, BTC doesn’t show better fungibility & stability standards. Let’s demonstrate the same through an example.
Alice and Bob are two people collaborating with each other for project completion. Alice gets 1 BTC for the project completion, which was valued at US$10,000 at the time of contract signing. The project took 5 days for completion and on the day of payment, BTC prices skyrocketed to US$15,000 due to an unprecedented event in the cryptosphere. Now, though Alice received 1 BTC as promised, the value has significantly risen. With that said, what if there were over 1 million people like Alice withdrawing funds in BTC from BTC exchange in India. Will the centralized financial system be accommodative of such excruciating pressure of funds on demand? This could likely trigger inflation and disrupt economic functionality. That’s what had happened in the past in Europe when a considerable number of freelancers experienced a great difficulty to withdraw funds from the Bitcoin ATMs when the prices of BTC to USD skyrocketed and the ATMs displayed the message that they do not have sufficient cash around to process their transactions. This brings a lot of speculation with respect to the validating BTC as a store of value. In the absence of fungibility, people can literally dis the currencies and prefer not to accept it as a legal tender and store of value.
That’s what pressed the economies of the world to adopt a community or government-backed asset standardization system termed as fiat money model rather than the Gold Standards backed currency printing model.
Why Bitcoin Fails To Be Categorized As a Store of Value?
BTC To Fiat Trading
Restrictions to enter the system where enough fiat money in cash wouldn’t be available in the system to accommodate rising surges in the demand. Especially during a highly bullish market where everyone wishes to trade in Bitcoin and withdraw the funds at the same time in fiat from BTC trading platforms. That was a case back in 2017 when BTC was at its highest vantage point in market sentiments and money aggregators and transferers like Cashin services in the UK abruptly succumbed to the pressure eliminating chances of instant spot trading. The system demanded users to come back to avail their services within hours that completely eliminated the chances of making profits out of a favourable time of trading. With that said, it completely barred the instant entry and exit mechanism that BTC or Blockchain promises to its users.
To validate as a store of value, a currency or a token should show a store of value, medium of exchange and unit of account traits. Unlike all other stores of value equivalent like US$, Gold or Bullion, Bitcoin has shown steep market volatility making it non-suitable for use as a global currency token at various merchant outlets. At the same time, in the absence of a proper regulatory mechanism because of censorship resistance, BTC fails to qualify as a store of value for future use around.
Regulatory Immunity or Deterrence
Choosing to be immune to regulatory compliances or rather averting them since its failure to categorize itself as a commodity or currency raises serious concerns to ensure value-storage happening while using the BTC at trading platforms and retail shops. There’s no guarantee that funds once stolen or defrauded can be recovered back. Even Satoshi Nakamoto said if you lose it, you do not own it at any point in time. There’s no going back to the past records to recover the same. Qualifying as a store of value demands that.
BTC trading platforms must have to be accommodative of the demand and supply and they cannot shut it down as per their whims and fancies to ensure mass adoption. Fiat currencies are no more pegged with Gold or other assets across the world but they have fungibility, velocity and end as a medium of exchange for getting a store of value tag. ITM/OTM equation or In the Money/ Out the Money (ITM/OTM) standardization protocols where different nodes can even earn by routing BTC payments will help establish BTC as a true store of value but there’s a lot to achieve and the lightning network has been working on the same. Till that time, we have to be content with establishing the fact that BTC is just a payment network that ensures faster value transfer across nodes and beyond borders economically.
Created on Nov 2nd 2020 00:32. Viewed 127 times.