- Almost nobody uses the Bitcoin network & speculation remains its primary use case
- But Store of Value is Bitcoin’s core utility, explains analyst Willy Woo
- Bitcoin is a good SoV for a period 4+ years while gold is for decades and fiat for just months like some altcoins
After Bitcoin rallied hard in May by over 60 percent, a Bloomberg report stated an “Uncomfortable Fact” about the network that “almost nobody uses it.”
Reportedly, hardly anyone is using the world’s largest cryptocurrency for anything beyond speculation. Per the Chainalysis data, only 1.3 percent of economic transactions came from merchants in his first four months of 2019.
“Bitcoin economic activity continues to be dominated by exchange trading. This suggests Bitcoin’s top use case remains speculative, and the mainstream use of Bitcoin for everyday purchases is not yet a reality,”
revealed Kim Grauer, senior economist at Chainalysis.
Speculation remains the primary use of Bitcoin, they say. Are they wrong? Not at all!
The data states that exchanges account for 89.7 percent of all Bitcoin activity between January and April of this year, down from 91.9 percent from all of last year. It is clear the flagship cryptocurrency is dominated by speculators.
The bull cycle of Bitcoin that makes a new all-time high (ATH) on every such cycle is the driving factor behind this.
Would you be spending a particular asset that history and data suggests will provide you returns 4x, 8x or even more in the future? The answer would be no.
Bitcoin is a Good Store of Value for a Period 4+ Years while Gold is for a Decade and Fiat for Just Months
Analyst, Willy Woo explains how Bitcoin’s core utility is that of a “store of value” and speculation is the foundation of SoV. If you buy an asset, the idea is to have someone that buy it off you later at either the same or a higher price, meaning
“you’ve stored value for a period.”
An asset shows the characteristics of a store of value if it maintains its value without depreciating. Metals like gold are a good store of value as they are essentially perpetual.
“In fact the majority of value accrual for all blockchains and coins is from SoV. That’s because utility valuations work out low (MV=PQ) and nobody is really using these chains yet at any kind of scale,”
Giving an example of Ethereum, he shares when 0.05 ETH are bought to pay for ERC20 transactions, it gives Ethereum a valuation of a few bucks only while 50 ETH bought by investors to HODL, Woo explains gives the second largest cryptocurrency a valuation for hundreds of dollars. This means,
“ETH is primarily valued as an SoV, not at all for its utility as a world computer.”
As for the SoV timeframes, Fiat Woo says is good on monthly just like altcoins that can act as a SoV in weekly to monthly timeframes, but “only during bull markets.” However, many haven’t proven their capability as a store of value over a complete bull-bear cycle.
While gold and houses can act as a SoV for HODL over many years, “ideally decades or more,” according to Woo, Bitcoin is good Store of Value for a period of more than 4 years.
Bitcoin’s price is $9,221.46 BTC/USD exchange rate today. The real-time BTC market cap of $169.93 Billion currently ranks #1 with a chart dominance at 62.37%, daily trading volume of $4.33 Billion and live coin value change of BTC -2.23 in the last 24 hours.