If Money Isn’t a Store of Value, Can Bitcoin Be Called One?
- An article from Bitcoin.com states that money isn’t a store of value.
- Economists break down how a store of value must involve unchangeable utility.
The Bitcoin community has maintained a consistent stance the BTC will ultimately end up being a store of value. Many people who support this theory believe that it is possible for money to store value and that the price will end up being higher as it is held. However, since money cannot store value, this is a significant economic fallacy. As such, Bitcoin remains unable to hold immunity against the influence of the market.
Holders of Bitcoin have accrued this cryptocurrency in an effort to become wealthy and outside of the traditional system, but a recent report from Bitcoin.com suggests that this hope couldn’t be more untrue. The report states that that BTC is not actually a store of value, and there have been many economists through the years to say that money cannot actually be a store of value, like Carl Menger, Murray Rothbard, and Ludwig von Mises. Menger became one of the first economists to unravel the connection between value and money with market prices.
In “Principles of Economics,” Menger states that value isn’t found in goods or in holding goods, but it isn’t instead,
“the importance that we first attribute to the satisfaction of our needs … and in consequence, carry over to economic goods as the … causes of the satisfaction of our needs.”
In the article from Bitcoin.com, the author explained that Bitcoin is not a store of value by comparing it to a television set that is worth 1 BTC. If the television were to be smashed to pieces, watching anything on it would be impossible, because the practicality and utility would be destroyed.
If someone created a wallet with external software, and then it was destroyed, they no longer have a claim to ownership. In that, Bitcoins, fiat money, and even golds cannot be made into stores of value. The idea that these assets could become stores of value has continually been perpetuated, and cryptocurrency has been one place to hold onto the idea the strongest.
Joseph Salerno, an author, wrote in 2014 to explain why people continue to believe that money stores value. He pointed out that money exists for the purpose of measuring “the value of goods and services exchanged on the market.” He pointed out that this mistake is common, adding that placing value on anything is “based on subjective judgment and is without physical dimensions.” Basically, his statement implies that the actual value of money can change at any given moment.
Konrad S. Graf, another economist that has experience in studying bitcoin and monetary theory alike, has written multiple pieces on these topics. Those pieces include On the Origins of Bitcoin, the Bitcoin Decrypted series, and Action-Based Jurisprudence. When interviewed in 2017, Graf discussed the possibility of defining Bitcoin with theoretical concepts.
Graf explained that there is often a need for economists to push Bitcoin into a definition that hardly covers it. He added that these individuals try to put Bitcoin in many different categories, but “none are exclusive.”
He added that there are variables that arise in trying to narrow down Bitcoin’s place, like how much is held, how long it is held, and “the increments of future spending of the medium of exchange.” Furthermore, he said that money is not so much about finding the value, but that it is,
“exchanged for goods at some indefinite future time.”
For that reason, value is unable to be stored, as Graf believes that the idea is,
“more a weak intuitive analogy than a rigorous economic concept.”
The world appears to crave both practicality and utility for money, so the crypto community wants the same for BTC. However, BTC is far from the only crypto asset with censorship resistance. If there’s no way for the entire world to use BTC, however, it is not actually censorship resistance. A store of value needs to be usable by everyone, or else it is not exactly practical.
Still, it is worth remembering that the real-world utility of cryptocurrency makes it possible to maintain censorship resistance, which overtakes anything that could be misconstrued as a pyramid scheme. However, as the Bitcoin.com article states, cryptocurrency ultimately comes down to being a bunch of
“numbers that help us make exchanges at different times in a permissionless fashion but they can never store value no matter how many times we repeat the erroneous statement.”