OKEx, a Malta based digital asset exchange has recently released a blog post in which they argue that Bitcoin as a store of value is more prominent than any other use case of the cryptocurrency.
The blog post by OKEx read,
“A store of value entity is worth what people are willing to pay for it. Gold has always been considered as a tool for the store of value because it is finite, universally regarded as valuable, and you can be sure that there will be someone who is willing to pay a high amount of money to buy your gold.”
The OKEx blog post tries to convey that Bitcoin is more like gold since just like gold it is not a verified currency of use but still people are willing to pay for it for its store value. The blog also notes that cryptocurrencies are relatively a new digital asset and people are confused over its usability as a store of value or a medium of exchange.
Bitcoin has launched almost a decade ago, and since then hundreds of altcoins have been created, but the debate is yet to be settled whether crypto would function as an asset value for its store value or an asset to be used as a medium of exchange.
The blog post notes that the confusion over the usability of digital assets arises because the majority of the people do not understand the decentralization concept or how cryptocurrencies work, and to be honest most of the investors are only in the game for the financial aspect, the fall, and rise of prices rather than how the digital asset should be refined to be used in daily life.
Bitcoin white paper describes the crypto as a peer-to-peer cashless network, where people on the network can send money to someone at the other corner of the world instantly and more efficiently than the currently available systems.
However, even after a decade of its existence, the pioneer of the cryptocurrency world is not able to stabilize itself as the medium of exchange. There are numerous vendors accepting Bitcoin as a mode of payment, but that does not make it equivalent to fiat currencies.
Bitcoin can only be considered to be a medium of exchange if one can buy goods and services using the digital asset. The OKEx blog claim that people have realized the price volatility makes it quite difficult for Bitcoin to be used as a medium of exchange and thus they have started to use it as a store of value.
Bitcoin Vs Gold
The OKEx blog notes that people only invest in Gold to safeguard their wealth against the rising inflation and since the value of gold is steady when compared to other assets, it serves as a perfect choice as a store of value. However, gold is 1quite difficult to liquidate or store and this can prove beneficial for the cryptocurrency. Here is an excerpt from the blog,
“Traditionally, people invest in gold to protect their wealth against inflation. But gold is difficult to liquidate. Finding a place to keep them safe is another challenging task one needs to tackle.”
The OKEx blog notes that Gold would eventually lose its luster as the world moves towards digitization and this would make Digital assets a perfect entity for the store of value, as it is quite easy to move around and safeguard, unlike Gold. The blog notes that as the blockchain technology gets more refined over time, digital assets would gain more confidence from the society and the security and feasibility would make it the perfect replacement for gold.
Cryptocurrencies Are Perfect For Financially Challenged Nations
The OKEx blog notes that the only perfect use case as a medium of exchange for cryptocurrencies lies in financially challenged nations like Venezuela and Zimbambe. These countries have suffered largely due to hyperinflation and their state-issued fiat have no value.
In Venezuela, the situation is so bad that if not for Bitcoin or other altcoins the nation would have been destroyed by civil wars. The national fiat became useless, and its not even worth the paper it is printed on. People have already started to dump fiat currencies on roads.
A local confirmed,
“it [has become nearly] impossible for them to purchase daily necessities with the depreciated [fiat] money. It’s not like cryptocurrencies don’t face inflation, and that their price might also plunge, but people would have still secured more money holding cryptocurrencies than holding fiat currencies in [economically unstable] regions, as the current annual inflation rate for Bitcoin is only around 3.8%.”
The OKEx research concludes,
“It is expected that Bitcoin’s inflation rate will further decrease in 2020, dropping to around 1.8% after the halving of the Bitcoin block mining reward according to BitcoinBlockHalf.com. Comparing to the annual inflation rate of the US dollar (2%), will you start to consider using cryptocurrencies to store your wealth?”