• TennHedge

There Can Only Be One Superior Store of Value

A store of value should be thought of as a vessel in which wealth is stored for many years, perhaps many decades. The time horizon in a comparative discussion of stores of value is thus very long. When we consider our objectives for our capital over such a period, we naturally prefer the most efficient vessel over an inefficient, perhaps inferior vessel, as an annual under-performance by our capital will become outsized over the course of many years. In summary, there can only be one superior store of value, as there is unlikely to be a tie for the most efficient store of value when the timeframe of many years is taken under consideration.


Let's do a quick thought experiment: let's compare Store of Value A vs. Store of Value B over a 50 year time horizon. Store of Value A appreciates 2% compounded annually, whereas Store of Value B appreciates 2.5% compounded annually. Doesn't sound like much difference, does it? Well, $10,000 in Store of Value A over 50 years would be worth $26,915.88 vs Store of Value B's $34,317.09, a 27.5% difference and nearly 1/3 of the value in question - not a small deviation by any means.


What are some of the qualities which make up a superior store of value?


A superior store of value is first and foremost resistant to inflation, that is, it is difficult if not impossible to increase the total supply of the asset. Secondly, it is salable, meaning it is universally recognized as money and highly liquid or marketable; moreover, it is salable across time and space as well. Portability also is taken into account in the measurement of salability across time and space, as a superior store of value can be easily carried, across borders if necessary. A superior store of value is fungible, in that its units are the same (and can be broken up into smaller units for transactional purposes). In modern times, a superior store of value is also resistant to seizure and censorship, in other words, a superior store of value should be decentralized, so a third party cannot easily destroy your value by decree.


For thousands of years, gold served as the superior store of value as it had many of the characteristics mentioned above. However, in an increasingly digital world, and a world in which global governments are increasingly seeking more and more control in the daily lives of their citizens, an asset like Bitcoin is poised to dethrone gold as the superior store of value. Bitcoin shares many of the characteristics of gold, with the key distinction of being incorruptible by world governments and banks, which is what gives it its superiority as a store of value.


In the end, only time will tell if Bitcoin usurps gold, choose wisely.


-TH


You should always consider seeking financial advice from a licensed advisor before making decisions with your money, and you should not consider anything I write as financial advice but merely my opinion. Getting your financial house in order is a prerequisite for Bitcoin saving, in my opinion.


Disclosure: nothing in this article should be considered financial advice and I am not a financial advisor. Do your own research as everything in finance carries risk.