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Bitcoin meets all the main criteria of a store of value but has not yet officially acquired this status, said researchers at Fidelity Digital Assets in a thesis paper yesterday.
Titled “Bitcoin Investment Thesis: An Aspirational Store of Value,” the paper argued that Bitcoin is capable of becoming an “insurance policy” that may provide protection against various consequences of contemporary monetary practices.
Introducing the first report in our Bitcoin Investment Thesis series by @riasearch, highlighting #bitcoin as an aspirational store of value. Please download and share. Thanks to the many experts and investors that contributed to this piece!
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— Fidelity Digital Assets (@DigitalAssets) July 29, 2020
“Many investors consider Bitcoin to be an aspirational store of value in that it has the properties of a store of value but has yet to be widely accepted as such," the document said.
A store of value, as the name suggests, is an asset that can save the value that was put in it over long periods of time. One of its main features is its ability to retain purchasing power and usefulness in the future.
While Bitcoin’s price volatility might seem like a direct opposite to “retaining value,” Fidelity Digital Assets pointed out that this is actually one of its “silver linings” as it helps bring attention, development and innovation to the cryptocurrency—at least in its early years.
Volatility is only bad if it goes against you.
Any good investor loves volatility when it is pointed in the right direction.
— Pomp 🌪 (@APompliano) July 27, 2020
Recently, Morgan Creek Digital co-founder Anthony Pompliano also echoed this sentiment during his heated debate with Peter Schiff, arguing that Bitcoin’s volatility is a double-edged sword that can be both detrimental and advantageous for investors.
Four reasons why Bitcoin can become a store of value
One reason why Bitcoin might become a store of value is its “unforgeable digital scarcity,” noted Fidelity. Since Bitcoin’s emission is limited to 21 million coins at the protocol level, Bitcoin can be considered a deflationary asset thanks to its hardcoded immunity to oversaturation.
“Scarcity is the key characteristic cited in reference to a good store of value as it is essential for protecting against the depreciation of real value in the long run,” the document stated.
The authors highlighted a second supporting factor, that today’s record-low interest rates in traditional finance, as well as unprecedented levels of global monetary stimulus, could have “unknown consequences” and are currently “adding fuel to the fire of awareness and adoption” of Bitcoin.
“Longer-term drivers include ‘slow and steady’ inflation and the great wealth transfer to a millennial demographic that has a favorable opinion on digital assets,” the authors noted, adding two more reasons.
Summarizing, Fidelity Digital Assets acknowledged that while Bitcoin's success as a store of value is not guaranteed, the cryptocurrency has all it needs.