Hi Excuse me Are currencies a "store of value

[heidikim]

Bitcoin price is very unstable. This prevents him from being a value store. But only this perspective does not make sense. A state may not survive only by stocking bitcoin. So he can't take all his financial power from bitcoin. However, the presence of bitcoin is undeniable. You must invest some bitcoin. Not a value store. But not worthless!

[deisik]

But what I also found out during my research is that there are two conflicting theories in regards to what causes the demand for money. One of them, the Cambridge cash-balance theory, saying that "money's ability to store value is more important than its function as a medium of exchange". And another one, Fisher's theory, saying that "demand arises because money is needed for exchange"

Keep in mind that both of these theories had been developed with hard currencies in mind and circulation, i.e. paper money back in the day was redeemable for gold. With fiat money, the Cambridge cash-balance theory becomes obsolete, especially now when many people are living on credit (read, households have negative cash reserves)

I think it's interesting to note that currently the demand for Bitcoin is mostly formed by people's treating it as a "store of value"(although formally BTC isn't one). But I think in the future the demand for BTC will be formed by people's willingness to use it for exchange

Most people are here for the quick buck

It means that their primary incentive and driving force is speculation (otherwise known as "buy low, sell high"), and this is what gives Bitcoin (as well as other cryptocurrencies) its value through its speculative utility. If we could somehow make Bitcoin prices rock-solid, which would make it a real store of value (like gold), many so-called investors would quickly lose interest in this market. And that's basically the reason why prices cannot be stable for long

Thanks for the correction! It nudged me to do some research, and now I see that, formally, there is a difference between what's called a good investment asset and a store of value. A speculative asset, such as Bitcoin today, for instance, can't be called a store of value because it lacks stability

You're welcome!

[darkangel11]

Currencies are not a store of value because they are inflationary. Nothing that can lose 5% a year can be a store of value.

Many cryptocurrencies also can't be a store of value. One of the exceptions is Bitcoin which is deflationary and because of this doesn't function well as a currency, but is a good store of value. Some people say it is not because of volatility but short-term volatility doesn't matter as long as the coin doesn't make lower lows. The lowest value of Bitcoin for the last 10 years has always gone up.

[bdivrik]

Too much price instability does not mean that they cannot be value stores. It may not be a value store for large companies. However, they can be an investment tool for ordinary people. Picking up some bitcoin and putting it aside can make huge gains in the future.

[Betwrong]

But what I also found out during my research is that there are two conflicting theories in regards to what causes the demand for money. One of them, the Cambridge cash-balance theory, saying that "money's ability to store value is more important than its function as a medium of exchange". And another one, Fisher's theory, saying that "demand arises because money is needed for exchange"

Keep in mind that both of these theories had been developed with hard currencies in mind and circulation, i.e. paper money back in the day was redeemable for gold. With fiat money, the Cambridge cash-balance theory becomes obsolete, especially now when many people are living on credit (read, households have negative cash reserves)

Yet, for most people in the world (read: for the people living in developing and undeveloped countries) hard currencies, such as United States dollar, Euro, Swiss franc, British pound sterling and Japanese yen, is still a store of value, regardless of the fact that they are not backed by gold anymore. Since we are talking about 85% of the world population here, I think it's too early to write off the capacity of money(hard currencies, at least) to serve as a store of value.

Or am I missing something here?

[deisik]

But what I also found out during my research is that there are two conflicting theories in regards to what causes the demand for money. One of them, the Cambridge cash-balance theory, saying that "money's ability to store value is more important than its function as a medium of exchange". And another one, Fisher's theory, saying that "demand arises because money is needed for exchange"

Keep in mind that both of these theories had been developed with hard currencies in mind and circulation, i.e. paper money back in the day was redeemable for gold. With fiat money, the Cambridge cash-balance theory becomes obsolete, especially now when many people are living on credit (read, households have negative cash reserves)

Yet, for most people in the world (read: for the people living in developing and undeveloped countries) hard currencies, such as United States dollar, Euro, Swiss franc, British pound sterling and Japanese yen, is still a store of value, regardless of the fact that they are not backed by gold anymore. Since we are talking about 85% of the world population here, I think it's too early to write off the capacity of money(hard currencies, at least) to serve as a store of value.

Or am I missing something here?

Well, that goes well beyond theories of money circulation

As it is more about the concept of money itself. If something aspires to become money, it must necessarily be a store of value, at least short to midterm. Put differently, anything which cannot keep its value over time cannot be money. Indeed, there are other requirements such as fungibility, fast transactions and low transaction costs, but having a capacity to more or less retain value is an absolute necessity. Hyperinflating currencies like the Venezuelan bolivar quickly lose this capacity and thus stop being money

[mamahdedeh]

Too much price instability does not mean that they cannot be value stores. It may not be a value store for large companies. However, they can be an investment tool for ordinary people. Picking up some bitcoin and putting it aside can make huge gains in the future.

those who are worried are those who see the market too often, while psychologically unable. therefore long-term investing is more suitable for me. There are no worries every day with market movements, and we can do other activities without disrupting our investment

[Getmon]

Too much price instability does not mean that they cannot be value stores. It may not be a value store for large companies. However, they can be an investment tool for ordinary people. Picking up some bitcoin and putting it aside can make huge gains in the future.

those who are worried are those who see the market too often, while psychologically unable. therefore long-term investing is more suitable for me. There are no worries every day with market movements, and we can do other activities without disrupting our investment

That is far better. Invest, set a long term for it, and then forget about it. Focus on some other activities more fun and interesting. It is fun to check on the prices every now and then, but only if the prices are in green and bullish. If they are in red and falling down, it will only give you stress. So you better leave it in your safe wallet and then return to it after the set period.

[jostorres]

A quick history of currencies and paper money shows that money began as a deposit of a certain value of gold/silver and then turned into a representation of the promises of those who issue it.
Looking at the US dollar, it has lost more than 90% of its value, making all paper currencies a bad example of a "store of value." "I do not want to mention the scenario that happened in the state of Venezuela or Germany after the war."

Anything currency, stock or asset can be used as a store of value. When you’re holding dollars, it's a store of value that you’re holding. You only have decision to change to something else like real estate, cryptocurrency, gold, silver, and precious stones when the value becomes unpredictable (e.g. hyperinflation). There are people that might be living in Mexico but buying dollars and Euros, they do this as a means of storing value. I also do that most of the times, I hold dollars, pounds and Euros in my Payoneer wallet.

So, currency is also a store of value. But, it will be good or not is being decided by its inflation rate. As far as I know there will be no limited supply base currency or deflationary currencies are available. Hence, storing your wealth in a currency may result in losing its worth over the time.

[webtricks]

Too much price instability does not mean that they cannot be value stores. It may not be a value store for large companies. However, they can be an investment tool for ordinary people. Picking up some bitcoin and putting it aside can make huge gains in the future.

This is the main problem with the forum. Did you even read the OP or simply wrote the post by reading title alone?
OP isn't talking about Bitcoin or cryptocurrencies. She's pointing the discrepancy in one of the 3 major functions that traditional money (i.e. fiat currencies like USD) performs.

Money basically performs these functions:

• Medium of Exchange
• Unit of Account
• Store of Value

However, due to excessive inflation, the purpose of 3rd function is collapsing. In general this function works like this: Suppose I own 50kg wheat that I require after 6 months. Then instead of spending money on its storage and security, I would rather sold my holdings and buy those again after 6 months. But due to inflation, I may not not able to buy 50kg wheat after 6 months as the price of wheat may have increased.

Best way to combat this problem is by investing money in inflation-defeating investment like debt funds or moderately-risked shares.

[deisik]

Too much price instability does not mean that they cannot be value stores. It may not be a value store for large companies. However, they can be an investment tool for ordinary people. Picking up some bitcoin and putting it aside can make huge gains in the future.

This is the main problem with the forum. Did you even read the OP or simply wrote the post by reading title alone?
OP isn't talking about Bitcoin or cryptocurrencies. She's pointing the discrepancy in one of the 3 major functions that traditional money (i.e. fiat currencies like USD) performs

In fact, it can't be any other way

I wrote extensively on the subject and had rather heated discussions and arguments with a few forum members in the past. It is ironic how stubborn and obstinate people can be (and then proceed to being outright obnoxious and offensive) when their deep-entrenched ideas are thoroughly challenged so much that it makes an interesting subject for exploration on its own merits and for its own sake

The point is, the functions of storing value and being a medium of exchange (synonymously known as a means of payment) are mutually exclusive. Simply stated, you can't have a good store of value and a good medium of exchange at the same time. It is either the former or the latter. And while we are at it, the function of a unit of account is not really a function of money as it is the very concept of it (read, there is no discrepancy here)

[FanEagle]

It obviously used to be more about store value, however for the past 3 years it has been more than just store value, it has became commodity that could increase in value or decrease in value depending on demand.

For example, Wheat is a commodity, the price of wheat depends on both how much wheat is produced but also how much wheat is consumed at the same time, so it is a double jointed result, if there is a lot of demand and not enough produced then price of wheat goes up, if there is a lot of demand but a lot of produced then stays about same, if there is no demand and less produced it is around the same yet again but when there is no demand yet too many produced the price goes down. EXACT same thing for bitcoin, could it be store of value? Sure, but it all depends on demand and the amount being sold.

[deisik]

For example, Wheat is a commodity, the price of wheat depends on both how much wheat is produced but also how much wheat is consumed at the same time, so it is a double jointed result, if there is a lot of demand and not enough produced then price of wheat goes up, if there is a lot of demand but a lot of produced then stays about same, if there is no demand and less produced it is around the same yet again but when there is no demand yet too many produced the price goes down

I'm not sure if wheat is a good example

Indeed, its price depends on the balance of supply and demand as everything else which gets traded out there. But wheat cannot be a good store of value simply because it can't retain its value over any significant amounts of time. It starts to "depreciate" almost instantly as it quickly loses its consumer properties (read, quality) after having been harvested. Apart from that, just its storage alone requires significant expenses which subtracts a lot from its usefulness as a hypothetical store of value (whatever that value might be)

[aamirsuh]

Bitcoin is a value store. It is not logic to constantly compare with gold. Because bitcoin is not a classic value store. A store of value for today's people. Let me tell you what I mean. There is a person who lives 24 hours a day. He's always on the lookout for his social media accounts. And his psychology is constantly changing. Bitcoin is just like today's people. The psychology of the price is constantly changing.

[bettercrypto]

the  government decides the value of  currencies which is why its not volatile as it is. the government also decides its volatility by not or printing more of it. now that we know 90% of its value were  lost, what was lost in BTC when its  growing exponentially over the years of existence? due to it people are already considering BTC as investment not even a currency. the  adoption  had helped it grow.

In conclusion, government can manipulate the price of money. The volatility of every currency depends upon how they launches the supply of the money. If they want to pull down the price, they will release bunch of paper money and hoard when the economy slowly turns to boom so that the peak of economy will become stable.
That is why they hate bitcoin. They cannot control it and it is transparent than paper money. We know the total supply of bitcoin and we know that time will come it will grow.

[STT]

the  government decides the value of  currencies

Its always about the people, government has the power of taxation over its nation and it leverages that position into control of a currency but even then it cant decide value.  It would be related to trade and demand normally.  Dollar benefits from an agreement by many nations to use it globally in reserve, so its fairly unique though there are a few other minor reserve currencies also held since ww2.
   Dollar was originally backed like alot of currencies by a link to a commodity value, a fixed amount available on demand.   Thats the long term store, the short term relys on use in circulation and ability to tax trade flows, I think its a slippery slope but many think a standard continues endlessly.   

[sana54210]

Bitcoin is a value store. It is not logic to constantly compare with gold. Because bitcoin is not a classic value store. A store of value for today's people. Let me tell you what I mean. There is a person who lives 24 hours a day. He's always on the lookout for his social media accounts. And his psychology is constantly changing. Bitcoin is just like today's people. The psychology of the price is constantly changing.

Bitcoin (not all other crypto) used to be a store of value but they don't look that way anymore. Looking at the prices bitcoin is too volatile to be a store of value. People think of store of value like gold, where the value is dependent on the inflation, when dollar worths less, gold worth more dollars that is how it works. Looking at bitcoin the price of bitcoin has nothing to do with strength of dollar right now, the value of bitcoin in itself is something totally different.

Yeah, there are times when you can consider a store of value but then the price drops like crazy without any reason or it could go up without any reason as well. For example we had no reason to go above 20 thousand dollars per bitcoin, that was stupid but we had no reason to fall to 3 thousand neither, none of those stores any faith in bitcoin price as a value.

[STT]

Looking at bitcoin the price of bitcoin has nothing to do with strength of dollar right now, the value of bitcoin in itself is something totally different.

I disagree and if Dollar had a policy of repaying fiscal debt and interest rates exceeding inflation, say 4% for the last 10 years.  No QE, no new debt and a budget in surplus we'd be living in an entirely different world.  I love technology and BTC I think would have propagated anyway but the price would be in the hundreds still if that alternate scenario had played out.  If debt had stayed with private interests and been resolved in the courts through default, liquidation and bankruptcy, we'd not have central control of money and interest rates at 1% or below inflation and then disappointment when BTC isnt five figures

[Ayiranorea]

the  government decides the value of  currencies which is why its not volatile as it is. the government also decides its volatility by not or printing more of it. now that we know 90% of its value were  lost, what was lost in BTC when its  growing exponentially over the years of existence? due to it people are already considering BTC as investment not even a currency. the  adoption  had helped it grow.

In conclusion, government can manipulate the price of money. The volatility of every currency depends upon how they launches the supply of the money. If they want to pull down the price, they will release bunch of paper money and hoard when the economy slowly turns to boom so that the peak of economy will become stable.
That is why they hate bitcoin. They cannot control it and it is transparent than paper money. We know the total supply of bitcoin and we know that time will come it will grow.

Yes, this is how the value of the currencies were determined. Another thing every country cannot print currencies on their own, there is certain criteria of depositing gold and based on that specific value currencies were issued or printed. This isn't followed, countries release of their own which finally ends with inflation and economic collapse.

[fauzan Ichsan]

the  government decides the value of  currencies which is why its not volatile as it is. the government also decides its volatility by not or printing more of it. now that we know 90% of its value were  lost, what was lost in BTC when its  growing exponentially over the years of existence? due to it people are already considering BTC as investment not even a currency. the  adoption  had helped it grow.

In conclusion, government can manipulate the price of money. The volatility of every currency depends upon how they launches the supply of the money. If they want to pull down the price, they will release bunch of paper money and hoard when the economy slowly turns to boom so that the peak of economy will become stable.
That is why they hate bitcoin. They cannot control it and it is transparent than paper money. We know the total supply of bitcoin and we know that time will come it will grow.

Yes, this is how the value of the currencies were determined. Another thing every country cannot print currencies on their own, there is certain criteria of depositing gold and based on that specific value currencies were issued or printed. This isn't followed, countries release of their own which finally ends with inflation and economic collapse.

true that a large supply of money will result in the currency is worthless and ultimately inflation. especially if officials in the country think of themselves with corruption, then hyper inflation is possible. if it's like that then the people who will suffer, to seek new asylum