Bitcoin's volatility doesn't make it a bad store of value.

[Accardo]

It's barely certain for most people about bitcoin being a nice store of value. Because they're sidetracked by its volatile nature, many, still, wouldn't trust saving money through bitcoin. In his book Skin in the game Nassim Taleb said; “Volatile things are not necessarily risky, and the reverse is also true.” Coupled with the viral term Bitcoin is risky due to its volatile nature, lots of potential investors don't risk taking this precious savings opportunity. Over this period of years, time has proven that bitcoin's volatility doesn't make it a risky store of value. Paying attention to the reverse of Nassim's statement, let's make dollar an example; Dollar is not volatile, but, it's a bad store of value, inflation affects dollar's value over the years.

Bitcoin's volatility is only effective for short term players same as dollar's stability. Ultimately bitcoin remains a better store of value than dollar despite being a volatile asset.

Share your insight.

My idea was taken from this article: https://unchained.com/blog/bitcoin-is-not-too-volatile/

[Churchillvv]

From my view of the world today I think this notion of bitcoin being a bad store of value is no longer as intensive as before because people are becoming aware of bitcoin and it's in-depth knowledge. back when people never gave fair hearing to bitcoin enthusiasts it was most spread that bitcoin was a bad investment because of it's volatile nature but because of it's result that it has pulled over the years we have now come to understand that bitcoin is truly the best store of value when considered in a long term.

I think this fact that fiat (dollar) is only stable in a short term is the same reason why Satoshi made bitcoin a side by side currency and not against fiat although the central authorities tried to make bitcoin seems like an enemy (threat) to fiat or them (government) where as it was never the idea of bitcoin.

What I would advise anyone with such notion and/or thinking about bitcoin is that they should look at bitcoin as long term asset and not a get rich quick scheme.

[Dr.Bitcoin_Strange]

As a matter of fact, I believe that the volatile nature of Bitcoin is the reason why investors are profitable with Bitcoin investments. With that being said, a store of value is an asset that can actually hold value or increase in value with respect to time longevity. 

According to Wikipedia, "a store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved, and exchanged at a later time and be predictably useful when retrieved."

With the above definition, any Bitcoin newbie should know that the volatile nature of Bitcoin results in an increase in price too (price surge), and they must understand that if the price of Bitcoin is made to be stable with reducing
 price, the value will not grow but rather depreciate. But we are happy that during every Bitcoin bull market, the price surges and those who invest at a low price always take profit. 

[Dunamisx]

Its very common that you can see some sort of people thinking that bitcoin isn't a good store of value because of it volatility, but they would have forgotten to realized the advantages that comes on with this as well, we don't lose from the part of the investment we are making in bitcoin when it becomes more volatile and dumps, we also make profits as much as possible the moment the market begins to pump through this same volatility, now the question lies on how people or bitcoin investors were able to withstand holding.

[The Sceptical Chymist]

Three replies to the OP so far in this thread, and they're so poorly reasoned and written that my heart weeps for this forum

It's barely certain for most people about bitcoin being a nice store of value. Because they're sidetracked by its volatile nature, many, still, wouldn't trust saving money through bitcoin.

Those people aren't wrong, and if you think saving money for the long-term in a relatively new asset that governments around the world seem to view as a threat to fiat and is as volatile as bitcoin is a good plan, you've either got bitcoin love-blinders on or have no investing experience.

In his book Skin in the game Nassim Taleb said; “Volatile things are not necessarily risky, and the reverse is also true.” Coupled with the viral term Bitcoin is risky due to its volatile nature, lots of potential investors don't risk taking this precious savings opportunity.

So?  That's one sentence from one guy's book, and frankly it doesn't make a lick of sense to me.  I haven't read what must be a fascinating argument as to why "volatile things are not necessarily risky" but I'd say that most investments with very high market volatility are quite risky.  OP, do you know what volatility means? 

Some folks might be taking advantage of the relatively high risk-free rate of return right now when interest rates are high, and to them bitcoin might not be as good a way to save money for their individual time frames.  When it comes to things like that, one size definitely does not fit all.

I read Black Swan by Nassim Taleb, btw.  Didn't care for it much as I recall, but it was a long time ago and the only thing I remember was that it seemed like there was a lot of fluff to it.

[Agbamoni]

A successful store of value depends on preservations in the long term for purchasing power. Including liquidity and acceptance as well. The American dollar regardless of its flaws has been accepted all over the world. It has gained acceptance universally and is easily convertible. Bitcoin has grown popular, yet it is not as popular, usable, or significant as the US dollar.

“Volatile things are not necessarily risky, and the reverse is also true.”

In Nassim Taleb's quote, he was busy sharing an idea and he had his interpretation, but you saw the other way round. Volatile things do not necessarily define risk. It can only amplify it but does not define it. In this context Nassim was in a setting for investors looking for a stable store of value, in the context of Bitcoin it reflects price swings.

[passwordnow]

It's not only dollar but every fiat and every local currency that we have. It's not a secret anymore that they are losing their value overtime because of inflation. As for Bitcoin's volatility, it is the opportunity that we see and the same with the stocks that are growing over the period of time. Many don't like risks and volatility and this is where they're having problem. They remain stagnant and they don't move with their lives staying to engaging with no risks and investments.

While us, we've taken the challenge and never minded the volatile that Bitcoin has. We just leaned on it and dependent to its move because we know where it is going and we've become enthusiastic about it as we all have said, it's about the tech. But eventually, it's about the financial aspect that Bitcoin is bringing us through being a great store of value.

[mirakal]

As a matter of fact, I believe that the volatile nature of Bitcoin is the reason why investors are profitable with Bitcoin investments. With that being said, a store of value is an asset that can actually hold value or increase in value with respect to time longevity.

According to Wikipedia, "a store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved, and exchanged at a later time and be predictably useful when retrieved."

With the above definition, any Bitcoin newbie should know that the volatile nature of Bitcoin results in an increase in price too (price surge), and they must understand that if the price of Bitcoin is made to be stable with reducing
 price, the value will not grow but rather depreciate. But we are happy that during every Bitcoin bull market, the price surges and those who invest at a low price always take profit.

Exactly. Volatility is what makes people stay with bitcoin. Without it, people will not experience massive profits but most probably, only less and fixed amount of income. Volatility is not a threat nor a burden for everyone, but a bigger opportunity for us to become more profitable in the future and make remarkable progress through bitcoin. So we should not see volatility as a bad store of value, but a blessing in disguise that will put bitcoin having the highest store of value in the near future.

[d5000]

I very much agree with the sceptical opinion of @The Sceptical Chymist.

Having read Parker Lewis' article on Unchained, I can agree with some parts of it, but there's a fundamental problem which I often see when Bitcoiners talk about concepts like "scarcity" or "supply".

The disparity in the rate of increase in demand (variable) vs. supply (fixed) combined with imperfect knowledge amongst market participants causes volatility as a function of price discovery.

Source

The problem here is that, in my opinion, he's comparing apples to bananas: the "real demand" on the market with the "theoretical supply" of the decreasing block rewards. If he compared apples to apples, he needs to compare the "real demand" with the "real supply on the market", which is equally variable and we don't know if there's really a decrease of its growth rate or not. [see below for an example]

And this leds to his conclusion that it's likely that the long term bull market will increase still for a long time, and thus, despite the volatility, Bitcoin is a good store of value.

But there are several questions.

One of the most important ones is: do we know that there is really a "rate of increase" for demand? We could cite theories like Metcalfe's Law or empiric data like crypto.com and Triple-A's ownership / market adoption studies. Metcalfe's Law is a nice principle but we don't know at which point we are: perhaps the adoption and network efficiency is already close to the maximum for Bitcoin's niche? Would really every person on the planet benefit from holding Bitcoin? What happens when everybody holds but nobody uses it?

Don't get me wrong, I have still reasons to be long term bullish, but I don't believe in a magical law for Bitcoin to always increase in value. Bitcoin can increase in value a lot still, but only if the community continuosly and creatively expands its user base. This also means to cater to more use case scenarios.

In the current situation, Bitcoin's use case as "store of value" is limited to people where the following two conditions apply:

1) they can afford to hodl for 2-3+ years (depending on the market situation when they bought)
2) they have a low probability to need the BTC suddenly (which can mean having to sell in the middle of a crypto winter)

This limits the usefulness of the store of value to the upper 30-50% in rich industrialized countries and the upper 10-20% in the rest of the world. And not all of them will buy Bitcoin because some will still like gold and other "real world assets" (with a similar target demographic) more.

But in this demographic Bitcoin will hit a ceiling soon (in the next 5-10 years, I think). If the user base is not expanded, then it could be possible that Bitcoin's "end game" will be there sooner than expected - in this case, it would happen before the universal adoption utopia Lewis talks about in his article happens.

Thus, it's crucial to think about the "currency" use case, and the community should really be more interested in scaling solutions which are the main reason holding back this use case. My interest in layer2's is not coming from nowhere.


[example] A quite interesting example is the user group of "unconvinced longterm holders". These are long term holders who don't believe in Bitcoin's "values" (censorship resistance, decentralization etc.), but see the growth of the price and want to profit from it. So they will hold it for a long time but will sell eventually. This group could become quite big eventually, as more and more early adopters are getting rich and are tempted to sell, and this would perhaps lead to a substantial increase in "market supply" in the future, even in times where the miner supply decreases.

[Marvell1]

I have never considered USD a store of value or a safe haven because it is their nature to lose value over time.
My point is, an asset is called a store of value, meaning they need to be stable, not too volatile to ensure their asset value. Meanwhile, in the short term bitcoin is so volatile that I wouldn't consider it a good store of value.
If you use bitcoin as a store of value, what happens if you buy bitcoin for $69k in 2021 and you need to use it in 2022 when bitcoin loses more than 70% of its value? Of course in the long run it will recover, but in the short term it won't help you.
For me, assets used as a store of value or safe haven are only gold or real estate, they are much better options than bitcoin or USD.

[kryptqnick]

If we take Taleb's claim, the statement about the USD should be that it is not volatile, but it doesn't necessarily mean it is not risky. Whether it's a good or bad store of value is a separate question, in my opinion. Now, the USD is not volatile, and I think it's pretty safe to say it is not risky. You can estimate the annual loss of purchasing power with a very high degree of certainty due to how stable the USD is. So there isn't much risk involved because you know what is likely to happen. It's a downside, not a risk.
As for Bitcoin, one could try to argue that while it's volatile, you can look at the price chart and see that Bitcoin always recovers from bear markets and emerges stronger than before. But it's also true that Bitcoin is still very new, so there isn't much data to rely on (less than 20 years is nothing for a currency). Moreover, Bitcoin is slowing down in terms of its growth, so predicting what you end up with is much more complicated than with the USD. Finally, I believe that there is a big risk with Bitcoin if someone considers a store of value something they can use in an emergency, as Bitcoin can easily be over 50% down for a long time.

[Roseline492]

It's barely certain for most people about bitcoin being a nice store of value. Because they're sidetracked by its volatile nature, many, still, wouldn't trust saving money through bitcoin.

You are right but it depends on the person understanding about Bitcoin because there is no way somebody with a good understanding about Bitcoin would reason that way because of volatility however if someone should consider volatility as a challenge that means they are not ready to invest on any cryptocurrency because irrespective of Bitcoin being the most volatile coin doesn't mean that other altcoins are not volatile, however the reason why they should always consider Bitcoin is that regardless of the volatility the price is always appreciating, so actually potential is what those people should consider and not volatility, though I noticed that the people who normally reason that way are mostly those with little capital because they know that any drastic move in price can easily affect them.

[Apocollapse]

Anything is volatile.

Bitcoin, business, real estate, precious metal and even "chance" is also volatile. What I mean by "chance" I refer to global economy where the world keep evolving, anything is in digital right now, if you didn't want to learn technology, you will not able to live comfortable now.

If you can't deal with volatility, it means you will not able to change your life. Savings will not make you rich and you will not able to retire, in the end you will own nothing and you will be happy.

[Hatchy]

Share your insight.

My idea was taken from this article: https://unchained.com/blog/bitcoin-is-not-too-volatile/

Any investor that is scared of investing in Bitcoin just because of it's volatile nature isn't fit to be a Bitcoiner and shouldn't even buy Bitcoins. If we are putting the word volatility we shouldn't only point it on Bitcoin. All cryptocurrency are volatile in nature, with some less volatile and while others even more volatile.bitcojns is even less volatile compared to other cryptocurrency. And most other cryptocurrency respects Bitcoin's volatility a lot. Normal BTC remaijs the king of the market. And when it's experiencing a bearish or bullish market other coins still have to respect it some how. So saying that you can't or won't buy BTC because of volatility means that the investor isn't ready and will only end up losing his funds investing them in shit coins.

[Accardo]

Three replies to the OP so far in this thread, and they're so poorly reasoned and written that my heart weeps for this forum

It's barely certain for most people about bitcoin being a nice store of value. Because they're sidetracked by its volatile nature, many, still, wouldn't trust saving money through bitcoin.

Those people aren't wrong, and if you think saving money for the long-term in a relatively new asset that governments around the world seem to view as a threat to fiat and is as volatile as bitcoin is a good plan, you've either got bitcoin love-blinders on or have no investing experience.

In his book Skin in the game Nassim Taleb said; “Volatile things are not necessarily risky, and the reverse is also true.” Coupled with the viral term Bitcoin is risky due to its volatile nature, lots of potential investors don't risk taking this precious savings opportunity.

So?  That's one sentence from one guy's book, and frankly it doesn't make a lick of sense to me.  I haven't read what must be a fascinating argument as to why "volatile things are not necessarily risky" but I'd say that most investments with very high market volatility are quite risky.  OP, do you know what volatility means?  

Some folks might be taking advantage of the relatively high risk-free rate of return right now when interest rates are high, and to them bitcoin might not be as good a way to save money for their individual time frames.  When it comes to things like that, one size definitely does not fit all.

I read Black Swan by Nassim Taleb, btw.  Didn't care for it much as I recall, but it was a long time ago and the only thing I remember was that it seemed like there was a lot of fluff to it.

What's Volatility? It's an estimation of an asset's price change over a period of time. In a simple term, volatility has nothing with value. Bitcoin price is volatile, but its value is not. And we have to understand that price and value are not necessarily the same. To still mandate the claim that bitcoin's volatility is not necessarily risky, we have to differentiate between volatility and risk.

Do you know what risk is? I'd help you with that, risk shows the possibility that an asset A will suffer the loss of a reasonable part or its complete value. Over the years Bitcoin has been valued at 1BTC = 1BTC which simply means that Bitcoin like any other volatile asset is only risky to short term players, whose thoughts coincides with your response; bothering themselves with its volatile price shift and the government's regulation.

And because everyone is deeply concerned about bitcoin's price they fail to recognize how powerful its value is to long term traders. In a nutshell,  like the title of my thread, Bitcoin is never a bad store of value. Dollar is risky because of the high rate of losing its value to inflation, despite its nonvolatile price. To heck with the price, value is what matters, and remains the foundation of this thread. Goodluck.

[dezoel]

Anything is volatile.

Bitcoin, business, real estate, precious metal and even "chance" is also volatile. What I mean by "chance" I refer to global economy where the world keep evolving, anything is in digital right now, if you didn't want to learn technology, you will not able to live comfortable now.

If you can't deal with volatility, it means you will not able to change your life. Savings will not make you rich and you will not able to retire, in the end you will own nothing and you will be happy.

Business is volatile at first but I think later on it can also become stable by the time you already grasps things and you are the ones who managed it. Real estate on the other hand is known to be stable but can only provide small yet consistent profits overtime, same goes with the precious metals.

As for the chance, it depends on the percentage because a high percent chance can become very stable, so the real ones that is volatile here is only Bitcoin. Bitcoin is a kind of crypto and there are still other cryptos which are also volatile. Going to be back to chance, IDK why you think that a global economy and chance are the same? There will always be countries that will continue to evolve even if sometimes they can also experience an issue. There is no chance there but it is inevitable.

Living comfortably can be subjective. For some, it is when they live a simple life and there is no stress that they can feel but for some they think they will live comfortably if they have all the luxury things and then they have a lot of money. Going back to volatility, I remember that emotion can be one of it and anyone can deal with this even if it takes time. Lastly, I still believe that savings can make you rich but even without it we can still be able to retire.

in the end you will own nothing and you will be happy.

Or maybe you mean not be happy? But, what you said there is still possible because like I said earlier; someone can still live a comfortable yet simple life.

[dansus021]

Bitcoin's volatility doesn't make it a bad store of value. From the beginning i just saw bitcoin as hedge of inflation and make it for store of value. Gold is store of value but for me bitcoin act as store of value aswell if we look athe past data its already proven. Double digit apy is the main source of store of value imo

[jrrsparkles]

Store of value means something that has constant value and you're comparing with investment and people who store their assets in the form of gold or anything.

Bitcoin is not bad and it's proven that it's best performing investment asset in the last decade but look at gold it's price is not volatile but not giving much returns to beating the inflation which makes it best option for store of value.

Tax on capital gains is added headache though.

[topbitcoin]

It's barely certain for most people about bitcoin being a nice store of value. Because they're sidetracked by its volatile nature, many, still, wouldn't trust saving money through bitcoin. In his book Skin in the game Nassim Taleb said; “Volatile things are not necessarily risky, and the reverse is also true.” Coupled with the viral term Bitcoin is risky due to its volatile nature, lots of potential investors don't risk taking this precious savings opportunity. Over this period of years, time has proven that bitcoin's volatility doesn't make it a risky store of value. Paying attention to the reverse of Nassim's statement, let's make dollar an example; Dollar is not volatile, but, it's a bad store of value, inflation affects dollar's value over the years.

Bitcoin's volatility is only effective for short term players same as dollar's stability. Ultimately bitcoin remains a better store of value than dollar despite being a volatile asset.

Share your insight.

My idea was taken from this article: https://unchained.com/blog/bitcoin-is-not-too-volatile/

In fact, seeing a stable currency is really scary because of the mirage of the same numbers but the declining exchange rate is scary and like a wolf in sheep's clothing that continues to swallow the value of the money we earn from hard work.

Bitcoin does not run stable in the scope of daily, weekly, monthly, yearly, but what we know is that bitcoin always increases from year to cycle, it is a value and it is not a bad one, but it may depend on the point of view, if you see it as monthly then it will be very bad, but if we see it every cycle even a decade, bitcoin is something tempting that can give us extraordinary profits, and it is the best investment place so far in my opinion.

I strongly agree that assets that have high volatility do not mean bad assets, we must be aware of this, if we look at bitcoin itself people are no longer bitcoin as a trading asset but as a store of wealth.

[tabas]

Bitcoin is not bad and it's proven that it's best performing investment asset in the last decade but look at gold it's price is not volatile but not giving much returns to beating the inflation which makes it best option for store of value.

This is what the traditional investors like. They don't like the high volatile assets because that seems to be the real risk that they can't take. As for gold's move, that's a low return and yet securing for them and that's very applicable to the conservative investors that don't want to deal with too much risk. And with that, we've got the choice whether to take it or not, we that has chosen this risk from Bitcoin earns from its volatility and it has become part of our lives already. We can tolerate these risky investments but not coming to the point of understanding a scheme that's likely to scam and still take it, what's good with this is we can detect sketchy investments and see signs of having red flags.