Why Bitcoin doesn't work well as a store of value.

[headingnorth]

Another big problem I see is that the quantity of bitcoin mined everyday is fixed and cannot be controlled or adjusted to meet the current level of demand.

But with anything else the supply can be controlled in accordance to the current level of demand. Gold, oil, Apple, Iphones, etc.
What happens if you don't control the supply of something during periods of low demand? You are going to flood the market causing prices to drop.

This is a problem that seems to be unique to bitcoin and other cryptos. But with any other asset you simply reduce or lower the supply when demand is low
which helps to stabilize prices. When demand for oil is low, oil producers will reduce the supply of oil. But with bitcoin you can't control the supply that is being produced each day (450 bitcoins per day) which causes the market to be flooded with new bitcoins even when demand is low. This oversupply pushes prices down even more causing a downward spiral or doom loop to occur which has probably been happening over the last few weeks and months.

[fenican]

It's a poor store of value because it's not backed by anything. Bitcoin would be more accurately described as a purely speculative investing instrument. It could go to $500,000 or back to $1. One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

[lionheart78]

It's a poor store of value because it's not backed by anything. Bitcoin would be more accurately described as a purely speculative investing instrument.

I think you are exagerating on this, bitcoin is not "not backed by anything".  Bitcoin is backed by something.  See how the community mined bitcoin?  That is one factor that backed Bitcoin. aside from that the scarcity of Bitcoin makes it more valuable, thus it can be said that backed by Bitcoin.

It could go to $500,000 or back to $1.

This is volatility, but high volatility does not mean nothing is backing it.

One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

This is what we call being a medium of exchange, converting BTC to fiat and vice versa to buy goods and other stuff that requires a monetary price for exchange.

And saying that nobody really uses BTC as currency is another lie, although majority uses fiat currency, but there are minority that uses Bitcoin as currency.  They are converted to fiat currency because of the limited merchants that accept BTC.

[headingnorth]

It's a poor store of value because it's not backed by anything. Bitcoin would be more accurately described as a purely speculative investing instrument. It could go to $500,000 or back to $1. One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

Bitcoin is backed by hashrate and arguably the most powerful and secure network of computers in the world.
It is backed by proof of work which requires substantial effort and cost in terms of energy and resources to produce each coin.
In that sense it could be compared to gold mining which also entails great effort and resources to mine the gold out of the ground.

In other words, unlike fiat currency you can't just print bitcoin out of thin air.
Bitcoin has other problems as I have been describing but being "backed by nothing" isn't one of them IMO.
  

[GeorgeJohn]

The conclusion you made here I think is too harsh. You need to understand that Bitcoin is still treated like a risk asset because it’s young not because it can’t store value. Volatility, correlation and speculation are normal for an asset still finding its place.

Actually bitcoin is a risky asset..but some people contradict everything, for cryptocurrency..even it was not introduced as a store value...it was made to be a currency for exchanges of good and services..

At the end of the day, people run to Bitcoin not because it’s perfect now but because of what it represents which are long-term, independence and scarcity. With time and broader adoption, its behavior will likely reflect that more clearly.

The adoption of bitcoin is multiplying in daily bases, people have known the advantages of bitcoin, but only thiing that remains for them to understand the advantages of bitcoin...really bitcoin is independent due it's privacy and that's why it's having traffics...but the thing is that some people misunderstood the objectives why bitcoin was made...many people seems bitcoin as investment option whereas it's wasn't the objectives why satoshi nakamoto creates bitcoin for global use.

[Zigabel]

Bitcoin as a store of value is not for short-term HOLDERS, even stocks and other commodities that are mostly digital assets used as store of value do not attain their full value potential within a short period of time except for certain situations that are exceptional.  For every digital commodities you would want to consider a store of value, they do have some form of volatility else we shouldn't be hearing of situations whereby  the stock market crashes if these were as stable as you may want to pit it, even Gold does have times where it crashes, same with S&P, so the volatility with Bitcoin isn't alien neither does it make it any less of a store of value, only  that you may be thinking short-term far too much to not be patient with Bitcoin.

As it regards demand, I cannot  be placing apple or other big share companies with Bitcoin when it has to do with demand source, firstly these commodities of comparisons are not decentralized, they are controlled and can be completely manipulated by those who are in charge of production and supplies of these commodities, they have an almost pseudo stability as compared to what we should regard as stability, if these commodities should be allowed the level of Independence Bitcoin has got, they cannot  be compared.  Another factor to look at is timing, Bitcoin hasn't been around  for as long as some of these others yet it has been able  to scale up to comapre, so imagine if Bitcoin stays long enough  and gains as much adoption and daily  utility as those other commodities, I bet that there will.be no grounds for comparison.

[goldkingcoiner]

Do you agree or disagree? I myself used to believe bitcoin was the greatest store of value ever created,
but after giving it a lot of thought I no longer believe that is the case, and here is why.

1. Not only a storage but also a growth of value. It is volatile, but that volatility makes it attractive in the first place.

2. Bitcoin doesn't have a stable source of demand.

2. I think Bitcoin has proven that even when demand is low, the price steadily rises. Because it seems nobody wants to sell their coins. Gold is a bit similar in that regard. You do not see people paying with gold at the supermarket yet they keep it safely tucked away as a store of value. But unlike gold, there is a known limit to how much Bitcoin can be mined.

3. It is easy to HODL it when prices were low.

3. It is easy to hodl when prices are not lower than the price at which you bought them at in the first place. Just don't panic sell during/after market crashes and you will find it easy to hodl. I won't sell under any price anyway, I have learned that lesson the hard way.

4. Bitcoin is too correlated to risk assets and the economy.

4. Lol what.

[headingnorth]

Do you agree or disagree? I myself used to believe bitcoin was the greatest store of value ever created,
but after giving it a lot of thought I no longer believe that is the case, and here is why.

1. Not only a storage but also a growth of value. It is volatile, but that volatility makes it attractive in the first place.

2. Bitcoin doesn't have a stable source of demand.

2. I think Bitcoin has proven that even when demand is low, the price steadily rises. Because it seems nobody wants to sell their coins. Gold is a bit similar in that regard. You do not see people paying with gold at the supermarket yet they keep it safely tucked away as a store of value. But unlike gold, there is a known limit to how much Bitcoin can be mined.

Of course. If dropping like a rock the last several months means the same thing as the price steadily rising than you are right!

But not to worry, anyday now bitcoin will suddenly reverse its freefall and spike to a million dollars per coin this year creating the largest
God and Omega candle ever seen in the history of mankind. That's what Cathie Wood and Samson Mow told me so it must be true.

[Alone055]

It's a poor store of value because it's not backed by anything. Bitcoin would be more accurately described as a purely speculative investing instrument. It could go to $500,000 or back to $1. One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

I agree with some of the points and disagree with the others. I don't understand why you think Bitcoin is not a good store of value only because it's not backed by anything. May I know what Gold is backed by? Nothing, the only thing is that Gold has a physical existence, but Bitcoin has proven over the course of all these years that it can be a very good store of value, as long as someone keeps their assets safe and keep them within their own custody instead of keeping them in exchanges or other custodial services.

Also, the initial intended purpose of Bitcoin was to be used as a decentralized p2p system for people to send and receive funds to each other without involving a third-party, and that purpose still exists, and I don't see how Bitcoin has failed it, you can say that most people are using Bitcoin for a different purpose, but that doesn't mean that Bitcoin cannot be used for what it was initially created. It wasn't created to become a currency.

[goldkingcoiner]

Do you agree or disagree? I myself used to believe bitcoin was the greatest store of value ever created,
but after giving it a lot of thought I no longer believe that is the case, and here is why.

1. Not only a storage but also a growth of value. It is volatile, but that volatility makes it attractive in the first place.

2. Bitcoin doesn't have a stable source of demand.

2. I think Bitcoin has proven that even when demand is low, the price steadily rises. Because it seems nobody wants to sell their coins. Gold is a bit similar in that regard. You do not see people paying with gold at the supermarket yet they keep it safely tucked away as a store of value. But unlike gold, there is a known limit to how much Bitcoin can be mined.

Of course. If dropping like a rock the last several months means the same thing as the price steadily rising than you are right!

But not to worry, anyday now bitcoin will suddenly reverse its freefall and spike to a million dollars per coin this year creating the largest
God and Omega candle ever seen in the history of mankind. That's what Cathie Wood and Samson Mow told me so it must be true.

Corrections are to be expected. I don't panic.

Yes, I would love to see a "god and omega" candle once Bitcoin gets bigger. I consider a million not only possible in the long term but also perhaps in this year. It would require radical political movement around the globe but it could be done, as unlikely as it seems. Eventually it will. Bitcoin shouldn’t be evaluated using traditional valuation models, but it absolutely should be compared as a competing use of capital.

The growth and global adoption speaks for itself.

[Dogedegen]

It's obvious that  10 times the money is needed "to manage to absorb this sale and keep the price consistent",  when you compare the situation for $10 000 per 1 BTC and $100 000. So what? It’s like telling Coca-Cola, after they sold their first 1 million bottles, that selling 100 million would be 100 times harder.

I don't get your so what? You did not understand the post of the other user in the part that you have quoted, I wrote an explanation that tells you what he tried to say. Also your comparison does not work, but others have explained a bit as to why it does not work.

Another big problem I see is that the quantity of bitcoin mined everyday is fixed and cannot be controlled or adjusted to meet the current level of demand.

I think that you have misunderstood something and that you come from traditional economic theories that are wrong. This is an intended and core feature of Bitcoin, not a problem. It was designed to do this.

What happens if you don't control the supply of something during periods of low demand? You are going to flood the market causing prices to drop.

It is not so simple as it sounds, there are many reasons and ways why miners do not have to sell instantly. Anyway the current issuance rate is very low, so the sell pressure even during low demand is quite slim. Also remember that each time a miner offloads some and pushes the prices down they are harming their remaining stack and cost-basis.

This oversupply pushes prices down even more causing a downward spiral or doom loop to occur which has probably been happening over the last few weeks and months.

No that is not what is happening here, Bitcoin's issuance is very different from unlimited supply shitcoins. It is very low and gets lower every 4 years. Shitcoins that have tried ideas where supply issuance is related to demand have all failed, look it up.

Actually bitcoin is a risky asset..but some people contradict everything, for cryptocurrency..even it was not introduced as a store value...it was made to be a currency for exchanges of good and services..

It is not, this is not 2015. Institutions and countries would not be investing in a very risky asset, that is why they are not investing in shitcoins. The year is 2026, update your views.

Yes, I would love to see a "god and omega" candle once Bitcoin gets bigger. I consider a million not only possible in the long term but also perhaps in this year. It would require radical political movement around the globe but it could be done, as unlikely as it seems. Eventually it will. Bitcoin shouldn’t be evaluated using traditional valuation models, but it absolutely should be compared as a competing use of capital.

The growth and global adoption speaks for itself.

I think you are maybe preaching to the wrong person because he wants control over the supply so that he can match it with the demand, which goes against everything that Bitcoin is and is a very traditional way of doing things. He won't view it in any other way than traditional ways from what I see. Anyway who would determine what the current demand is and how would it be done in an objective way on the protocol level? It is impossible.

[headingnorth]

It's obvious that  10 times the money is needed "to manage to absorb this sale and keep the price consistent",  when you compare the situation for $10 000 per 1 BTC and $100 000. So what? It’s like telling Coca-Cola, after they sold their first 1 million bottles, that selling 100 million would be 100 times harder.

What happens if you don't control the supply of something during periods of low demand? You are going to flood the market causing prices to drop.

It is not so simple as it sounds, there are many reasons and ways why miners do not have to sell instantly. Anyway the current issuance rate is very low, so the sell pressure even during low demand is quite slim. Also remember that each time a miner offloads some and pushes the prices down they are harming their remaining stack and cost-basis.

Umm no, it's not hard to understand all. Miners don't hold bitcoin during a major downturn because they can't afford to.
Bitcoin is their primary means of paying for operating costs. If they don't sell bitcoin they can't pay for their high energy and
operating expenses. How else do you think they are going to pay for it?

In recent months it is costing them more money to mine each bitcoin than they are getting in return, forcing them to sell every coin as soon
as it is mined. That's why we always read in the news about miners quitting bitcoin and converting into AI data centers. Or if they can't do that
they may have little choice but to shut down or go out of business.

Another factor driving them to sell bitcoin during a downturn: They want to sell it as quickly as they can before the price drops even more.

[Dogedegen]

Umm no, it's not hard to understand all. Miners don't hold bitcoin during a major downturn because they can't afford to.
Bitcoin is their primary means of paying for operating costs. If they don't sell bitcoin they can't pay for their high energy and
operating expenses. How else do you think they are going to pay for it?

In recent months it is costing them more money to mine each bitcoin than they are getting in return, forcing them to sell every coin as soon
as it is mined. That's why we always read in the news about miners quitting bitcoin and converting into AI data centers. Or if they can't do that
they may have little choice but to shut down or go out of business.

That is not how it works, and don't assume things about other people's operations that you don't operate. There could be any number of financial fiat related reserves or instruments that could be tapped into during a downturn. Also they are able to temporarily shut down an appropriate amount of capacity to significantly reduce the operating costs which primarily relate to electricity. An efficiently run operation is not going to have a lot of staff or other costs. So they have the abilities to both reduce the operating costs and pay them if they want to continue to run at full capacity during a downturn.

Do you really believe that most people who run these companies do not care at all about Bitcoin and just entered this very risky venture in hopes to gaining some profit? When they know and everyone knows downturns are hard and have been pretty predictable? That makes no sense. There are miners that consistently solo mine even at a loss since long periods of times. Many small miners equals a fair share of the hashrate. Actually from what I can observe in recent years the trend of running solo or small scale miners regardless of profitability has picked up. Why would I not run a miner or two to help secure the network if I have a stash? I am sure big players are doing similar stuff.  

Another factor driving them to sell bitcoin during a downturn: They want to sell it as quickly as they can before the price drops even more.

Nobody who wants to acquire more Bitcoin does things this way, you are confused about miner groups. If someone comes from the fiat industry and wants more fiat and not Bitcoin, they can do this and they will regret it as so many people have since Bitcoin has been created. 

[HONDACD125]

Do you really believe that most people who run these companies do not care at all about Bitcoin and just entered this very risky venture in hopes to gaining some profit? When they know and everyone knows downturns are hard and have been pretty predictable? That makes no sense. There are miners that consistently solo mine even at a loss since long periods of times. Many small miners equals a fair share of the hashrate. Actually from what I can observe in recent years the trend of running solo or small scale miners regardless of profitability has picked up. Why would I not run a miner or two to help secure the network if I have a stash? I am sure big players are doing similar stuff.  

I don't agree with you on this. No company or individual would do mining if they are not making profits from it, because mining costs quite a lot of money considering how the difficulty has increased over the years, now you need to have pretty heavy equipment and quite a few of them to even be able to reach ROI within a few months or so, some might not even reach ROI within a few months. Those who get into mining only do it so that they can make money from it, it's all about getting bitcoins from the network, and not because they want to support the network, they know there are already enough people in this business, and they don't necessarily need to do it.

Anything that people do these days is only done for money. I don't know what makes you think that those who hold a stash of bitcoins will do mining only to support the network even if they are not making any money from it. It's not like Bitcoin lacks miners and it's going to face problems soon because there are no miners, the coins to be mined will end after year 2140, so we still got plenty of time to worry about this matter.

[shinratensei_]

It's a poor store of value because it's not backed by anything. Bitcoin would be more accurately described as a purely speculative investing instrument. It could go to $500,000 or back to $1. One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

It's backed by the hashrate which secures the network and every bitcoin mined there is energy spent to acquire that. People convert their bitcoin to fiat because the government isn't approving bitcoin to be a legal tender.
If countries willing to approve bitcoin as a legal tender bitcoin will be used more frequently. It's too bad that many countries are too afraid to open up their domestic market for a decentralized currency because their bad money will depreciate in value and have high inflation.

[Swordsoffreedom]

One thing it has failed it, the initial intended purpose, was to be a currency. Nobody really uses BTC for that. They convert to fiat, overwhelmingly, and use fiat for transactions because fiat networks are so much more robust, widespread, scalable, and honestly are just better in every way.

You need to understand that Bitcoin is designed to operate outside and beyond the rule of the traditional financial system. Therefore, the fact that people are not using bitcoin for its original purpose due to government restriction does not mean it has failed

Today, despite the fact that most people are only using it as a store of value. But if they want, including you, they can use it as currency without asking for permission or consent from anyone. You can use it to make payment and transfer money anywhere, as long as both parties agree. That's how a decentralized currency works, and it shows that bitcoin is still a currency