This complements What are the perceived advantages of bitcoin as a means of exchange?
To some, Bitcoin today is considered "better" than other stores of value. Why do some people think it's a good store of value, or even investment?
3 Answers
Bitcoin has several advantages over other means as a store of value.
They take no space. This means that you can store them in a USB as well as a backups online for example in an email.
You do not need to pay anything for storing the Bitcoins. There is no need to pay for a secure bank account since they can be stored online or in USB or even in your brain if you use a deterministic wallet. In this case you only need to remember the passwords.
This also means that you can bring them to any country easily without paying any fees.
They are easy to hide. Nobody will know how much you store or how to get them.
This will make them impossible to steal.
Your funds cannot be seized by any bank or government.
The downside is the fluctuation in value.
But if Bitcoins are here to stay they will increase in value over the years, perhaps outperforming many other assets. There is also a small risk that they might get replaced by a more efficient cryptocurrency though; so far several have tried but none have succeeded.
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This is pretty much it. If anyone sees anything that @istar missed, please add it. Commented Feb 2, 2012 at 11:28
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1I think the "... they will increase in value over the years" deserve some more explainations. Specifically, we should explain just how much the upside potential is if, say, Bitcoin replaces 1% of USD trades, given the limited coin supply. Commented Feb 2, 2012 at 11:29
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2@ripper234 the difficulty there is that the upside potential is an unknown quantity. Every speculator has a guess and every guess is different. It's probably safe to say that the ratio of adoption to availability drives price (the old supply/demand bit) but anything more is likely to be pure speculation, and I'd rather not see Bitcoin.SE filled to bursting with speculative chatter - let's stick to the facts :) Commented Feb 2, 2012 at 18:13
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1The big downside is that they can become close to worthless overnight, should Bitcoin be replaced by some other system. (And you might sell out to cut your losses when you think that's happening only to miss a big appreciation.) Commented Feb 2, 2012 at 19:55
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@DavidPerry - well, I meant an estimate of the "max theoretical upside", not an actual prediction of true values, certainly without any time frame. Commented Feb 2, 2012 at 20:17
The parallels between Bitcoin and the most successful communications technologies are too great to be ignored. It gives you the opportunity to invest in a technology without any threat of being shut down by an individual. In fact, it opens up whole new range of technologies besides simple monetary value. I've missed enough opportunities in the last several decades to let this one get by. It's like having a piece of a patent on email. Sure someone could create a Bitcoin 2, but that would require herding the people that make things like the internet possible. They are not sheeple. They may not allow such a thing to happen without their blessing. If anyone knows a better store of value than what Bitcoin has to offer, I sure would like to see the prospective.
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Spoken with proverbial blurry speculator vision. "herding the people that make things like the internet possible"– yeah such as myself and guess where I am not herding to? Another reference or two. Commented Mar 21, 2013 at 19:25
A less poetic version, so as "to answer the question.".
Bitcoin has the advantages of gold in electronic transferable form. It is really neither deflationary nor inflationary. In today's bizarro world of hyper money printing (this time is no different), stability is in relative terms deflationary.
Printing money has for centuries been used as a weapon to accumulate vast wealth and power to a tiny group of people. That power has been used to defeat governments, create wars, dictate social policy, create culture and on and on. The trick of invading Iraq to install a regime bound to the US dollar, and leaving the cost to the American people in the form of debt bearing interest to the same beneficiaries of the war is as old as money printing itself.
This same small group controls most of the worlds money printing, trillions of dollars in assets and they own or influence every political process you can name.
Bitcoins store of value is all about that. It is inherently inversely reflective of that system: limited quantity, not easy to expand supply, widespread control, politically neutral, open, etc. The greater the inflationary forces of money expansion, or if ever there is contraction in money supply (globally coordinated in early 80s, 22% interest rates!!) and deflation, Bitcoins stay stable. If the money printers were just to leave Bitcoin alone, Bitcoins store of value, once it reaches stability will be something like gold's, inherently stable in real terms.
Bitcoiners are asleep at the switch. They need to start thinking in terms of protecting and developing immunization for a war. There is clear direct evidence of the money printers taking great nations to war in order to print money. Bitcoin will get wiped out as a store of value legally, technologically, culturally etc, if Bitcoiners dont get serious about it. Market value Bitcoin about $700M. US Federal reserve prints that much in about 6 hours, every day.
Or we can just go back to being slaves.
Poetry is so much more succinct! But not everybody gets it.
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It does not have the attributes of gold, it has risen in value from $10 to $70 in 3 months, while gold has never risen that fast. It exhibits both deflation and inflation in a very volatile way. You can't provably assume that Bitcoin is not controlled by the power elite when it looks like they are in control. I agree there needs to be more serious design work on hardening, but still you are answering the wrong question. The question here is to give advantages, not talk about weaknesses. Commented Mar 24, 2013 at 18:08
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Alot of rules... Only advantages, not disadvantages. Only price quality comparison to gold not other innate qualities of both... Point is, BTC is a currency. Currency production is a social and political weapon. Value of currency is social, NOT technical features.– yadayadaCommented Mar 24, 2013 at 19:55
Today, it primarily serves as a store of value...).