Viewpoint | Meeting three major standards, Bitcoin will become a means of global value storage

-There are three very different factors that determine whether an asset has a good value storage capacity, and Bitcoin occupies an important position among these three factors.

-Currently, gold and the US dollar are the most prominent means of value storage. As people lose trust in the government, this situation may soon change.

-Investors may eventually realize the value of owning uncensorable assets such as Bitcoin.

In the follow-up information to investors, Electric Capital listed a framework to determine whether an asset is a means of value storage. Electric Capital said that Bitcoin meets all the standards in the framework, and it may become the most important means of value storage when the global economy is in trouble.

What determines value storage?

Bitcoin is mainly used to hedge large-scale banknote printing. Therefore, investors believe that Bitcoin is a means of value storage, and the long-term price trend of Bitcoin reinforces this view.

However, due to Bitcoin’s limited history and price fluctuations, it has not proven this argument in the form of written research.

Despite the short-term fluctuations, Bitcoin has created long-term value (data from TradingView)

According to Electric Capital, before an asset becomes a globally recognized means of value storage, there are three crucial factors, namely utility, trust and adoption.

Bitcoin is testing these three standards.

The basic use case for providing benefits to a group is to provide asset utility. Bitcoin’s utility lies in its ability to facilitate uncensored payments.

Trust refers to the belief that the store of value will continue to provide utility in the future. In this regard, trust means that most market participants believe that Bitcoin will become an integral part of the future.

Finally, adoption is self-evident, and it represents the most critical goal of Bitcoin. Adoption will bring bitcoin to so many people and will help bitcoin develop from an experiment to a true economic innovation.

In short, these three criteria determine whether the asset belongs to value storage. At present, the most important means of value storage are the US dollar and gold.

Although U.S. residents may disagree on the dollar ’s ability to maintain purchasing power, other countries in the world (whose currencies depreciate steadily against the dollar) disagree. In the past century, gold has also been a good value reserve.

But these two assets and their status as the main means of value storage are being threatened because Bitcoin is brewing a perfect storm.

How Bitcoin has become a means of global value storage

The collapse of trust in government and the increased awareness of how cryptosystems eliminate trust needs may be the main catalyst for Bitcoin to gain global recognition.

The utility of digital assets is that they can facilitate the exchange of goods and services without relying on central authority. No entity can be prevented from using Bitcoin, nor can anyone prevent others from using Bitcoin.

Bitcoin has established utility, as can be seen from its prominent position in areas managed by authoritarian governments.

Both the government and enterprises have registered excessive debt. At this point, the global debt crisis seems destined to happen, only a matter of time.

Therefore, people have confidence in the longevity of Bitcoin and its tendency to serve as an economic hedging tool.

The last important frontline of Bitcoin is its widespread adoption. In recent months, Bitcoin ’s capital inflows have increased. Well-known financial figures, including billionaire Paul Tudor Jones and author of “Rich Dad, Poor Dad” Robert Kiyosaki, have advocated adding BTC to their portfolios.

But not every major investor publicly announces his investment like Jones or Kiyosaki. It is not difficult to imagine that several high-net-worth investors have finally found a clear reason to invest in Bitcoin.

The price of BTC rises as the supply of the exchange drops, indicating the willingness to buy and HODL (data from Santiment)

Bitcoin has already had obvious utility, and the public’s trust and adoption are increasing day by day. Before the new coronavirus epidemic in 2019, the reasons for BTC as a means of value storage were already sufficient, and the current economic situation is amplifying its value proposition.

What do you think about this news? Please share your comments with us.

Comments

Leave a Reply