In this article, you will learn what is a store of value. Earning money is one thing – knowing how to save it is completely different. No matter how big your paycheck, if you're not saving it in the right way some of its value will be robbed by inflation. That is why you need a reliable store of value that lets your earnings retain their worth.
What is a Store of Value?
The term “store of value” is almost self-explanatory, but the fact is, what it refers to has changed drastically over time. Presently its definition can only be specified once you understand the terms “value” and “inflation”, and how they apply to your earnings.
So, what do these two terms mean? Well, the value of cash refers to the purchasing power (how much you can buy with it) it has at a given point in time, while inflation is the gradual decrease in the purchasing power of cash Due, to the increasing supply of the cash. Simply put, there is no limit to the number of banknotes or coins a country can issue; and by the simple principle of economics, when the supply of something increases, its value decreases.
That brings us to the term “store of value”. To store value, an asset must have a growth rate that's higher or equal to the inflation rate (the amount of new money is being produced). It must also be easily transferred through time (doesn't deteriorate), otherwise it won't really store the value.
Why can Crypto be Used as a Store of Value?
Crypto can be used as a store of value for several reasons:
Limited supply: Many cryptocurrencies, such as Bitcoin, have a limited supply, which means that their value is protected against inflation caused by an increase in supply.
Decentralization: Cryptocurrencies are decentralized, meaning that they are not controlled by any central authority or government. This makes them less susceptible to manipulation and interference.
Security: Cryptocurrencies use advanced encryption techniques to secure transactions and prevent fraud. This makes them a more secure store of value than traditional forms of currency, which can be more vulnerable to theft and fraud.
Portability: Cryptocurrencies can be easily transferred across borders and can be stored in a digital wallet, making them more portable than physical assets.
Divisibility: Many cryptocurrencies can be divided into small fractions, making them highly divisible. This means that they can be used to make small transactions, which is not always possible with traditional currencies or assets.
Bottom Line
The future isn't one-dimensional. Stocks, bonds, gold, silver and real estate will no doubt remain popular investments. But with its ingrained ability to store value, we're sure to see crypto being leveraged more and more often by people who want to safeguard their earnings. This article is about what is a store of value.
