Is Crypto A Poor Store of Value?

By Prashant Jha

One of the most hotly debated issues in the world of finance and crypto today is: if crypto is a store or value. Almost every economist who has ever aired any opinion about crypto has commented on the suitability of Bitcoin and cryptocurrencies as “money” and subsequently as a “store of value”. The latest person to add his own two cents to this raging debate is Dave Ramsden, the deputy governor of the British Central Bank.

Ramsden, an official of the Bank of England pointed out how about a year ago, the Financial Policy Committee of the UK had commented that crypto’s immense volatility was reason enough to conclude that crypto is not a good enough store of value.

He also cited the body’s observation that crypto made for a poor and impractical medium of exchange as well because of the high transaction costs involved.

How is a Store of Value Defined?

The most common definition of an appropriate “store of value” says:

“A store of value is an asset that maintains its value without depreciating.  Gold and other metals are good stores of value as their shelf lives are essentially perpetual, whereas a perishable good (e.g., milk) is a poor store of value due to its propensity to decay. Interest-bearing assets, such as U.S. Treasury bonds (T-bonds), are very good stores of value because they generate interest income and their principal balances are backed by legal contracts.”

Now, this clearly indicates that a good store of value is something that is able to retain its value without any massive depreciation. Now let’s see if crypto qualifies this criteria.

Is Crypto A Poor Store of Value?

Crypto, because it tends to often be highly volatile, might undergo a high level of depreciation in the case of a sudden market slump.

However, it is highly possible that this problem may be transcended in cases of stablecoins or cryptocurrencies that manage to achieve a certain level of stability, owing to a strong technological foundation.

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