On days like these, it’s easy to mock Bitcoin (BTC)—specifically, the idea that this pioneering cryptocurrency is a store of value, a digital equivalent of gold.
Black Monday
BTC fell along with the broader financial markets on Monday, briefly dropping below $50,000, its lowest level since February, before recovering some ground. By early afternoon New York time, the asset was down 9% over 24 hours, trading at $53,387.67.
For skeptics, Bitcoin’s volatility is reminiscent of Billy Crystal’s old comedy routine: “Where’s your savior now?”
“The narrative of Bitcoin as a ‘store of value’ is being tested,” Bloomberg columnist Joe Weisenthal declared on X (formerly Twitter). “Bitcoin doesn’t look like new gold. It looks like three tech stocks in a trench coat.”
But there’s a more nuanced view of this issue that needs to be considered from a conceptual angle.
We shouldn’t confuse store-of-value assets with safe-haven assets; the former is a long-term expectation asset, while the latter is a liquid and quick market asset.
The “long-term” part is crucial.
On a day like Monday, when the Nikkei dropped 12%, evoking memories of the “Black Monday” of 1987, U.S. Treasuries “tend to be everyone’s go-to safe-haven asset,” Baehr said. Treasury yields, which move inversely to prices, hit their lowest levels since January.
Bitcoin clearly does not enjoy safe-haven status.
“There’s no doubt that Bitcoin is still a volatile asset, speculative in many cases, leveraged in many cases, and traded in many cases,” Baehr said. “But its characteristics are promising, with its scarcity, portability, and immunity from government or corporate policies making it a genuinely interesting asset as a store of value over time.”
Investors who view Bitcoin this way see it not as a refuge from daily market fluctuations but as an insurance policy against the continuous erosion of the dollar’s purchasing power. Bitcoin’s supply is predictable, capped at 21 million, and immune to the whims of policymakers.
“People who hold Bitcoin long-term, especially those concerned about…national debt, central bank policies, and all these things…don’t care much about Bitcoin’s price going up, but rather the value of its denominator going down,” Baehr said.
He added that, paradoxically, something can be both a risk asset and a store of value simultaneously. “People using Bitcoin as a store of value aren’t unaware of its volatility.”
Arthur Breitman, co-founder of the Tezos blockchain protocol and a cryptocurrency expert, noted that Bitcoin’s resistance to seizure makes it a “store of value” in another sense.
“If…your bank accounts are seized, Bitcoin is a good store of value. It’s situational,” he replied to Weisenthal on X.
In another reply to Weisenthal, Dan McArdle, co-founder of the crypto data service company Messari, referred to an old post where he described his expectations for Bitcoin’s performance in various types of crises.
In 2018, McArdle wrote that Bitcoin should “sell off in a liquidity crisis, rise in a sovereign debt/fiat confidence crisis.” Monday was an example of the former.
As for more time-tested stores of value, gold prices were down about 1% Monday afternoon.
“Comparing Bitcoin to a store of value with thousands of years of history isn’t fair when Bitcoin is still in its infancy,” said Alex Thorn, head of firm-wide research at the crypto investment bank Galaxy Digital, in reference to comparisons with gold.
He said buying Bitcoin is “a venture capital-like bet on its future as a store of value.” “Bitcoin is still gaining acceptance. That’s why it’s volatile and has growth potential.”
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