Can Bitcoin Volatility Interfere With Its Role as Value Storage?
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Most people recognize Bitcoin as a global value storage. Others see it as a tremendous evolution that will change most people's perception of money. Essentially, people see Bitcoin differently. Gamers and nerds see Bitcoin as the magic internet currency. To some individuals, it's an anonymous currency that criminals use to purchase weapons and drugs on the dark web. Some have even described it as a get-rich-quick scheme and a speculative bubble.

However, Bitcoin is slowly proving its ability to be the future value storage. It's acting as an equivalent digital gold. From being a mysterious digital currency that only a handful of cyberpunks and gamers knew to an asset that companies can invest in, Bitcoin is changing how people store value. Today, many merchants accept this cryptocurrency as a payment method. People are purchasing Bitcoin on platforms like Bitcoin Era and holding onto their coins. That's because they can see the potential of this virtual currency.

But Bitcoin's volatility is undeniable. Essentially, the price of this electronic currency can change wildly within a short period. However, Bitcoin price has continued to increase over the years, despite its wild volatility.

How Bitcoin Volatility Compares to That of Gold

As emerging value storage, Bitcoin's history predicts what users can expect.

  • Rapid price appreciation and a slow down over time: Every new value storage starts with a low price because few people believe in it. But the price rises exponentially as the asset becomes established. Over time, the price begins to appreciate slowly before reaching a steady state.
  • High and declining volatility: Early volatility of value storage can be extreme. That's because people would question the long-term sustainability of the asset. But as money establishes itself, its volatility will eventually tail off. What's more, its market capitalization will increase.

Essentially, Bitcoin's volatility will eventually decline as the cryptocurrency grows and establishes itself.

What to Expect as Bitcoin Becomes Value Storage

As more institutions accept and adopt Bitcoin, this electronic currency gets close to its recognition as a value storage. Here are the stages that Bitcoin will go through as it establishes itself as a value storage.

  • Collectible: Initially, people demand money for its peculiar properties. Gold, beads, and shells were collectible before playing their role as money.
  • Value storage: As more people demand an asset due to its peculiarities, they start recognizing it as a means of storing or keeping value. And this increases the purchasing power of money due to its rising demand. Eventually, the purchasing power plateau when more people hold onto it and new people wanting to keep it dwindles.
  • Exchange medium: Once money has become value storage, its purchasing power stabilizes. And the opportunity cost of its use to trade diminishes to a suitable level for using it as an exchange medium. For instance, people didn't appreciate the significant opportunity costs of using Bitcoin as an exchange medium. Instead, they preferred it as value storage.
  • Unit of account: Once more people use money as an exchange medium, they price goods in terms of it. That most goods will have an exchange ratio against it. Today, some goods have Bitcoin prices. That's why you can pay for a cup of tea using Bitcoin.

Bitcoin volatility marks a step in its process of becoming value storage. Bitcoin is a relatively new and developing electronic currency. Some people may not consider this cryptocurrency an exchange medium and value storage. However, its acceptance and adoption continue to increase. That means Bitcoin might eventually become an exchange medium and value storage like gold and other precious metals.

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