Bitcoin is a New Store of Value. Now What?

Not even all Bitcoiners expected it. But it happened: Bitcoin has become a new store of value. But what follows from this—for individuals and collectives?

There has been much debate about what constitutes a store of value. It was often argued that a good store of value needs to have „intrinsic value“—that is, a utility beyond storing value—or a „cash flow,“ such as interest or dividends.

After 16 years of Bitcoin, we know: a store of value needs none of these things. It is sufficient if a broad enough global consensus exists that a scarce good is a store of value. Then, people store their wealth in it—and it becomes a store of value.

You can raise a hundred objections to this, parade dozens of theories that are meant to disprove it. Often, such objections come from Bitcoiners themselves, who believed that Bitcoin needed to reach mass adoption as a means of payment before it could become a store of value.

But reality speaks clearly, and one should not adjust perception to fit theory but rather adjust theory to what is perceptible: Bitcoin is a store of value. Period.

The Consensus Is Growing Broader and Deeper

For a long time, Bitcoin’s status as a store of value was shaky. It was mainly tech-savvy, experimental investors who accepted it as such, more out of idealism than realism—not because Bitcoin was already a store of value, but because they wished it to become one:

These included critics of the fiat system, computer scientists who had read and understood the Whitepaper, cypherpunks who hoped for privacy features from Bitcoin, and libertarians who saw Bitcoin as a tool against the state.

By now, Bitcoin has reached the investment mainstream. Everyone knows the term, more and more investors hold Bitcoin in their portfolios through ETFs or similar instruments, and more and more banks offer it as an investment as a matter of course.

But above all, more and more companies are beginning to use Bitcoin as their primary reserve, led by MicroStrategy from the USA, but also Metaplanet from Japan, Blockchain Group from France, and many others. It’s becoming hard to keep track.

In addition, states are gradually getting involved. El Salvador, Abu Dhabi, indirectly Norway and the Swiss National Bank, the USA—which is planning a Bitcoin reserve—some U.S. states that are removing legal barriers, Bhutan, which holds a large portion of the bitcoins it has mined itself, and others.

The global consensus that Bitcoin is a store of value is becoming broader and broader, deeper and deeper. By now, the process may be unstoppable, like an avalanche that can’t be halted once it has amassed enough momentum. Bitcoin has become digital gold, and the world is using it to store value.

Technically, Bitcoin Could Fail

Socially, Bitcoin has already won. The world has accepted that value can be stored in an otherwise completely useless digital coin, as long as it is scarce and called Bitcoin. Once such a conviction arises, it is hardly reversible.

However, Bitcoin could fail on a technical level. A central part of the belief that Bitcoin is a store of value lies in belief in the technology itself. If the technology fails, so does belief in the store of value.

There are several scenarios in which this could happen:

• Developers could introduce an error into the code that, once it is deeply embedded, can no longer be reversed.
• Quantum computers could break ECDSA cryptography—a standard for digital signatures in Bitcoin (Elliptic Curve Digital Signature Algorithm)—faster than expected, and the Bitcoin community is unable to agree on an alternative, quantum-safe system.
• Fees may not rise sharply enough to keep the hash rate stable. If a mass of mining devices becomes worthless uncontrollably, a secondary market for 51% attacks could emerge.

Probably, several more potential attacks and vulnerabilities could be listed. Each of them, however, is highly unlikely; enough reason not to put absolutely everything into Bitcoin, but not in the least a reason to dismiss Bitcoin as a store of value.

Bitcoin for Individuals

Once you have accepted that Bitcoin has become a new store of value, you should ask what that means—for yourself, for our society, for the world.

For you, as an individual and a private person, Bitcoin is primarily an opportunity: a new technology for storing value gives you another option to do just that—to store value. An estimated several hundred million individuals worldwide have already realized this and are successfully storing value with Bitcoin.

You can do this in your stock portfolio by buying ETFs or ETNs if you care merely about the value. If you care about the self-custody aspect, you should keep your bitcoins in a wallet. The website bitcoin.org has an excellent, German-language wallet guide that should be your first stop.

If you want to get more specific, you should spend a few minutes learning about the theory and practice of storing bitcoin. If you understand how bitcoins are stored—this ingenious principle of stamping value into galactic randomness—you’ll also understand why Bitcoin is such a groundbreaking new technology for storing value.

The Danger of Ignoring Bitcoin

While the individual conclusions from the fact that the world has a new store of value are relatively straightforward, the collective consequences become more complicated and controversial.

Because an individual acts for themselves, while collectives define themselves by acting on behalf of others. If an individual loses value, it’s their problem, but if the collective „Federal Republic of Germany“ burns money, it becomes a problem for all of us.

The basic truth for all new technologies is that ignoring them means not only missing out on gains but also suffering losses. If your collective ignores a new value storage technology while others adopt it, then others will store value better, and your own wealth will shrink.

This is the very first thing to understand: a collective that fails to embrace Bitcoin risks destroying and thereby losing wealth.

What a Collective Should Do

Every member of a collective should therefore expect those who represent them politically to engage with new technologies. Lawmakers should not place obstacles in the way of citizens and companies so they can use a new store of value. If there are hurdles, they should be removed, for example, in rules governing the corporate accounting of assets.

Furthermore, lawmakers should ensure that the economy and industry that form around a store of value like Bitcoin thrive within the collective: trading venues, ETF providers, custodians, payment service providers, wallets, miners. A collective lacking such institutions would be like an early-modern state without its own mint.

Often, it’s enough simply not to introduce new obstacles to allow such an ecosystem to flourish. Sometimes existing obstacles must be dismantled, and in some cases, it may even be necessary to actively promote development through subsidies and other incentives. Especially for mining, targeted support could benefit climate protection.

Finally, it would also be appropriate for collectives—that is, public institutions—to recognize the store of value. Municipalities, cities, states, institutions, health, pension, and retirement funds hold and manage capital reserves. Like private actors, they should use every technology available to preserve these values.

If there are legal obstacles to, for example, a municipality adding bitcoins to its portfolio, these must be removed. This allows them to at least decide for themselves if and to what extent they wish to hold bitcoins. Under certain circumstances, it might even be advisable to legally mandate a small minimum allocation—say, 0.5 or 1 percent.

Grassroots in the Truest Sense of the Word

Individuals have long understood what it means to have a new store of value: it is an opportunity to store wealth better. Hundreds of millions have decided to preserve and grow a portion of their wealth through Bitcoin—and with great success.

Companies find it significantly harder. While it is normal for companies in the industry to also hold bitcoins, it was only MicroStrategy that brought Bitcoin into play as a capital reserve for companies outside the industry. Since then, there have been many imitators—but overall, probably far less than 0.001 percent of all companies hold bitcoins in their portfolios.

Finally, if we look at public institutions, the adoption rate shrinks even further. Not one of the roughly 50,000 cities worldwide with more than 100,000 inhabitants has bitcoins in its treasury, nor do municipalities, public institutions, states, provinces, oblasts, or nations.

The adoption of the new store of value, Bitcoin, is a grassroots movement in the truest sense of the word. It starts at the bottom, with individuals, and reaches the higher levels of collectives ever more slowly the higher up you go. Thus, Bitcoin redistributes capital and wealth from the top down, from collectives to individuals—and that is not just good because it fits with Bitcoin’s libertarian, freedom-oriented mission.