You're not alone: all the people who bought Bitcoin and holding it use Bitcoin mainly as the best store of value in human history. All fiat currencies are being printed like crazy (CHF was an exception, but it changed a few years ago)
Could you explain that? Compared with traditional currencies, Bitcoin's high volatility and unknown long-term risk profile make it look like a terrible store of value to me. (And, for similar reasons, very attractive to speculators.)
Volatility should never be important when selecting a store of value. Gold and silver has much volatility compared to USD and hamburger price, still if you sold a cow 5000 years ago in Egypt for silver, you could buy at least 0.1 cows from the same amount of silver today. Silver doesn't lose more than 0.01% of its value/year (still the volatility is much higher than that).
It's actually more important to understand why USD and CHF are so bad store of value. The best explanation is by Mike Maloney:
https://www.youtube.com/watch?v=iFDe5kUUyT0
Volatility matters a lot for a value store, because the point of storing value is being able to convert back to something you actually value later on. If you put it in something highly volatile relative to whatever you actually care about, you may end up losing a lot of the stored value.
I can't reply to your comment for some reason, so I reply here.
I bought Bitcoins more than 1 year ago. If you look at Bitcoin in terms of years, and as a long-term store of value, Bitcoin is not volatile: the value is increasing until total adaptation.
And I don't know anybody else who bought and held his bitcoins who's complaining :) (I'm not counting people who had Bitcoins held at MtGox, as they didn't have Bitcoins, just IOUs for Bitcoins)
That you bought something and had it go up is great for you, but it does not mean the volatility is low. Indeed, if it went up a lot, it means volatility is high. Volatility is the inverse of stability.
A currency can be as volatile as it wants from day to day, but if over a very long time the value appreciates consistently then wouldn't that make it a good value store? You're hedging day to day against a long term win, surely?
Nope: long term appreciation may make it a good investment but a poor store of value.
Lets say you have two magical safes, and you put $100 in each one.
The first safe gives you the real-dollar value of what you put in, less $0.50 per-month. So a year later, you get $94 worth of inflation-adjusted dollars no matter how high or low inflation has been over the course of the year.
The other safe gives you an additional dollar for each day you keep the money in it, but there is a 70% chance all but $10 catches on fire when you open the safe. So one year later you have $465 or $10, statistically averaging $149.5 .
The second safe might be worth gambling on as statistically you get almost a 50% return on investment: but if you need to be certain the value you put in is maintained, the first safe is the better option. Therefore, the first safe is a far better store of value.
Gotcha. I've been thinking a lot about BTC recently, but I'm useless when it comes to economics and there is a lot of "faffing" around it. Thanks for the information. :)
Bitcoin has a relatively fixed supply, but that doesn't mean it's guaranteed to appreciate over time.
Bitcoin is only valuable because people choose to find it valuable. One example of how it could crash in value is if a competing cryptocurrency starts to gain momentum, and people jump ship, or if a major flaw is found.
There are many plausible scenarios for bitcoin going to 0.
The maximum amount of each cryptocurrency is hardcoded into their design, but nothing stops people from "printing" new cryptocurrencies. There's bitcoin, litecoin, peercoin, darkcoin, namecoin, primecoin, and of course dogecoin... Gimme a few hours and I could cook up xiphiascoin in your honor.
And when something happens that makes people migrate en masse from one *coin to another (perhaps a security flaw in the reference implementation), you might wake up to find that your old coins are now worth less than a Zimbabwe dollar.
