Original source: Finance Magnates Author: Rachel McIntosh

Joint Compilation: Bochain Finance & Apifiny Team

Affected by the global COVID-19 pandemic, the economies of countries around the world are full of various uncertainties. In this general environment, investors are looking for new ways to increase asset value, among which the performance of Bitcoin has aroused great interest. In just a few months, Bitcoin broke through the $10,000 mark and soared to $19,880, setting a new record high in ten years.

Compared with other mainstream investment categories, is Bitcoin, with a market value of just over US$350 billion, a "safe haven" asset or a "reserve" asset? Garrick Hileman, head of research at Blockchain.com, pointed out that "if the value of each bitcoin can be stabilized at more than $50,000, that is, the total market value exceeds $1 trillion, it can truly be regarded as a global reserve asset."

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"There is no such thing as a safe haven in the new crown epidemic," Bill Noble, chief technical analyst at Token Metrics, wrote in an email to Finance Magnates. Having said that, "Bitcoin is a good hedge against inflation," So Bitcoin can be viewed as a store of value.

“If milk is up 40% and wages are only up 20%, how can you afford milk?” Noble said. “Consumers need a currency that can keep up with inflation.”

In other words, “Bitcoin helps protect the purchasing power of holders.” Noble argues that “the term ‘store of value’ is not an adequate term to fully explain Bitcoin’s value proposition.”

Michael Sonnenshein, managing director of Grayscale, told Finance Magnates that "the instability caused by the new crown epidemic and the resulting economic impact are the key factors in determining whether most people invest in Bitcoin."

“Recently, we conducted a survey of U.S. investors. Among those who recently invested in Bitcoin, nearly two-thirds said that the COVID-19 pandemic affected their decision to invest in Bitcoin,” Sonnenshein explained. “Even including those who don’t invest in Bitcoin, about 40% of U.S. investors say the pandemic has made Bitcoin more attractive.”

Sonnenshein said this increase in attractiveness is true for both institutional and retail investors. “Recently, we can see well-known public companies such as Square buying millions of bitcoins as reserve assets.”

Another listed company MicroStrategy also made the same choice. Legendary hedge fund manager Paul Tudor Jones recently declared that Bitcoin has enormous value. “Not exaggerating, just last quarter our own crypto fund raised over $1 billion from institutional investors.”

"More and more institutions are beginning to understand the role of long-term investment in Bitcoin. For example, various strategies can be used to hedge risk exposure, such as regular purchase of Bitcoin through the dollar cost averaging method." He said.

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Hacker Noon founder and CEO David Smooke believes that the narrative shift around Bitcoin will have a major impact on the future of the digital financial world.

"While it would be irresponsible to call bitcoin a 'safe haven', I do think bitcoin has certain advantages and potential as a store of value asset," he said. "We are still in the early days of the digital cash revolution. Just like gold Like the mascot of the Federal Reserve’s financial system, Bitcoin will be the mascot of the rise of digital cash.”

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Coro Global co-founder David Dorr believes that Bitcoin is not really "digital gold", "No matter how many people want to believe it, Bitcoin is not digital gold."

“Bitcoin has no competitive barriers to entry other than the inability to satisfy speed with transactions,” he explained.

Specifically, "Gold is a physical element on the periodic table. There are only a handful of precious metals on the periodic table, and unless a meteorite hits the Earth and introduces new precious metals to it, there are practical physical limits to competing with these precious metals." He said.

“While the number of bitcoins may be limited, it has no barriers to competition. This is why there are currently more than 100,000 cryptocurrencies.”

Ashu Swami, Apifiny's chief technology officer, believes that while "there is no perfect safe-haven or store-of-value (SoV) asset," Bitcoin "has a unique position in the basket of SoV assets and is irreplaceable."

"From a traditional perspective, the basket includes assets like bonds, munis, income stocks, index futures, gold, U.S. Treasuries and cash," said Ashu Swami.

In fact, whether Bitcoin can be considered a store-of-value asset depends largely on the background and timing of the investor, says Ashu Swami: “Applicability depends on the size of the investor, investment horizon and macro environment. "

"For example, cash is an ideal safe-haven asset when investors are waiting for the market, looking for direction, but because of inflation, it is a poor choice in the long run." Imbalances are very interested, but they also hold a certain amount of gold and other currencies as a hedge against the possibility of a dollar collapse.”

“Bitcoin has become a safe-haven asset of last resort. Like gold, Bitcoin’s value comes from the scarcity of supply."Swami said."While the U.S. national debt is piling up, the government’s printing of money shows no signs of abating, so there will be a corresponding increase in demand for dollar hedging and bitcoin. "

“Bitcoin, as the new digital gold, may make gold investors cry.” Adds Token Metrics’ Bill Noble: “By the end of the year, if institutional investors don’t have Bitcoin on their books, they will be unemployed, and very likely never to be employed again."

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Anton Altement, CEO of Osom.Finance, believes that regardless of the intrinsic properties of Bitcoin, whether Bitcoin can become a "value store" at any time has a lot to do with public perception and narrative.

In fact, "store of value" is not an "intrinsic property" of anything of value that society collectively agrees on. The reason why people think of diamonds, gold, wine, art, watches, etc. as a store of value is because we all agree on their value. This is more of a social contract and has little to do with the intrinsic properties of the asset.

“For example, shells were used as an early form of currency in some areas, but not anymore. But the shells haven’t changed in essence, what’s changed is the collective agreement they represent,” Altement added : "Bitcoin has been recognized as a secure protocol that can produce rare goods. In an era where money can be printed infinitely, people realize that Bitcoin's security and rarity have enormous value."

"It is undeniable that some people have regarded Bitcoin as a store of value. For example, MicroStrategy regards Bitcoin as its main reserve asset. It can be seen that more and more people hold this view." With the central bank digital currency (CBDC) Popularity, and this situation is likely to continue. “The discussion around CBDC will only increase awareness of ‘code as value’, even if they have nothing in common with Bitcoin, it will familiarize people with the concept of ‘code as value’,” Altement said.