Store of Value

What Is Store of Value

The term store of value describes the quality of an asset that helps it bypass depreciation over extended periods of time. So to be classed as a store of value, an asset should have either stable or increasing value over time.

A good store of value will allow the asset owner to trade it in the future at a similar or higher value than it was bought at. This value is based on the asset’s market price or purchasing power. However, in some cases, the store of value can also apply to the asset’s liquidity and the ease of buying and selling.

Many fiat currencies have a track record of declining purchasing power due to inflation, mainly due to a rapid rise in the circulating money supply of that currency. However, despite the effects of inflation, money is considered a primary example of a store of value.

 The reason for money being a store of value is primarily due to its purchasing power, which changes at a slow rate. Money is also the most liquid asset we currently have. 

Gold, silver, and other precious metals are also viewed as a good store of value, mainly due to their limited supply or scarcity. In addition, these metals are also storable for extended periods without getting physically affected. 

Crypto enthusiasts consider Bitcoin a good value store, and it is often described as “digital gold.” However, Bitcoin is in limited supply and viewed as virtually indestructible. It is a digital form of money that cannot be duplicated. 

Let's look at another example, such as meat. Meat is a poor store of value, as when it spoils, it will become worthless. This can be said for any product that depreciates over time.