Bitcoin resiliency implores: Is it a “speculative asset” or a “store of value”?

Bitcoin

It may be far too early in its short history to claim that Bitcoin has arrived and that its future is secure, but the fact that it depreciated 80% over eleven cruel months and that every critic known to man was claiming its imminent demise, but then picked itself up, dusted itself off, and rose from the ashes is a testament to its resiliency. Originally designed to be the “world’s digital currency” without a central bank, Bitcoin has not made its case at the point of sale, but as a speculative asset, it has shined, and it is now being regarded more and more as the equivalent of “digital Gold”, a store of value, if you will.

What is truly amazing is how quickly it mounted a recovery and how strongly it has performed in five short months. Crypto Winter decimated the industry for the latter eleven months of 2018, but Bitcoin has sprung from a bottom of $3,130, established in late December, to rise above $9,000, as of this writing. If you do the math, the return has been just a notch short of 200%, and we still have more than six months left in 2019. Try finding another asset in your portfolio that has kept pace with BTC.

Despite its Libertarian and counter-culture roots, Bitcoin and its altcoin brethren have grudgingly gained the respect of global investors, at least those that were willing to allocate a portion of their portfolios to what has been called in the past “Special Situations”. Speculative assets by definition mean that you should only invest what you can afford to lose, since the risk/reward demographics are off the chart. According to a few Nobel Laureate economists, cryptos should not even be on a chart. To them, they have no value, and investors will wake one day to find only “zeros” in their accounts.

For those investors, fools, enthusiasts, and Bitcoin diehards that bought in early for pennies, they do see “zeros” in their accounts, many zeros with numbers in front of them, too. There was a day when one Bitcoin was equal to one U.S. Dollar or even less. If you bought a thousand of them on a whim and held on, or “hodled” per crypto slang, you would be sitting on a cool $9 million today. Yes, gains are not gains until you close your position, and capital gain tax rates may not apply since BTC is a “currency”, but who would care at that stage. Champagne would already be flowing.

To many observers, however, the fact that Bitcoin bounced back, when everyone from regulators, economists, Wall Street aficionados, bankers, and government officials tried their level best to undermine its viability, should be enough to establish credibility. Its resiliency has restored confidence that the total market capitalization of the industry, some $500+ billion if you include all token, mining, exchange, and support programs in the crypto-verse, is not about to rush to “zero” in a nanosecond.

Better still, Bitcoin’s resiliency has revived the old debate as to whether the world’s favorite crypto currency is really a “speculative asset” or a “store of value”. One could easily argue that one’s individual situation and perspective could allow for either case to be true. In the latter case, citizens of countries, where their fiat currency is devaluing far too quickly, have also found a way to acquire Bitcoins from one of the 200+ crypto exchanges spread across the globe, whether by direct Internet access or through an OTC market provider’s virtual private network (VPN). Where there’s a will, there’s a way.

Gold Bugs and sellers of the yellow metal have recently risen in defiance, when Bitcoin was compared to Gold, as a good or better store of value. Such comparisons might proliferate a Gold salesman’s brochure, in hopes of making a commission, but for a person in need, access to Bitcoin can be a far easier matter in this digital age. Gold reserves also stand somewhere north of $7 trillion. With Bitcoin’s market cap at $150 billion and change, why is there even an argument?

One debater on this topic, Twitter’s Eric Jhonsa, concluded:

But with all that said, it’s also not hard to imagine Bitcoin meaningfully adding to the large gains it has delivered over the last few years in the event that support for it as a gold-like store of value becomes more widespread. And on multiple occasions now, Bitcoin has done an impressive job of defying skeptics who have predicted support for it would wither after a major crash that followed bubble-like euphoria.

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