What Makes an Asset Worth Holding? Understanding the Store of Value Principle

Community Submission - Author: Anonymous

When we talk about whether something is truly valuable for the long term, we’re really asking: will this asset maintain or grow in worth over time, or will it gradually lose value? This is the essence of the store of value concept—the ability of an asset to preserve or increase its worth rather than declining into worthlessness.

The Challenge of Fiat Money

Most traditional currencies face a fundamental problem: their purchasing power weakens over time due to inflation, which is typically driven by increases in circulating supply. Despite this weakness, many economists still categorize money as a store of value, primarily because the decline happens slowly and money remains the most liquid financial asset available. However, this classification remains debated, especially when hyperinflation events occur, rapidly eroding monetary value.

Why Certain Assets Retain Their Worth

For an asset to truly function as a store of value, it must be scarce and physically or digitally durable. Gold and silver exemplify this principle perfectly—their limited supply and resistance to deterioration allow them to maintain value across centuries. These precious metals have proven themselves reliable stores of value precisely because scarcity prevents overabundance and debasement.

Bitcoin’s Emergence as Digital Scarcity

The introduction of Bitcoin added a new dimension to this discussion. As a digital asset, Bitcoin carries properties similar to precious metals: it has a fixed, limited supply and cannot be duplicated or spent twice. These characteristics make Bitcoin appealing as a potential store of value—what some call “digital gold.” Over time, this scarcity mechanism has driven Bitcoin’s value appreciation.

Yet controversy persists. Bitcoin’s significant market price volatility and rapid fluctuations challenge its classification as a reliable store of value by traditional definitions. Critics argue that an asset experiencing such unstable price swings cannot reliably preserve purchasing power in the short to medium term, even if it maintains long-term scarcity properties.

The Core Principle

Whether an asset qualifies as a store of value ultimately depends on whether its worth remains stable or increases over time. This depends on liquidity, scarcity, and market conditions—different combinations that make gold, money, and Bitcoin each imperfect yet functional stores of value in different contexts.