What is Store of Value And Its Examples

Inflation is a raging issue that can cause a massive dent in your value of savings. So, investing in something that will safeguard your investment from the devaluing impact of inflation is crucial. This is where the ‘store of value’ comes in. 

Let’s find out more about this in the context of cryptocurrency. 

What is a store of value?

A store of value refers to an asset, currency, or commodity that you can save, exchange and retrieve in the future without any depreciation in value. 

For an item to be termed a store of value, its value should either remain the same or increase with time. 

You can take gold, platinum, and other precious metals as examples of a store of value. These commodities are considered as such because they have a perpetual shelf life and a limited supply. 

A limited supply ensures that the price of an asset will rise with time due to increasing demand. However, let’s understand why endless shelf life is important for a commodity to become a store of value. 

Think about a commodity like an egg. It is a poor store of value as its value will deteriorate when it gets bad. It will become worthless. Now, any commodity that degrades or depreciates value with time is considered a poor store of value. 

In some cases, experts also relate the store of value to an asset’s liquidity. It denotes how easy it is to buy or sell that commodity. Let's take a look at some real-life scenarios for a better understanding. 

Store of value examples

Using precious metals like gold and silver as a store of value has been a practice by nations throughout history. It was due to the ability of these items to hold their value and ease of transport. Furthermore, it is easy to exchange these items for different denominations. 

One of the most powerful nations in the world, the United States of America, was on a gold standard till 1971. It means an individual could redeem a specific weight of gold for dollars.    

You can also consider Bitcoin as a store of value. It has a limited supply and an endless shelf life as it exists on a blockchain. Many crypto investors consider this asset as “digital gold”. If you trace Bitcoin’s price history, you will see that its value has risen with time. 

It is not just Bitcoin that is considered a store of value. Many experts consider the entire digital asset class a store of value. It is mainly due to their portability, underlying value, fungibility, and security. Crypto experts believe that Bitcoin and the altcoins will act as a hedge against inflation.