Can Bitcoin really be a store of value?

Key conclusions

Gold has long met standards as a store of value, while fiat currencies lose purchasing power over time. Bitcoin now meets several of the same standards for storing value.
With a demanding cap of 21 million coins and 24/7 global trading, Bitcoin offers digital scarcity, durability backed by network security, and liquidity that rivals many established assets.
Concerns remain, including short-term volatility, inconsistent global regulations, cybersecurity risks, constrained historical data and challenges in integrating Bitcoin with established investment models.
Still, rising inflation, geopolitical tensions and weakening confidence in some fiat currencies are prompting pension funds to explore Bitcoin as part of a long-term strategy.

Since Bitcoin (BTC) rose to prominence, a key question has arisen: Can it reliably function as a store of value? The idea has long intrigued individual investors, and now even pension funds are starting to explore it. They assess whether Bitcoin can retain value over time, potentially paralleling or even competing with established safe and sound assets such as gold.

This article examines what defines an asset that stores value and how pension funds are approaching Bitcoin. It compares Bitcoin to established assets that store value and explores how cryptocurrency exposure for pension funds could expand beyond BTC.

What defines an asset that stores value?

Assets that store value maintain purchasing power over a long period of time. It usually has four main characteristics:

Scarcity: Narrow supply that is challenging to expand
Durability: The ability to survive without degradation
Mobility: Basic to carry and store
Liquidity: Can be easily exchanged for goods or other assets.

Gold traditionally meets these standards. In turn, fiat currencies lose value over time due to inflation and a growing money supply. Pension funds are interested in Bitcoin because it may outperform gold and fiat currencies in some areas.

The total supply of Bitcoin is constrained to 21 million coins. It is fully digital, remains secure as long as the network is operational and trades around the world 24/7 with high liquidity.

Did you know? Despite being called “coins”, Bitcoin only exists as entries on a decentralized digital ledger. There are no physical Bitcoins anywhere.

Pension funds: Cautious but interested

Pension funds operate under strict regulations designed to protect investors’ money and ensure steady retirement income for decades. This framework has made them wary of assets that are volatile or lightly regulated. Their main concerns include:

Piercing short-term price fluctuations
Different regulations in individual countries
Secure storage and cybersecurity threats
Narrow long-term performance data
Challenges of integrating Bitcoin with established investment models.

However, the broader economic environment is changing. Rising inflation, geopolitical tensions and concerns about the stability of some fiat currencies are prompting investors to review alternative assets that can lend a hand preserve value. As cryptocurrency becomes more integrated into mainstream finance, pension funds are assessing whether excluding digital assets could limit diversification rather than enhance it.

Case study: AMP Super’s take on Bitcoin

Australian superannuation fund AMP Super made allocation to Bitcoin futures under the vigorous asset allocation program. The Fund does not classify Bitcoin as a speculative bet. Instead, it sees Bitcoin as part of a broader strategy to protect purchasing power and hedge against currency weakening.

The fund’s research found that Bitcoin performs well as a store of value, in some cases more effectively than many conventional assets.

The fund’s approach includes:

Evaluating Bitcoin against store-of-value criteria such as scarcity, durability, portability, and liquidity.
Using trading signals in your vigorous asset allocation program that include price dynamics, investor sentiment, liquidity indicators, and inflation changes to determine the size and timing of your allocation.
Watching how Bitcoin reacts to changes in inflation expectations and other macro signals, rather than simply focusing on inflation levels.
Using onchain analytics to monitor blockchain data metrics to assess market conditions and generate trading signals.

This prudent, evidence-based strategy is a model for other pension funds, combining established analysis with cryptocurrency-specific tools.

Did you know? One Bitcoin can be divided into 100 million units called “satoshi”, which allows for micropayments.

Comparing Bitcoin to established assets that store value

Bitcoin differs from assets such as gold in terms of volatility, liquidity, scarcity and regulatory risk. Understanding these differences is crucial when assessing its potential role in a diversified portfolio:

Scarcity: Bitcoin’s constrained supply is enforced by code. This is in contrast to gold, which can be mined, and fiat money, which can be expanded through politics.
Portability and smoothness: Bitcoin can be transferred around the world in minutes and traded around the clock. Gold is steep to transport and store, and fiat transactions depend on banking infrastructure.
Response to inflation: Bitcoin and gold often rise when inflation expectations change. Thanks to this, both solutions can be useful for funds that want to maintain real profits.
Diversification: Bitcoin’s correlation with stocks and bonds varies, but generally remains low enough to provide diversification benefits. Even a tiny allocation can improve risk-adjusted returns in some portfolio simulations.

Cryptocurrency investments beyond Bitcoin for pension funds

Pension funds are also exploring investments in cryptocurrencies other than Bitcoin. For example, converting asset rights into digital tokens could improve the way investments are stored, transferred and accounted for. This approach enables asset programming, allows digital wallets to replace established accounts, and uses blockchain technology to reduce operational costs.

However, current systems still require technical improvements and wider application to fully realize these benefits. Blockchain has the potential to reduce reconciliation costs and unlock fresh forms of settlement, but several implementation challenges must be overcome.

Bitcoin faces challenges such as:

Evolving regulations regarding digital assets
Providing safe and sound, insured and approved care
Obtaining regulatory approval for fresh projects
Building internal expertise through training.

Pension funds see Bitcoin as a complement, not a replacement, for assets like gold or inflation-protected bonds. They found that Bitcoin can act as a store of value asset during changes in inflation expectations and that modest allocations can lend a hand improve overall portfolio performance.