Bitcoin as "Digital Gold": Exploring its Role as a Macroeconomic Store of Value

What makes a good store of value

A store of value preserves purchasing power over time. Economists usually point to several properties: scarcity, durability, portability, divisibility, verifiability and broad acceptance. Gold scores well on most of them, which is why central banks still hold large reserves of it.

Bitcoin was designed with many of these properties in mind. The comparison below shows where the two assets are similar and where they differ.

• Scarcity: Bitcoin's supply is capped at 21 million coins by code; gold's supply grows slowly through mining.
• Portability: bitcoin can be sent worldwide within minutes; moving large amounts of gold is costly and slow.
• Divisibility: one bitcoin divides into 100 million units called satoshis; gold is harder to divide physically.
• Verifiability: anyone can verify Bitcoin transactions on the public ledger; gold requires assaying.
• Track record: gold has thousands of years of history; Bitcoin has under two decades.

The scarcity argument

Bitcoin's fixed supply schedule is its most distinctive feature. New issuance declines with each halving, and no central authority can change the cap without broad agreement from users and node operators, which is widely considered impractical. After the 2024 halving, annual new supply fell below 1 percent of the outstanding stock, a rate comparable to or below gold's estimated annual supply growth.

Supporters argue that this predictable scarcity makes Bitcoin attractive in a world where governments can expand the money supply. During periods of high inflation or currency crises, the idea of an asset with a known, limited supply has a clear appeal.

Volatility: the main objection

A store of value should be relatively stable, and Bitcoin has been anything but. It has experienced several drawdowns of more than 70 percent from peak to trough, including in 2018 and 2022. Annual price swings of 50 percent or more are common.

Supporters argue that volatility tends to decline as an asset matures and its holder base broadens. Bitcoin's volatility has trended lower over its history, but it remains several times higher than that of gold or major stock indices.

How Bitcoin behaves in market stress

Gold has historically held up during many periods of market turmoil and has often benefited when real interest rates fall. Bitcoin's record is mixed. In March 2020, during the initial pandemic shock, Bitcoin fell sharply alongside stocks before rebounding strongly. In 2022, as central banks raised rates aggressively, Bitcoin declined together with growth stocks.

At other times, such as during the regional bank failures in the United States in March 2023, Bitcoin rose while some financial stocks fell. Overall, its correlation with risk assets has varied over time, which makes it an unreliable hedge for portfolios that need protection during crises.

Gold's own limitations

The comparison works in both directions. Gold is heavy and expensive to store, insure and transport, so most investors hold it through vaults, funds or certificates that depend on intermediaries. Verifying purity requires testing, and counterfeit bars have surfaced in the past.

Gold has also been subject to government control. In 1933, US Executive Order 6102 required most private holders to sell their gold to the Federal Reserve, and private ownership remained restricted for decades. Its supply responds only slowly to price, but it does respond: higher prices encourage more mining and recycling.

Supporters of Bitcoin point to these drawbacks when arguing that a digital alternative could serve the same role more efficiently. Gold's defenders reply that its long history and physical nature give it a resilience that no software network has yet proven.

Institutional and macro adoption

The approval of US spot bitcoin exchange-traded funds in January 2024 made it easier for institutions and retail investors to hold bitcoin through traditional brokerage accounts. Some public companies hold bitcoin as a treasury asset, and a few governments have accumulated holdings, often through seizures rather than purchases.

Broader adoption strengthens the store-of-value case by deepening liquidity and broadening the holder base. It also ties Bitcoin more closely to traditional market flows, which may increase its correlation with other assets in the short run.

Weighing the case

The digital gold thesis rests on long-term adoption. If Bitcoin continues to gain acceptance as a reserve asset, its scarcity and portability could support its value. If adoption stalls, or if technical, regulatory or competitive threats emerge, its lack of cash flows means there is no fundamental floor beneath its price.

Some investors treat Bitcoin as a small, high-risk allocation with store-of-value potential, sized so that a large decline would not derail their plans. Others avoid it entirely. Both positions can be reasonable depending on goals and risk tolerance.

The bottom line

Bitcoin shares several of gold's monetary properties and improves on some, such as portability and verifiability. It has not yet shown gold's stability or its consistent behavior during crises. Whether it becomes digital gold depends on decades of adoption that have not happened yet.

Bitcoin is a highly volatile asset and can lose a large share of its value quickly. This guide is educational and not investment advice.