“Bitcoin is a great store of value.” You will hear this sentence on almost every podcast, YouTube show or interview regarding Bitcoin and Crypto. However, it is a lie – Bitcoin is not a great store of value!
Bloomberg article BTC as store of value
Why do people tell this lie all the time? I guess most people really believe it and just repeat what other people said, but some I guess want to sell Bitcoin for more than it is.
Therefore, here is an ethical question: Is it okay to lie for a greater cause?
There are different answers to this question from different moral theories. However, let´s first discuss why Bitcoin is not a great store of value.
What is a Store of Value?
The term “store of value” is defined as something that stores value.
In general a store of value is a commodity or an asset that would normally retain purchasing power into the future. The best example of a great store of value is money. Yes you heard right, MONEY. The dirty fiat money that loses value due to inflation and makes Bitcoin necessary, as a store of value, is the best example for a store of value. Under normal circumstances money only loses a tiny bit of its value over long periods, therefore it is a good store of value. There were assets like bonds and gold for example which were better stores of value, but still money was able to retain most of its purchasing power over time. Expect in times of hyperinflation. Than money or better the affected currency loses its value very fast. Like in Venezuela lately, in Iceland couple of years ago or in Germany about 100 years ago.
In times of hyperinflation people buy gold for example, another asset which is a better store of value at that time.
Today Inflation is on the rise again and the fear of hyperinflation drives people into assets which are better stores of value.
Bitcoin is the new gold; therefore it is a great store of value. WRONG.
Everyone who follows the price of Bitcoin more than a few days will recognize that Bitcoin gains but also loses a lot of its purchasing power. Sometimes Bitcoin loses up to 90% of its purchasing power compared to the Dollar.
These wild price fluctuations and high volatility are the reason why Bitcoin is a very bad store of value. If you want to store the value of your possessions for let’s say 2 years and buy Bitcoin, you have a good chance you buy it near the top of its price and entering a bear market for the next two years seeing your investment going down 80%. If you have to sell in exactly two years, because you need the money by then you will realize, that Bitcoin is not a great store of value. This is a realistic scenario and there are real life consequences to this lie.
So why do people tell this lie all the time?
Reason 1: Another “Definition”
One reason would be that people use another definition of “store of value” which refers to a very long period.
A) Bitcoin makes on average triple digits in percent of return every year (Only if you take the average over multiple years).
B) There are years where Bitcoin loses substantial amounts of its value.
Someone might say, if you take property A) and B) of Bitcoin you will see that it is a good store of value, because if you wait long enough the value always goes up. Nevertheless, they are misunderstanding the concept of a store of value.
Property B) makes it impossible for Bitcoin to be a good store of value.
Property A) makes it a good investment, in fact a very, very, very good one.
This is still not another or a better definition of “a store of value” it is simply a wrong use of the word. What these people want to say it is a good investment, not a good store of value.
Reason 2: Misunderstanding about Inflation
The Dollar is an inflationary asset. However, it is still a good store of value. In times of Hyperinflation, the dollar loses this quality therefore; it is not a good store of value anymore.
Bitcoin is not an inflationary asset. Because of its scarcity and the fact that coins/wallets are lost and coins are burned due to people sending it to wrong addresses. Bitcoin is (almost) a deflationary asset. This makes Bitcoin a good inflation hedge (at least over a long period of time – see Property B).
Just because something is a good inflation hedge doesn’t make it a good store of value, as stated in my example earlier. This is the great misunderstanding about the concept of a store of value.
So I guess most people didn’t know the definition of the term and were misunderstanding the concepts of inflation, store of value and what makes a good investment. Nevertheless, there are people who knew these definitions and concepts and still would argue and tell other people that Bitcoin is a good store of value. My assumption is that they want Bitcoin to succeed so they sell it for more than it actually is.
Moreover, that brings me to the ethical question from the introduction:
Is it okay to tell a lie for the greater good?
Short answer: It depends.
Long answer: There a different moral theories from several philosophers who give different answers because of different reasons.
I want to start with utilitarianism because they allow a lie for the greater good, when more utility comes from the lie than harm is done by it:
[…] an act is morally right if and only if that act maximizes the good, that is, if and only if the total amount of good for all minus the total amount of bad for all is greater than this net amount for any incompatible act available to the agent on that occasion.
So we could argue that if Bitcoin succeeds the world is a better place, therefore we need to help Bitcoin succeed. In order to help Bitcoin succeed we have to sell it to the people as good as we can. Even if that includes exaggeration and lying to some extent.
This argument would only be true if the harm by lying is not relevant, compared to the good that came from the lie. I do not think that this is the case. We do not need to lie about Bitcoin being a great store of value if we can just say the truth and tell people that it is a very good investment and a good hedge against inflation if you hold it over a long period. Just confront people with the truth and the numbers about Bitcoin. I think it is not necessary and therefore morally wrong to lie about Bitcoin and its quality as a store of value. Even by the standards of Utilitarianism. Other moral philosophies would be against lying no matter what. In the next part I will talk more about those.
What do you think about that?
Is it okay to lie for the greater cause?
Why do people tell that BTC is a great store of value?
Let me know in the comments.