Store of Value
An asset or currency that retains its purchasing power over time, allowing it to be stored and used in the future without significant loss of value. In trading, a store of value is typically a stable asset that investors hold as a way to preserve wealth, especially during periods of economic uncertainty. Examples include gold, certain fiat currencies, and stable cryptocurrencies.
What Is a Store of Value?
A store of value is an asset that maintains its value over time, allowing it to be saved, retrieved, and exchanged without significant loss in purchasing power.
How It Works
- A store of value is an asset that you can hold onto for a long time, and it will retain its worth.
- It's often used as a safeguard against inflation or market volatility, because it tends to keep its value or appreciate over time.
Examples
- Gold: Historically, gold is considered a classic store of value. Even though its price fluctuates, it has consistently maintained value for thousands of years.
- Cryptocurrency: Some cryptocurrencies, like Bitcoin, are often considered a store of value because, unlike fiat currency, they aren't as susceptible to inflation or devaluation from central authorities.
Why It Matters
- Protection Against Inflation: A good store of value helps protect your wealth from the effects of inflation, where the purchasing power of money decreases over time.
- Wealth Preservation: Investors often choose assets with a reliable track record of being a store of value to safeguard their assets for the future.
In short, a store of value is something that keeps its worth over time, protecting your wealth from losing its purchasing power.