Bitcoin: Currency or Strategic Reserve?

I was reading through the topic about Bitcoin as a strategic reserve, and it got me thinking. If Bitcoin becomes a strategic reserve, it could boost its price and turn it into more of a store of value. But if it’s used as a medium for transactions, the price might stabilize instead of skyrocketing. I can’t really see a payment method that’s super volatile, you know? I get that there are scalability issues, so this is more of a thought experiment to weigh both sides. Which approach would increase the price and which one would stick to Bitcoin’s original purpose? Ugh, now I’m not even sure what I’m saying. To summarize, how does the stability I think a widely accepted medium should have fit with a decentralized asset? Would that stability always be just a theory, while scarcity pushes the price up? Or should we redefine what money is something that doesn’t lose value over time and adapts to price changes? Sigh, what am I even rambling about? I’ll probably regret this when I’m sober and more awake.

Gold is volatile, yet it can be considered a medium of exchange. All you need to do is reach a value where changing it requires a large amount of liquidity (a trillion dollars, for example), and then the price will be stable in the short term and in an upward direction in the long term. Then it will be a store of value and stable.

It doesn’t have to be one or the other. Bitcoin was created as a medium of exchange but proved so valuable that it is now used more as a store of value, although it still serves as a medium of exchange. There have been bitcoin reserves around the world for some time now, but that doesn’t stop many of us from using bitcoin to make purchases. The thing is, as a medium of exchange, it doesn’t have much of a future because, objectively speaking, it’s better to use fiat currencies. Fiat currencies lose value due to inflation, whereas Bitcoin gains value. That’s why it’s better to build up your wealth in Bitcoin and spend in fiat currencies.

For a trade, if price in short term does not change too much, that asset is good for using as a medium of exchange. Gold has bigger market cap and bigger trading volume than Bitcoin has so gold price is less volatile than Bitcoin is, it's fact but another fact is it has been changing with time and Bitcoin adoption growth. Better adoption growth, there are consequent increases of Bitcoin value, price, marketcap and trading volume so that there will be less volatility with time. It's only matter of time when Bitcoin will no longer be considered as a risky asset and turned into safe medium of exchange as well as store of value. Bitcoin has its market cap is about 30 times less than Gold has but it will be changed and reduced in coming years. https://companiesmarketcap.com/assets-by-market-cap/

Stability is what increases the use of a currency for financial transactions. The dollar is a prime example, which is why it is widely used in international trade. From my experience with Bitcoin, it seems that a decentralized currency would not gain stability since it is not centrally controlled. Maybe this might change in the future but for now, the value is determined by market forces. Bitcoin's biggest attraction now is its speculative nature. These big firms are setting up Bitcoin reserves because of the returns from it. Bitcoin would be mostly used as an asset for a long time because of its volatility.  There are predictions that the value might become more stable in the future. Maybe at that time, its use as a currency would become more popular.

It can be both. Volatility would be reduced, but it would still be volatile enough to be a store of value and stable enough to be a medium of payment. We can already see how Bitcoin's volatility has reduced compared to how it was years ago. These days, the rate of Bitcoin's price fluctuation within 24 hours is less than 3%. It can be 3-5% on bad days. Meanwhile, the long-term price increase still makes it a store of value. The more Bitcoin's market cap increases, the more volatility will be reduced. I don't believe volatility will ever completely be gone and Bitcoin to be stable like fiat currencies, but I believe it would be stable enough to be used for payment. I don't know any store of value that is better than Gold (not even Bitcoin in that regard), but it is also volatile. So, if gold were still used frequently as a currency, do you think that could have hindered it? For something to be a store of value doesn't mean it price would be fixed to a point. There is no financial asset that can have a fixed point, but even fiat currencies. If fiat currencies have a fixed point, then there will be no inflation and some currencies won't gain on other currencies. A store of value can fluctuate in the short term; it can even dip in the short term, but what makes it stand out is the fact that when it comes to the long term, that asset either maintains or increases its original value. Bitcoin is a store of value because it has shown that over time, your wealth either increases in value or at least maintains its value without any significant depreciation. If you stored your wealth in Bitcoin 5 years ago, even though Bitcoin is in a bear market now, your wealth still maintains its value today. If you store your wealth in Bitcoin today, the value may drop tomorrow or next week or next month, but there is a 99% chance that if you come 4-5 years later, your wealth still mantains it's value. That is what a store of value is. A store of value is not an asset without volatility whatsoever; it's an asset that maintains it's value over time.

To be a store of value, one should not be volatile, and at the same time not being volatile is good to be a medium of exchange.  It is said that a good store of value has low inflation risk, have stability that can preserve the purchasing power as time passes by.  Thus, being volatile is in contrast of being a good store of value. In the same manner, stability is also needed for a medium of exchange so that the value is preserved when an exchange happens.  Bitcoin might be volatile now, but once the demand and supply are even out (market saturation), stability of price will surely established.  Thus Bitcoin can be both a medium of exchange and a store of value at the same time, though it may take some time for Bitcoin to be called a good store of value.

All assets have their most volatile times but it is acceptable in long term like volatile price movements during chaotic times of the world in economy, politics and so on like gold with less volatility than Bitcoin still has its volatile times. Having that is already enough to be a good store of value asset and medium of exchange, as people can feel confident that there will be very small probability of price changes too much within several minutes or hours, even several days. Just some hours of non high volatility is very enough to convert gold or bitcoin to fiat currency if the receiver wants a safe fund storage option.

Don Pedro Dinero I agree with you, is actually better to use bitcoin as an investment and then use fiat currency has a medium of exchange, I’m investing in bitcoin and I can’t dip hands into my bitcoin investment to use it as a medium of exchange while my countries fiat currency is their ready to be used. I think bitcoin is better to be used as an investment or store of value, using it as a medium of exchange is not okay by me, use fiat as a medium of exchange and then use bitcoin to build wealth is the perfect thing to do.

Bitcoin is money, and money has three main purposes. It is used to measure value, exchange value, and store value.We cannot stop companies and governments from using Bitcoin as a store of value and as part of their treasury reserves.In the same way, they cannot stop people from using Bitcoin as a medium of exchange, running their own node, creating their own Lightning channels, and spending or earning Bitcoin.Look at BTCMap.org. A huge number of people already use Bitcoin in everyday life, pay with it, and accept it as a payment method. You also need to understand that in economics there is a law called Gresham’s Law. It says that when two forms of money exist, one weaker and one stronger, people tend to spend the weaker money because it loses value through inflation, and save the harder, better money.Another important lesson from Austrian economics is that for something to become widely accepted as a medium of exchange and money, it must first prove itself as a store of value.Bitcoin is in a process that economics calls monetization. At this stage, people use it more as a store of value, and only later can it become widely accepted as a medium of exchange

I think I also saw something similar to that, bitcoin network is not dependent of any centralized platform or activities before it could make it all time high and at the same time far in due season, all we may just wanted to know or see is about how we could take advantage off and make every necessary applicable use, because more factors determines the rise or fall of Bitcoin other than this that I was just been mentioned.

Cant Bitcoin be both a medium of exchange and a strategic reserve both at the same time? Isnt that what it is currently? We have to get over the fact that the Bitcoin market is volatile and will likely continue because it is susceptible to human emotion which in turn is sensitive to any sort of news or report regardless of whether that information is true or false. Strategic reserve has been proven anyway based on Bitcoins overall upward trajectory over time.

So let me not get wrong is bitcoin actually a store of value in your regards? I see you seem to disagree with that because of the volatility of bitcoin. If bitcoin then isn’t a store of value then what is gold because it is also volatile in some ways. You simply said a good store of value had low inflation risk and bitcoin as an asset is an hedge against inflation due to its limited supply this in real time means bitcoin is a store of value, same way scarcity makes gold as one. For me yes you have your point about volatility issues hindering bitcoin as a clear store of value for you now, but this is not the definition of been a store of value alone, bitcoin regardless of how volatile it is, over the long run it always increases in value when compared to fiat currencies. For me bitcoin now can both be treated as a means of exchange or a strategic reserve due to its long term value

Bitcoin can be considered a medium of exchange and a long-term reserve or investment vehicle. Currently, Bitcoin can be traded quickly and with low fees due to the Lightning Network, which has made it an effective medium of exchange. On the other hand, it can also be kept as a reserve like gold. Bitcoin can play an important role in both preventing inflation and making profits in the long term. That is, in my personal opinion, Bitcoin is effective as both a medium of exchange and a reserve. Since the maximum supply of Bitcoin is limited to 21 million, many large companies are keeping it as a reserve. In a sense, it is being considered as “digital gold”. As large companies keep Bitcoin in reserve, its demand is increasing at a huge rate. As a result, people are also accepting Bitcoin as a medium of investment and exchange. However, in reality, most people use it mainly as an investment vehicle in the hope of making profits in the future. All in all, Bitcoin has the potential to be used as both a medium of exchange and a reserve.

It seems like you started talking about BTC and ended up questioning the universe haha. Don't be confused. As far as I understood, you are questioning the nature of BTC as decentralized and thinking if it could ever become a world money instead of just reserves. But why not both? It can be adopted as both. The first step is that they have considered it an asset to hold for long-term value, which will add long-term security to Bitcoin. I can sense some members will now say BTC doesn't need them and I agree with those members haha. Bitcoin can be a store of value and it can be a currency as well.

If you look at the characteristics of Bitcoin, stability is indeed a hypothesis at this time, Bitcoin is not really stable because the price of Bitcoin will be determined by everyone who trades, especially if whales can shake the market with the manipulations they do, as has happened and are really manipulated to achieve the desired price, so that stability does not really occur because market fluctuations will continue to move along with time. Then for scarcity whether it will affect the price or not, of course it will have a big influence. When a rare crypto asset like Bitcoin is only available for 21 million, then a scarcity will occur immediately. Even now there are 20million+++ that have been successfully mined and there are still approximately 1 million BTC left that need to be mined for a long time. The scarcity in Bitcoin is called Absolute Scarcity which is a pre-programmed scarcity, absolute and predictable, the supply is only 21 Million and there will be a halving every 4 years and indicates that the number of new Bitcoins entering the market is reduced by half. Bitcoin will be the most valuable digital asset in the future, a digital asset that is increasingly scarce and when it is fully mined, there will be no more new Bitcoins emerging, coupled with a supply that does not move or can no longer be opened further reducing the bitcoins circulating in the market.

The value of things is subjective, therefore everything is "volatile". Its only a matter of how much in what amount of time, it depends in various factors such as offer and demand, location and time (situation). Gold moves slowly now, but it moves. If a huge amount of gold is discovered, it will go down because there is more in the market than before. Gold was infamously declared illegal to possess and trade in the USA in 1933, so those people were forced to sell it to the State or hide it. Those who survived until the 70ies could finally use what was always rightfully theirs... If there is a war and you want to escape, what good is that gold if its seized from you at the border? Yes its valuable, outside, but you are dead if you don't hand it over... This is why location and situation matters. It also reminds me of banknotes, in there there is a written promise, a written promise than can be broken at anytime. Same happens with anything that is "backed with" whatever. Its a promise, which can be broken. Anyway its healthy that the value moves by a market and is not a fixed price artificially enforced by the State. It means its free and genuine, not a facade of a lie waiting to explode.

The volatility is relatively lower than Bitcoin and medium of exchange here is quite secondary I'm talking about something similar to how Fiat function as a medium of exchange. I can't really go out and get something with Gold in a random store And it not get treated like its a second hand product (below market price). Hopefully you get what I'm driving at.

Both effects are possible but quite different: The price effect of a widespread usage as strategic reserve would be probably very much an one-time event. It can propel Bitcoin to duplicate the price (or more) if many countries and other treasury entities acquire BTC. However, once this phase is over and most (of course never all) treasury entities have the BTC they want, the effect would be much weaker. In addition: see with Saylor's recent announcement that all or most entities will eventually spend or sell at least a part of their reserve. Some people may think that the "treasury entities" will be so greedy that they always want even more Bitcoin and the price would rise infinitely in consequence. I think that's delusional, because the price will rise, and while some entities could indeed buy Bitcoin regularly the BTC amounts would tend to be smaller. If you can acquire more than 10 BTC with a million USD now and that million was your yearly goal, with a Bitcoin at $300,000 you would perhaps only buy 3 BTC. Thus in some moment, after the first fireworks of the reserve adoption have passed, we would have relative stability again. The stability effect of a usage as a currency comes from increased liquidity. However, a mass adoption would also first make the price rise, as several new users would acquire BTC. If that mass adoption occurs in a short timeframe the volatility may rise temporarily due to his. But later if most of the adoption "already happened", the stability would increase. Scalability is probably not a problem due to technologies like Ark and sidechains. And regarding Gresham's Law: If Bitcoin becomes a global currency with wide adoption, fiat-like currencies with inflation could become outdated in some moment, so there would be no Gresham Effect anymore.

A medium of exchange is basically one of advantages owned by the store of value asset. Although most of people now primarily consider gold as store of value, but it can still used as a medium of exchange too. I think whether it's store of value or medium of exchange, it totally depends on how people treat those asset. So bitcoin, which is similar as gold but in digital form is also have those advantages too. However, we consider bitcoin as store of value based on how majority of us treated it.