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Store of Value

Intermediate
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What Is a Store of Value?

A store of value refers to an asset that maintains its value without depreciating over time. To be considered a good store of value, an asset should either retain or increase its value, making it sellable or exchangeable at a similar or higher value than its initial purchase price. The value of the asset is typically tied to its market price or purchasing power.

Examples of Store of Value

Fiat Currencies:

Despite inflation, fiat currencies are considered primary examples due to their liquidity and relatively stable purchasing power.

Precious Metals:

Gold, silver, and other precious metals serve as good stores of value due to their scarcity and long-term physical durability.

Cryptocurrencies:

Bitcoin is often referred to as "digital gold" due to its scarcity and indestructibility. However, its high volatility challenges its classification as a store of value by some experts.

Characteristics of a Good Store of Value:

Stability: The asset should maintain its value over time.

Liquidity: It should be easily exchangeable for goods and services.

Durability: The asset should not physically deteriorate over time.

Scarcity: Limited supply enhances value retention.

Importance in Economics

A store of value is essential for economic stability, as it enables individuals and entities to save and transfer wealth efficiently over time. Understanding the properties and examples of stores of value assists in making informed financial and investment decisions.

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