Key Takeaways
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Gold has historically met store-of-value standards, while fiat currencies tend to lose purchasing power over time. Bitcoin now meets several of these same benchmarks.
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With a hard cap of 21 million coins and continuous global trading, Bitcoin offers digital scarcity, durability supported by network security, and liquidity that rivals many traditional assets.
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Concerns persist regarding short-term volatility, inconsistent global regulations, cybersecurity risks, limited historical data, and challenges integrating Bitcoin into traditional investment models.
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Despite these concerns, rising inflation, geopolitical tensions, and weakening confidence in some fiat currencies are prompting pension funds to explore Bitcoin as part of a long-term strategy.
Bitcoin as a Store of Value
A key question has followed Bitcoin (BTC) since it gained prominence: Can it reliably act as a store of value? This idea has long intrigued individual investors, and now even pension funds are beginning to explore it. They are assessing whether Bitcoin can preserve value over time, potentially alongside or even competing with traditional safe assets such as gold.
This article examines what defines a store-of-value asset and how pension funds are approaching Bitcoin. It compares Bitcoin with established store-of-value assets and explores how crypto exposure for pension funds may expand beyond BTC.
What Defines a Store-of-Value Asset?
A store-of-value asset maintains its purchasing power over long periods. It typically has four main qualities:
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Scarcity: A limited supply that is difficult to expand.
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Durability: The ability to last without degrading.
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Portability: Ease of transfer and storage.
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Liquidity: The ability to be easily exchanged for goods or other assets.
Gold has traditionally met these standards. Fiat currencies, by contrast, lose value over time because of inflation and an expanding money supply. Pension funds are taking interest in Bitcoin because, in some areas, it may outperform both gold and fiat currencies.
Bitcoin’s total supply is capped at 21 million coins. It is fully digital, remains secure as long as the network functions, and trades worldwide around the clock with strong liquidity.
Pension Funds: Cautious Yet Interested
Pension funds operate under strict regulations designed to protect investors’ money and deliver steady retirement income over decades. This framework has made them cautious toward volatile or lightly regulated assets. Their key concerns include:
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Sharp short-term price swings.
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Varying regulations across countries.
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Secure storage and cybersecurity risks.
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Limited long-term performance data.
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Challenges integrating Bitcoin with traditional investment models.
However, the broader economic environment is changing. Rising inflation, geopolitical tension, and concerns about the stability of some fiat currencies are prompting investors to review alternative assets that may help preserve value. As cryptocurrency becomes more integrated into mainstream finance, pension funds are assessing whether excluding digital assets could limit diversification rather than enhance it.
Case Study: AMP Super’s Approach to Bitcoin
Australian superannuation fund AMP Super made an allocation to Bitcoin futures through its dynamic asset allocation program. The fund does not classify Bitcoin as a speculative bet. Instead, it views Bitcoin as part of a broader strategy to protect purchasing power and hedge against currency weakness.
The fund’s research found that Bitcoin aligns well with store-of-value criteria, in some cases more effectively than many conventional assets.
The fund’s approach involves:
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Assessing Bitcoin against store-of-value criteria such as scarcity, durability, portability, and liquidity.
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Using trading signals in its dynamic asset allocation program that include price momentum, investor sentiment, liquidity, and inflation-change indicators to guide the size and timing of the allocation.
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Observing how Bitcoin responds to changes in inflation expectations and other macro signals rather than simply focusing on inflation levels.
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Employing on-chain analytics to monitor blockchain data metrics as part of evaluating market conditions and trading signal generation.
This cautious, evidence-based strategy offers a model for other pension funds, combining traditional analysis with cryptocurrency-specific tools.
How Bitcoin Compares to Traditional Store-of-Value Assets
Bitcoin differs from assets such as gold in volatility, liquidity, scarcity, and regulatory risk. Understanding these differences is important when assessing its potential role in a diversified portfolio:
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Scarcity: Bitcoin’s capped supply is enforced by code. This contrasts with gold, which can be mined, and fiat money, which can expand through policy.
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Portability and liquidity: Bitcoin can be transferred globally within minutes and trades around the clock. Gold is costly to move and store, and fiat transactions depend on banking infrastructure.
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Response to inflation: Bitcoin and gold often rise when inflation expectations shift. This can make both useful for funds seeking to maintain real returns.
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Diversification: Bitcoin’s correlation with stocks and bonds has varied but generally remains low enough to provide diversification benefits. Even a small allocation can improve risk-adjusted returns in some portfolio simulations.
Crypto Investments Beyond Bitcoin for Pension Funds
Pension funds are also exploring crypto investments beyond Bitcoin. For example, turning asset rights into digital tokens could streamline how investments are held, transferred, and settled. This approach makes assets programmable, allows digital wallets to replace traditional accounts, and uses blockchain to lower operational costs.
However, current systems still need technical improvements and broader adoption to realize these benefits fully. Blockchain has the potential to reduce reconciliation costs and unlock new forms of settlement, but several implementation challenges must be addressed.
Bitcoin faces challenges such as:
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Evolving regulations for digital assets.
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Ensuring secure, insured, and approved custody.
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Obtaining regulatory approval for new projects.
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Building internal expertise through training.
Pension funds view Bitcoin as a supplement rather than a replacement for assets such as gold or inflation-protected bonds. They have found that Bitcoin can behave like a store-of-value asset during shifts in inflation expectations and that modest allocations may help improve overall portfolio performance.