Tim Draper, founder of Draper Fisher Jurvetson: Expect Bitcoin to Become a Good Store of Value

Stock investors around the world have been on a roller coaster ride over the past few days. In addition to the plunge in the Chinese market, the Dow Jones Index also plummeted from 16,459 points on August 21 to 15,446 points on the 24th.

When the stock market winter comes, investors begin to look to funds they think are safer, including cash, gold and government bonds. Many times, people choose gold because they think it is the best way to store value. However, in the eyes of some people, Bitcoin may one day surpass gold and become a better safe-haven asset.

Tim Draper, founder of Draper Fisher Jurvetson, a well-known Silicon Valley venture capital fund, believes that Bitcoin may one day become an excellent means of storing value in the eyes of investors.

“As Bitcoin matures, I expect people to use it as a safe haven in the event of a stock market crash, much like they do with gold,” Draper told Bitcoin Magazine in an email. “Right now, Bitcoin is still a bit underused and investors are not comfortable investing in Bitcoin as they exit the stock market, and I expect that to change.”

Draper pointed out that Bitcoin is currently too speculative to be a store of value. According to Investopedia, a store of value is "any commodity, asset, or money that has value and can be used as a store of value and withstand the test of time. Because currencies are relatively stable in value, such as U.S. dollar bills, they are the most common store of value in the economy."

Basically, when the stock market falls, people run to cash because they think they will lose less from a little inflation than they would from the stock market. Or they run to gold because, as Investopedia writes, "it retains value in any situation, especially for stores of value that are in limited supply."

For Bitcoin to be recognized as an effective store of value, its price needs to rise and then remain stable rather than fluctuating wildly. Draper explained that the Bitcoin ecosystem has not reached such a point. He said:

“Because miners will get more Bitcoin, there will be pressure on the price of Bitcoin given the supply relationship.”

Essentially, miners are choosing to sell their Bitcoin to pay for electricity, which is outstripping demand from hodlers and users, which is one of the reasons why Bitcoin prices are falling.

Draper went on to say:

“Over the next six months or so, as adoption becomes more and more evident, I expect that to shift.”