Cryptocurrency Investment Theses – Part 1: Bitcoin is Digital Gold

Warren Buffett correctly identified there is no cash flow from holding Bitcoin1. Therefore buying Bitcoin cannot be classified as an investment. Others have called Bitcoin a pyramid scheme or outright the biggest price bubble the world has ever seen.2

In this series titled Cryptocurrency Investment Theses, I want to explore why I believe Bitcoin and other cryptocurrencies will continue to generate and capture value.

Part 1: Bitcoin is Digital Gold

The two Commodity Functions

Commodities such as oil and gold have always fulfilled two functions simultaneously

  1. They are consumable
  2. They are a good store of wealth

The price of a commodity is influenced by demand from both functions.

oil tankers in Gibraltar
Oil tankers storing the commodity off the coast of Gibraltar

The demand from consumption, and its influence on price, is widely understood. For example, economic growth increases the demand for petrol. The increase in demand by consumption increases the price of the commodity crude oil.

The demand in relation to storing wealth, and its influence on price, is less clear. For example, a war or economic crisis increases demand for storing value in gold. The increase in demand for storing wealth securely increases the price of the commodity gold.

But it’s not only gold that fulfills the second function. Any exchangeable commodity that’s not perishable has demand beyond consumption that adds a price premium over raw consumption demand.

Consider real estate in New York. Chinese investors buy apartments in NYC, but they do neither live there nor rent them out.3 There is no consumption. The investors are acquiring the commodity real estate for the purpose of storing wealth. The subsequent increase in price through this demand has been debated in many big cities across the world.4

Bitcoin is a store of value

Bitcoin is not a consumable commodity. But Bitcoin stores value.

When trying to store and protect wealth, the chosen instrument must satisfy certain properties. Interestingly, Bitcoin satisfies most of these properties more effectively than any other commodity.

A store of value retains purchasing power into the (far) future.

To be able to exchange the instrument at a later time at a similar value it was acquired at, it must still exist at a later date, ie.: it must not be perishable. The rightful owner must still have control over it. It must be possessable, transferable, and seize resistant. And it must still be valuable later: scarce and desirable.

I will explore each attribute in turn by comparing various commodities.


Milk is not suitable as a store of value at all as it is highly perishable.

Real estate is a reasonably stable in the medium term, but requires maintenance (incl. taxes) to be paid out in the long term. Gold is not perishable. It’s non-reactive and needs very low maintenance for storage.

Bitcoin is non-perishable – as long as the internet is operating, Bitcoins will always be accessible. (Temporary or local internet outages do not pose a problem).


Live stock in the open prairie lacks good possessability. Cattle can run away!

Low density commodities, like oil, are difficult to store millions of dollars of worth in. Gold is highly possessable. A million USD worth of gold can fit into a suitcase. Ten million USD can fit into a car or basement.

12 word Bitcoin wallet seed
A twelve word seed generates a unique Bitcoin wallet

Bitcoin is highly possessable. Any amount of Bitcoin is by design possessed by nothing more than 256 bits of information. You can possess a million or a billion USD worth of Bitcoin with a short phrase like “My Bitcoin seed phrase.”5


Transferability comprises both a physical transfer and a lawful transfer of ownership.

For example, real estate can be transferred lawfully, but not physically, which limits its claim to being a great store of value. A massive upside of gold is that it’s a bearer asset. Ownership transfer in person is possible irrespective of governing laws. However, the physical transfer of gold can pose problems with regard to verifying purity and amount.

Bitcoin is a bearer asset like gold. Additionally, Bitcoin has the easiest physical transfer of all commodities. A Bitcoin transfer simply requires sending a tiny bit of data online, much like one would send an email. Bitcoin is the most easily transferable valuable in the world.

Seize resistant

Real estate can only be seized by the local government. This makes real estate both a great and terrible store of value. Great for those who own property outside the reach of an evil government. Terrible for those who own under one.

Gold is moderately seize resistant. Hiding gold from invaders or the government is relatively easy. But when you are passing airport security or crossing a border with a suitcase full of gold, there’s a high chance it will be seized.

Bitcoin is seize resistant, full stop. Without a set of private keys, the crypto asset cannot be seized by any entity on this planet. Bitcoin is the most seize resistant asset the world has ever seen.


Oil is not scarce. If the price of oil increases, supply will go up, for example by extracting more shale oil. Storing your wealth in oil is not ideal.

Certain real estate, like apartments in Manhatten, can be very scarce. Gold is increasingly scant.

Bitcoin inflation schedule
Bitcoin supply and inflation rate over time. Bitcoin supply asymptotically approaches 21 million.

Bitcoin is predictably scarce with a fixed maximum supply of 21 million Bitcoins. That’s arguably the most scarce anything can be.


Oil will be desirable in the future. Apartments in Manhattan will likely be in high demand as well. Gold’s track record would indicate a safe bet.

Future Bitcoin demand on the other hand, is extremely uncertain. While it might increase, it might also vanish.

Bitcoin is the best store of value

Bitcoin stores wealth because it is

  • non-perishable: a digital asset
  • extremely easy to possess: a few words can own any amount
  • highly transferable: any amount of the bearer asset can be transferred globally in seconds
  • highly seize resistant: a result of being possessable transferable
  • predictably scarce: no new units can be found or created

For all these reasons, Bitcoin could be adopted by more and more people as a store of value. The demand of Bitcoin will most likely increase.

It is arguable the most suitable asset of all when it comes to performing the second function of commodity: storing wealth.

Bitcoin is the world’s best store of value.

The question is: will Bitcoin be increasingly accepted over time? Will it be deemed desirable in the future? Or will people continue to follow the negative narratives surrounding Bitcoin? I believe in the wisdom of the market to pick the best product over time.

Value capture by the world’s best store of value

The investment thesis “Bitcoin is Digital Gold” claims that the world will slowly move towards Bitcoin as the accepted best store of value ever created. The continuously increasing demand for Bitcoin will subsequently result in a much higher price.

Gold has an estimated global market capitalization of $8 trillion. Bitcoin currently has a market cap of around $100 billion. Bitcoin has the necessary properties to rival gold for its market.

Bitcoin doesn’t generate cash flow. Bitcoin is not a consumable commodity. But Bitcoin has demand as a store of value. It creates value by offering this function. I believe this created value will, in turn, be partly captured by the Bitcoin price.

What do you think the future holds for Bitcoin?


1 Buffett’s comments on CNBC

2 Bitcoin is the biggest bubble in history, The Guardian

3 Empty apartments in NYC, New York Times

4 Based on my own experience of real estate dealings across EU capitals and US cities. The sentiment of local experts everywhere is that prices are very high due to “Airbnb investors” (cashflow investors) and “foreign buyers” (store of value investors). In Vancouver, I discovered the government is trying to cope with the situation by enacting a tax law specifically charging foreigners.

5 A brain wallet takes any string of letters, for example “hello”, and hashes it into 256 bits that can be used as a private key. Brain wallets have poor security, I strongly advise against using them to store value.


Smart ideas are likely copied from someone else.

Mistakes are all my own.

Written by

Paul is Managing Partner and Co-Founder of F5 Crypto Capital. His analytical mind led him to be one of the most successful online poker players for years. Paul holds a university math degree and has expertise in financial and discrete mathematics.

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