Store of value is the primary function of a currency

It makes no sense to account in or exchange something that one doesn’t want

World of Warcraft Gold as Medium of Exchange

Transactions in World of Warcraft gold are cheaper and faster than transactions in bitcoin, gold or fiat money, so it should be a better medium of exchange. Yet is has a far smaller market cap then all these alternatives. Why?

It’s because the market cap of a currency is primarily determined by its usefulness as a store of value, not as a medium of exchange. Why?

When you decide whether to sell one currency for another, what’s more important: Which currency you can buy coffee with (or world of warcraft weapons), and which currency will still be worth something in ten years? Most people’s savings are greater than the money they have to carry around with them to buy to a cup coffee, whenever they want one. (And some people have very large savings.)

Stocks as Unit of Account

A stocktrader doesn’t account in how many stocks of particular companies he’ll end up with. Why? Owning as many stocks as possible is not his goal. He can’t be sure that he can still sell them when he retires and he can’t buy coke with them now.

Bitcoin as a store of value

Even though you can’t buy a coffee with bitcoins in most places, and even though accounting with it isn’t particularly simple, many people own bitcoins. Why?

Bitcoin is a better store of value than fiat money (no inflation) and gold (less risk of theft and confiscation).