Store of Value Precedes Medium of Exchange

The four stages

Drawing on Vijay Boyapati's essay "The Bullish Case for Bitcoin," which itself builds on the nineteenth-century economist William Stanley Jevons, the investor Matt Huang summarizes the underlying law for institutional readers: a money is not adopted for all of its functions at once, but evolves through four sequential stages, collectible, store of value, medium of exchange, and unit of account.¹ The sequence traces Jevons's own account of gold, which served first as an ornamental commodity, then as stored wealth, then as a medium of exchange, and only last as a measure of value. The mechanism behind the ordering, rather than an accident of history, is that an asset must be reliably held before anyone will price contracts or wages in it: a still-volatile asset cannot function as a unit of account or a payments currency first, because nobody denominates long-term obligations in something whose value swings daily. Demand for the asset as a store of value is what stabilizes its price and builds a broad base of holders, and only once that has happened do the exchange and accounting functions become possible. Boyapati's own conclusion follows directly: criticizing a young monetary asset's volatility as disqualifying for payments "puts the cart before the horse."

The market-competition version

A companion piece by Huang restates the same law as a claim about competition rather than sequence.² Money, in this framing, is a competitive market with strong network effects, and a new entrant into that market is scored against the classic monetary properties: scarcity, portability, fungibility, divisibility, and durability. Bitcoin, in his assessment, rates strongly on nearly all of them, with its one clear weakness being broad acceptability, the share of people and of wealth actually willing to transact in it. An asset climbing the adoption curve as a store of value is, on this reading, precisely a second-stage asset working toward the acceptability a payments currency requires at the third stage, which is why Huang judges Bitcoin unlikely, at least for the foreseeable future, to challenge the dollar as the leading medium of exchange, while likely to earn a place alongside gold as a store of value.

The payments-first counterpoint, and what happened to it

Marc Andreessen's widely read 2014 essay took the opposite position, arguing that Bitcoin's most important use cases were payments ones: reducing merchant fees on low-margin goods, eliminating a large share of credit card fraud, cutting the cost of international remittances, which he cited at over four hundred billion dollars a year and taxed at up to ten percent, and banking populations without access to modern financial infrastructure.³ History has largely sided with the store-of-value framing instead: on-chain Bitcoin never became the everyday retail payment rail Andreessen forecast, transaction fees rose rather than fell during periods of high demand, and it was stablecoins, not Bitcoin itself, that ultimately became the crypto industry's actual medium of exchange. The four-stage law is exactly why that outcome should not have been surprising: a still-volatile Bitcoin was never structurally positioned to become a payments currency first, regardless of how compelling the payments use case looked on paper.

Why it matters

The framework resolves what would otherwise read as a genuine contradiction between two camps within the same asset's own history, since store of value and medium of exchange stop being competing claims about what Bitcoin is and become sequential stages of what it could eventually become, with store of value doing the necessary first work everything else depends on. It also reframes volatility itself, from a defect to be argued away into the expected signature of an early-stage monetary asset still climbing toward the acceptability a later stage requires. Whether Bitcoin ever advances past the store-of-value stage into genuine use as a medium of exchange and unit of account, or settles permanently as a second-stage digital equivalent of gold while programmable dollar-denominated instruments own the exchange and accounting functions instead, remains open, and Huang's own reading leans toward the latter.