Bitcoin and gold have many similarities. To get gold, miners have to go to the mines. Bitcoin cannot be arbitrarily created. It must be mined by digital means and its supply is limited and limited. Of the 21 million Bitcoins, 80% of them have been mined with the priority given to the coin’s father, Satoshi Nakamoto.
Limited supply is Satoshi’s way of fighting inflation. While fiat currencies are inflationary, Bitcoin is not. Therefore, Satoshi establishes an algorithmic scale with halves to curb inflation when tokens are distributed.
In the process, Satoshi says:
“The fact that the coins are newly produced means the money supply increases according to a plan, but this does not necessarily lead to inflation. If the money supply increases at the same rate as the number of people using it increases, the price remains stable. If it does not increase as quickly as demand is, there will be deflation and early holders will see its value increase. The coins have to be initially distributed somehow and the constant rate seems to be the best recipe. ”
The 2020 Bitcoin Halving Event
The 2020 BTC Halving event will further cut the mining reward by 50%. These events happen after the 210,000 blocks are mined. This took about four years. As of the date of the upcoming Halving event, Bitcoin miners will earn 6.25 BTC instead of 12.5 BTC per block mined today.
This event last happened on July 9, 2016 and so far there have been 2 halving with the first on November 28, 2012. Investors and traders predict that a supply drop is imminent. the coming of BTC will cause the price to go higher.
Bitcoin’s market base has grown and has more institutional players in it than ever before. However, according to historical data, the coin has reached a value of $ 1,000 12 months since the first halving. The 2016 event is also considered a precursor to Bull Run 2017 and BTC peaked at $ 20,000.
Financial experts say that the BTC Halving effect was anticipated so it could have a negligible impact on the value of the coin. Instead, the market will begin to predict supply decreases and adjust accordingly, thereby inhibiting spikes and price increases. However, it is a fact that they agree that the price of Bitcoin always increases after a halving. According to Satoshi’s design, Bitcoin will eventually be mined in 2140.
Scarcity is what differentiates Bitcoin
Gold and Bitcoin are different from any other consumer commodity because of their scarcity. According to PlanB, these scarcity can be expressed in terms of their stock-to-flow (SF) ratios. Both Gold and Bitcoin have high SF.
Gold’s high SF ratio, for example, gives it the lowest price elasticity of all commodities. It is estimated that by 2022, the SF rate of BTC may surpass gold as the supply decreases. While gold has an SF of 62, Bitcoin stands at 25. However, there are only 3.5 million BTC left, so Bitcoin’s SF will reach 50 by 2022 and bring its market cap to the 1,000 mark. billion dollars. As a result, Bitcoin could then reach a price of $ 55.00 with cash inflows from gold and silver, billionaires and institutional investors.
However, the Bitcoin maximalist pointed out that gold is not as scarce as Bitcoin. Bitcoin can only be created by an extremely energy intensive process where complex mathematical equations are solved. The rewards received are halved over time, slowing the creation of more BTC.
In contrast, the National Ocean Service claims that the oceans hold more than 20 million pounds of gold. But there is no way to exploit this gold. There is also a growing interest in asteroid mining, for example with the steroid Psyche 16. This asteroid has more than 700 billion dollars in gold, nickel and iron.