Bitcoin’s inflation rate post-halving is now 75% less than the current US inflation and 72% lower than gold’s annual issuance. Following the April Bitcoin halving, the block reward decreased from 6.25 BTC to 3.125 BTC, significantly impacting the cryptocurrency’s issuance rate. Each halving event reduces the supply of new bitcoins, tightening the market supply and potentially increasing the asset’s value over time.
With approximately 450 BTC mined daily, Bitcoin’s current inflation rate stands around 0.84%, whereas the most recent US inflation data for May reported a rate of 3.4%. This reduction in Bitcoin’s inflation rate marks a significant milestone, as it now undercuts even the lower boundary of gold’s annual inflation rate, which ranges between 1% and 3% per year. Gold mining issuance contributed to a 1% increase in supply, and when considering recycled gold, the inflation rate reached 9% in 2023, resulting in a net 3% increase in gold’s circulating supply.
Historical Perspective of Bitcoin Halving’s Price Increment
Historically, Bitcoin halvings have been followed by significant price increases. For example, after the previous halving in May 2020, Bitcoin’s price increased fivefold over the following year. This pattern underscores the impact of reduced supply on Bitcoin’s market value, making each halving event a pivotal moment for investors and enthusiasts alike.
Bitcoin Halving’s Unique Advantage Over Traditional Currencies
Bitcoin halvings show off its special deflationary properties, unlike traditional fiat currencies, which central banks can print more of whenever they want. Bitcoin’s built-in scarcity makes it resistant to inflation, while gold’s annual production usually increases. This key advantage of Bitcoin is attracting more interest from financial analysts and investors.
Even though Bitcoin has these special deflationary properties, it is still a young asset compared to gold, which has been a reliable store of value for thousands of years. Bitcoin’s growing adoption, with milestones like the approval of spot ETFs and record-high prices, doesn’t stop it from having sharp price changes. To be seen as a globally recognized store of value, Bitcoin needs to keep proving its durability and become more stable.
The fourth Bitcoin halving has significantly reduced its inflation rate, making it lower than that of gold and the current US inflation rate. In a world struggling to control inflation, this could make Bitcoin more valuable as a stable store of value and a hedge against the traditional financial system.
Reference: Forbes
