Uncovering the halving’s impact on Bitcoin’s inflation rate and store of value proposition

In the next few days, the Bitcoin (BTC) blockchain is predicted to undergo halving. Some experts believe this could impact Bitcoin’s role as a valuable asset.

Around April 19, 2021, approximately 630 more Bitcoin blocks needed to be mined before the halving event took place. This significant occurrence in the cryptocurrency world happened when only about 628,000 blocks had been mined. In 2024, Bitcoin reached its peak price at over $73,000, marking a new record. During this year, the US Securities and Exchange Commission permitted the listing and trading of Bitcoin spot ETFs on various exchanges. Since then, Bitcoin’s price has continued to experience fluctuations.

Bitcoin, held by numerous crypto users and financial experts, is believed to serve as an shield against inflation due to the devaluation of fiat currencies caused by central banks such as the US Federal Reserve, who print money. In contrast, only 21 million Bitcoins exist in total, with approximately 19.7 million already mined.

On April 19, an event called halving will take place in Bitcoin’s blockchain for the fourth time in history, following the last one in May 2020. During this process, the reward given to miners for verifying transactions will be reduced from 6.25 Bitcoins to 3.125 Bitcoins. Consequently, Bitcoin’s inflation rate will be lowered by approximately half, from around 1.7% to 0.85%. This reduction in new supply could lead to a price increase if the demand for Bitcoin remains stable or grows.

In the past, each Bitcoin (BTC) halving has led to price growth. Already, some Americans utilize Bitcoin as a shield against the U.S. dollar’s inflation. Furthermore, individuals from nations experiencing high inflation, such as Argentina, might consider using Bitcoin as an alternative.

“Bitcoin and digital assets are proving to be more than just a means of making transactions with cryptocurrency, according to Gnosis Pay CEO Marcos Nunes,” said one interpretation. “Instead, these assets provide essential support for millions of people worldwide who reside in economically unstable countries, experiencing inflation or financial upheaval.”

The way countries decide to regulate Bitcoin can influence its value. For instance, analysts pay particular attention to the US regulatory landscape because approximately one-third of Bitcoin mining takes place there.

Winning against gold?

After the Bitcoin halving, which reduces the reward for mining new blocks, there is expected to be less supply in circulation. This scarcity may make Bitcoin an even more attractive option as a store of value for cryptocurrency users. Some are also pondering how Bitcoin will stack up against gold post-halving. Historically, gold has been seen as a reliable store of value by traditional investors who aren’t actively involved in crypto. However, this dynamic might shift.

Uncovering the halving’s impact on Bitcoin’s inflation rate and store of value proposition

The unpredictability of Bitcoin‘s price following its halving may persist for some time. However, analysts predict that Bitcoin’s inflation rate will fall below gold’s once more. This is due to miners increasing their share of the gold supply at a faster pace than crypto miners increasing their share of the Bitcoin supply. Gold advocate Peter Schiff has yet to discuss this topic publicly, instead focusing on recent Bitcoin price developments in his social media posts.

Based on the forthcoming halving and previous records, it’s predicted that the final Bitcoin reward for mining a block could occur around 2140 – over a century from now. As per the Bitcoin blueprint, by this time, the motivation for miners will have shifted exclusively to transaction fees, with all 21 million coins having been extracted.

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2024-04-16 18:36