After the 2024 Bitcoin halving Bitcoin will have a lower inflation rate than gold. Could Bitcoin finally become the ‘safe-haven’ it’s always promised to be?

With only a couple of days to go until the 2024 Bitcoin halving, analysts are forecasting a significant shift in the cryptocurrency’s economic model. This shift will see Bitcoin’s inflation rate—the rate at which new bitcoins are added to circulation—decline to levels lower than those of gold, traditionally the standard-bearer for low-inflation assets.

This development prompts a closer examination of what this means for Bitcoin, for gold, and for investors considering the future landscape of digital and traditional assets.

Understanding the Halving

Bitcoin’s halving is an event hardcoded into its blockchain protocol, occurring approximately every four years. It effectively reduces the reward that miners receive for verifying transactions and adding new blocks to the blockchain by 50%. The next halving, expected on April 18th, will decrease the Bitcoin reward for miners from 6.25 to 3.125 bitcoins per block. This mechanism controls the supply of bitcoins and mimics the scarcity dynamics of precious metals, thereby insulating the currency against inflation.

Bitcoin’s Inflation Rate Post Halving

Currently, with each block taking about 10 minutes to mine, the Bitcoin network generates approximately 328,500 new bitcoins annually. Post-halving, this number will drop to about 164,250 bitcoins a year. By the time of the halving, the total circulating supply of Bitcoin is projected to be close to 19.7 million—out of a maximum of 21 million. This sets the stage for a post-halving inflation rate of approximately 0.83% per annum.

Gold Vs Bitcoin: Inflation Rate Comparison

In contrast, gold, which has been a symbol of stability and a hedge against inflation for centuries, sees its total above-ground stock grow by about 1% to 1.5% each year, due to new mining output.

Global annual gold production has been consistent for decades. Source Barchart

The production and addition of gold to the global market are influenced by a combination of factors including mining technology, geological availability, market demand, and various economic variables. Despite these fluctuations, the gold supply inflation rate has remained remarkably steady, reinforcing its role as a “safe haven” asset.

Post-2024, Bitcoin’s expected inflation rate of 0.83% will undercut even the lower boundary of gold’s annual inflation rate. This marks a significant milestone for Bitcoin, transitioning from a highly volatile investment to a more stable store of value—a quality long associated with gold.

Bitcoin – Finally The New Safe Haven?

This emerging dynamic prompts the question: could Bitcoin assume some of the safe haven characteristics traditionally held by gold? While Bitcoin’s journey has been marked by high volatility, its capped supply and decreasing inflation rate are features that align well with…

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