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Bitcoin Wins Inflation Battle, Now Scarcest Asset

Bitcoin Wins Inflation Battle, Now Scarcest Asset

Bitcoin is now the scarcest asset in history because its official inflation rate is lower than that of Gold after the most recent Halving. 

The Halving of Bitcoin causes the inflation rate to drop to just 0.83%. 

Glassnode, an on-chain analytics company, recently explored the impact of the latest Halving on cryptocurrencies in its weekly report. Halving, a recurring event on the Bitcoin blockchain, permanently reduces block rewards by half. This most recent Halving occurred just days ago, lowering the asset’s block rewards from 6.25 BTC to 3.125 BTC. Miners rely on these rewards to create new cryptocurrency by solving network blocks. Notably, the network maintains a consistent pace of incentive distribution, regardless of existing mining conditions. The network’s built-in “Difficulty” mechanism adjusts how challenging mining is, ensuring rewards are distributed as intended. As miners increase processing capacity, they produce blocks more rapidly. However, the network’s adjustments slow them down to maintain consistent rewards. Consequently, Bitcoin’s supply steadily grows between Halving events. The graph below depicts the asset’s Issuance evolution over time, reflecting daily miner-generated quantities on the network Bitcoin is now the scarcest asset in history because its official inflation rate is lower than that of Gold after the most recent Halving. 

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Bitcoin Settles Inflation Rate Battle With Gold, Becomes Scarcest Asset
The data for the Issuance over each BTC epoch | Source: Glassnode’s The Week Onchain – Week 17, 2024

 

Bitcoin’s Inflation Rate Overtakes Gold: A Historic Milestone

The asset’s inflation rate stays constant over these periods since the Issuance is essentially constant between halving. In a similar vein, during halving events, the inflation rate also halves alongside the Issuance. 

Of course, this configuration has stayed true with the most recent Halving as well since Bitcoin’s inflation rate has decreased once more. The annualized inflation rate of Bitcoin decreased to 0.85% in this new period from 1.7% in the previous one. 

As the article states, “For the first time in history, Bitcoin’s steady-state issuance rate (0.83%) becomes lower than Gold (~2.3%), marking a historic handover in the title of the scarcest asset,” Bitcoin has been able to accomplish a new milestone in contrast to Gold as a result. 

The graph that follows compares the inflation rate of Bitcoin over time to that of the precious metal. 

Bitcoin Vs Gold
The value of the Bitcoin measure has recently moved away from Gold. Source: The Week Onchain – Week 17, 2024 BTC Price, Glassnode

BTC Price

Although it had rallied in the previous few days, Bitcoin’s value has dropped in the last day, returning below $64,700. 

Bitcoin Price Chart
Looks like the price of the coin has plummeted over the past day | Source: BTCUSD on TradingView

 

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