This is the sixth part of a series “Everything You Need To Know About Bitcoin Halving”. If you’re interested to read the whole report, go ahead and start at the first part here.
The limited supply gives Bitcoin its deflationary trait and is also why many people compare it to gold. Gold is mined from the ground as a natural resource and its supply is also finite. Because of their rarity in nature, gold and other precious metals are also favored among assets that act as a store of value. Their scarcity reduces the risk of future devaluation.
Bitcoin is well-known as the digital gold among the crypto community.
Bitcoin shares similar characteristics to gold. It is also mined (digitally), its supply is also limited, and it is well regarded to function as a store of value.
What I consider to be an important distinction between Bitcoin and gold is the fact that Bitcoin’s supply is predictable. Unlike the supply of gold, which is mostly theorized, the supply of Bitcoin is digital and can be viewed by anyone, at any time. Gold’s supply has also historically increased by 2% per annum, whereas Bitcoin’s supply will decrease as time moves forward. After the third halving event, Bitcoin will record less than a 2% issuance rate per annum, and after the year 2025, the number will go below 1%, making it scarcer than gold as time passes.
I believe the closer we get to the exhaustion of Bitcoin’s supply; the more people will embrace the idea of storing Bitcoin for the long term. Consequently, the amount of Bitcoin in circulation will decrease, making it even more sparse than it already is. Going back to basic economics, the less there is of something in the world, the more valuable it becomes. Let us assume more people start storing their Bitcoins and knowing that its supply will eventually run out, it provides a strong notion that, as time moves forward, Bitcoin’s value will likely appreciate.