Bitcoin’s Mathematical Monetary Policy Is Much More Predictable Than Gold and Fiat Currencies CryptoBlog


Last April, records show 19 million bitcoins were mined and 133 days later there are 1.88 million bitcoins left to mint today. The overall network subsidy is expected to be halved on or around April 20, 2024, as there are less than 91,000 bitcoins left to mine until then. While Bitcoin’s annual inflation rate is 1.73% today, after the halving in 2024, the crypto asset’s annual inflation rate will be reduced to 1.1%.

The Institute of Mathematics: “Bitcoin can only function because of the intelligent mathematics that is behind it and allows it to exist”

Time flies and today there are less than two years left until the next Bitcoin reward halving is around 617 days away. Bitcoin gives miners a reward every time a block is discovered by a miner dedicating a hashrate to the network. At the time of writing, miners receive 6.25 bitcoins per block and on or around April 20, 2024, the block reward will be halved to 3.125 bitcoins per block. At that time it will be much more difficult to get bitcoins through the mining process and today there are only 1.88 million bitcoins left to be mined.

Bitcoin's mathematical monetary policy is much more predictable than gold and fiat currencies
The next halving is expected to take place on or around April 20, 2024. The block grant will be halved from 6.25 bitcoins to 3.125 bitcoins after the next halving.

Bitcoin is a highly predictable monetary network that operates on its own. Unlike the unpredictable inflation rate in the United States, people can safely predict Bitcoin’s inflation rate per year. There is no stimulus added to the equation and central bankers cannot change Bitcoin’s issuance rate per year on a whim, as they often do in an “emergency”. During the next Bitcoin halving, Bitcoin’s issuance rate per year will be 1.1%. With Bitcoin’s open network, the public knows this for a fact. The Federal Reserve, on the other hand, can cause recessions and booms by increasing the money supply and raising and lowering the benchmark federal funds rate.

Gold’s correlation with inflation and the so-called scarcity of precious metals

Although gold, a precious metal, is considered rare and people suspect that the price of gold will rise in times of economic uncertainty, this is not necessarily a fact. Research shows that gold has “an extremely low correlation with inflation”. While Bitcoin is a very predictable financial system, the crypto asset itself also has a low correlation with inflation. As the consumer price index (CPI) in the United States and inflation rates around the world rose, the value of bitcoin (BTC) fell while inflation posted higher peaks months after month. Although BTC hasn’t seen much correlation with inflation – like gold and silver – it’s still a more predictable asset class than precious metals.

Bitcoin's mathematical monetary policy is much more predictable than gold and fiat currencies
Research shows that gold has a low correlation with inflation, and recent market data indicates that the price of bitcoin is highly correlated with stocks rather than inflation. As inflation rose, the value of bitcoin fell, and when inflation declined in the United States according to last week’s CPI report, the price of bitcoin surged higher.

We have rough estimates of how much gold is mined each year, as statistics show that around 2,500 tons are mined from the earth each year. But thanks to smuggling gold, that estimate is really just an educated guess. Surprise gold deposits have also hurt the supposed scarcity factor of gold and it is well known that there are huge gold deposits under the ocean floor, as well as in the asteroids of the space. However, at present, humans cannot access gold in space or under the depths of the ocean. Gold is still considered rare despite these elements. An estimate from the US Geological Survey indicates that there are approximately 50,000 tons of gold beneath the earth’s surface, but the estimate is rated as “a rolling number”.

Gold and fiat currency issuance rates are unreliable, while bitcoin is a much more predictable monetary asset

When it comes to the monetary supply of Bitcoin, the public knows for a fact that there will only be 21 million bitcoins. With gold, we know that there is about 20% of earth’s gold left, but since some mining methods are not profitable at present, there is a chance that they will become profitable in the future. coming. This means that it is possible that technology will advance enough to allow gold diggers to access precious metals buried under the ocean floor or in asteroids in space. If that happened, gold and other precious metals could become much less scarce, as could the fiat currency that central bankers print on a whim. With Bitcoin, we know that’s not the case, and it won’t be, because the network’s annual inflation rate will continue to fall.

Bitcoin's mathematical monetary policy is much more predictable than gold and fiat currencies
Chart via Bitcoin Finder Murch on April 26, 2015.

At the time of writing, we know Bitcoin’s inflation rate is around 1.73% and as mentioned above, by the next halving it will decrease to 1.1 % in 2024. By next year in 2025 Bitcoin inflation rate per year will drop below 1. % and by 2028 halving the issuance rate will be around 0.5% per year. We also know that the last bitcoins will be mined in the year 2140, but we are unsure of the purpose of gold mining. Moreover, after the monetary expansion of the central bank over the past two years, estimating the rate of inflation set by the bankers is like trying to read tea leaves.

Although bitcoin may not be the best hedge against inflation, at least for now, we can guarantee that the asset is rare and far more predictable than any popular monetary asset issued or mined today. today.

Keywords in this story

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What do you think about Bitcoin’s mathematical monetary policy being more predictable than gold or fiat currencies? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the News Manager at Bitcoin.com News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 5,700 articles for Bitcoin.com News about disruptive protocols emerging today.




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