Bitcoin’s Potential as a Store of Value
Bitcoin (BTC) has gained significant attention as a potential “digital gold” due to its programmed distribution and limited maximum supply of 21 million BTC. This has led many to believe that Bitcoin can serve as a long-term Store of Value (SoV).
However, it’s important to note that BTC’s supply inflation still impacts its value. Currently, only around 19.48 million BTC have been distributed to Bitcoin Miners, according to data retrieved by Finbold on September 5. If we consider this circulating supply, one Bitcoin would be worth close to $66,838, which is $2,207 (3.19%) less than its all-time high price in US dollars.
Additionally, the market capitalization of Bitcoin plays a crucial role in determining its perceived value and speculative demand. Bitcoin requires increased demand to maintain historical prices with a comparatively lower supply, aligning with the basic principles of supply and demand economics.
Bitcoin Price Analysis
As of the time of publication, BTC is trading at $25,747. This presents a potential opportunity for Bitcoin investors to gain 160% if the cryptocurrency ever meets previous demand levels.
Currently, the price of Bitcoin is -62.72% lower than its all-time high price.
Bitcoin Supply Inflation
When Bitcoin’s creator, Satoshi Nakamoto, designed the cryptocurrency, they needed to determine how the coins would be distributed. They resolved this by introducing mining, which not only secures the network through Proof-of-Work (PoW) but also rewards miners with newly minted coins, known as the “coinbase” transaction.
Satoshi Nakamoto programmed the Bitcoin protocol to halve the amount of coins released in each block through the coinbase transaction every 210,000 blocks. This distribution will be completed when approximately 21 million BTC are in circulation, which is expected to happen by 2140.
Currently, during the current halving cycle, around 6.25 BTC are created in each block every 10 minutes, resulting in a supply inflation rate of 900 BTC per day or 328,500 BTC per year. This equates to an annual inflation rate of approximately 1.7%, which will be halved in 2024.
How Other Cryptocurrencies Would Perform
- If XRP reaches its all-time high market cap, it would trade at this price.
- If Ethereum reaches its all-time high market cap, it would trade at this price.
- If Dogecoin reaches its all-time high market cap, it would trade at this price.
- If SHIB reaches its all-time high market cap, it would trade at this price.
- If Cardano reaches its all-time high market cap, it would trade at this price.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Hot Take: Bitcoin’s potential as a Store of Value is influenced by its supply inflation and market demand. While BTC’s price has reached all-time highs, it currently trades at a lower value. However, if Bitcoin can meet previous demand levels, investors stand to gain significantly. The halving cycle and programmed distribution of coins contribute to Bitcoin’s supply inflation, which is expected to decrease in 2024. It’s also interesting to consider how other cryptocurrencies would perform if they reached their all-time high market caps. Overall, Bitcoin’s value is influenced by various factors, and understanding its economic fundamentals is essential for assessing its long-term potential.
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