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This past April, records show that 19 million bitcoins have been mined and 133 days later there are 1.88 million bitcoins left to mint today. The network’s block subsidy halving is expected to occur on or around April 20, 2024, as there are less than 91,000 bitcoins left to mine by then. While Bitcoin’s annual inflation rate is 1.73% today, the cryptoasset’s annual inflation rate after the halving in 2024 will be down to 1.1%.
Time flies and today there are less than two years left until the next Bitcoin reward halving takes place approximately 617 days from now. Bitcoin gives miners a reward every time a block is discovered by a miner who dedicates hashrate to the network. At the time of writing, miners get 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 obtain bitcoins via the mining process, and today there are only 1.88 million bitcoins left to mine.
Bitcoin is a very predictable monetary network that operates in an autonomous manner. Unlike the unpredictable inflation rate in the US, people can confidently 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”. When the next Bitcoin halving takes place, Bitcoin’s issuance rate per year will be 1.1%. With Bitcoin’s open network, the public knows this. The Federal Reserve, on the other hand, can cause busts and booms by increasing the monetary supply and hiking and lowering the benchmark federal funds rate.
While the precious metal gold is considered scarce and people suspect that the price of gold will rise during economic uncertainty, that is not necessarily a fact. Research shows that gold has “an extremely low correlation to inflation.” While Bitcoin is a very predictable financial system, the crypto-asset itself also has a low correlation to inflation. As the Consumer Price Index (CPI) in the US and inflation rates around the world have risen, bitcoin (BTC) has fallen in value while inflation has pushed higher peaks month after month. Although BTC has not seen much correlation with inflation – like gold and silver – it is still a more predictable asset class than precious metals.
We have rough estimates of how much gold is mined annually, since statistics show that approximately 2,500 tons are mined from the earth each year. But thanks to gold smuggling, that estimate is really just an educated guess. Surprising gold deposits also damage gold’s alleged scarcity factor, and it is well known that there are massive gold deposits under the ocean floor, and also within asteroids in space. But currently, humans cannot access the gold in space or under the ocean. Gold is still considered scarce despite these elements. An estimate from the US Geological Survey says that there is approximately 50,000 tonnes of gold beneath the earth’s surface, but the estimate is considered “a moving number”.
As for Bitcoin’s money supply, the public knows for sure that there will only be 21 million bitcoins. With gold, we know that there is about 20% of the earth’s gold left, but because some methods of mining are uneconomical right now, there is a chance that they could become profitable in the future. This means that there is a chance that the technology will advance enough to where gold miners can access the precious metals that are buried under the ocean floor or in asteroids out in space. If this happened, gold and other precious metals could become much less scarce just like the fiat money central bankers print on a whim. With Bitcoin, we know that’s not the case, and it won’t be, as the network’s inflation rate per year will continue to decline.
At the time of writing, we know that the Bitcoin inflation rate is around 1.73%, and as mentioned above, at the next halving, it will shrink to 1.1% in 2024. By the next year in 2025, Bitcoin’s inflation rate per year will fall below 1% and at halving in 2028, 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 not sure of the finality of gold mining. Also, after the central bank’s monetary expansion over the past two years, estimating the inflation rate set by bankers is like trying to read tea leaves.
While bitcoin may not be the best hedge against inflation, at least right now, we can guarantee that the asset is scarce and far more predictable than any popular monetary asset being issued or mined today.
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.
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