Bitcoin’s Inflation Rate Is Three Times Lower Than The Dollar

March 4, 2023 5:56 pm Comments

So far, 90% of the possible Bitcoin that can be mined is already in the circulating supply which means that there isn’t much Bitcoin that can be mined left.

Once 100% is finally reached, this means that the supply of Bitcoin will finally be capped which means price will definitely go up if demand increases.

Because of this, the data is now showing that Bitcoin’s inflation rate is three times lower than that of the US dollar which faces inflationary concerns due to the Federal Reserve’s printing.

With its much lower inflation rate, BTC is turning out to be a popular asset for institutions to hedge against inflation and any other global economic uncertainty.

This is especially true as Bitcoin gets closer to its next halving event which happens consistently once every 4 years.

FinBold reports:

Bitcoin’s dropping inflation rate stems from the cryptocurrency’s fixed supply of 21 million BTCs. The rate drops after every four years during the halving event.

As a result, the maiden cryptocurrency’s inflation rate has been on a steady decline since its inception in 2009 to stand at 1.79% as of March 4, data by crypto analysis platform WooBull indicates.

At the same time, the annual inflation rate of the U.S. dollar in 2023 stands at 6.4%. The value peaked at 7% in 2021, data by USInflationCalculator indicates. This implies that the U.S. dollar inflation rate is 3.57 times higher than Bitcoin.

Bitcoin’s ability to record a low inflationary rate is because of the asset’s deflationary model. The design means that the inflation rate decreases post-halving events.

What the halving event does is that it essentially reduces the reward that miners get for mining Bitcoin.

As a result, this means that the number of Bitcoin that is introduced into the circulating supply is also halved and this continues slowly until Bitcoin reaches the max supply of around 21 million.

Many investors and speculators have been studying the effects on the crypto market after the halving events happen and the data shows that it is often correlated with a bull run directly after.

On the other hand, the Fed is currently trying to reduce inflation by increasing interest rates with many analysts predicting that interests rates will be above 5%.

Whether or not that will actually be effective on the USD inflation rate or if a higher rate is required is still unknown.

FinBold concludes:

The contrasting inflation rate between the assets has translated to a debate over the best investment option and the perfect hedge. Bitcoin proponents argue that BTC is the ideal asset to protect against inflation.

However, the same has yet to translate to the asset’s price amid rising inflation and interest rate hikes. Amid the broader economic downturn, Bitcoin and the general cryptocurrency market have suffered significant losses.

Meanwhile, Bitcoin’s 2023 rally has been cut short, with the crypto facing threats of retesting lows below $20,000. By press time, BTC was trading at $22,382.

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