Importance of Bitcoin Halving for BTC Scarcity

Halving is Bitcoin’s most crucial mechanism that might catapult Bitcoin into a value asset store for the digital age, seeking extra liquid assets compared to gold or real estate.

The fourth-ever Bitcoin halving is one of the most critical economic processes affecting the supply of Bitcoin and generating scarceness for the asset. This halving event decreased block issuance rewards from 6.25 BTC to 3.125 BTC for every mined block, efficiently reducing the cryptocurrency’s issuing rate by 50%.

Bitcoin Scarcity to Improve Asset Value

Karim Chaib, the chief executive officer of Dopamine App, noted that the event is a critical mechanism for Bitcoin’s market valuation and scarcity. He told a digital media resource that scarcity is a vital economic principle that impacts an asset’s value.

The halving events emphasize the scarcity of Bitcoin by programmatically ensuring a rise in its supply at a sluggish rate over time.

The Bitcoin halving is hard-coded into the cryptocurrency’s code base, which occurs for each 210000 mined block. This figure equates to approximately every four years. 

Bitcoin experienced its initial halving in 2012. At this time, its issuance rate fell from 50 BTC to 25 BTC for every mined block. The other halvings happened in 2016 and 2020, considerably reducing the issuance rate to 3.125 BTC. 

Bitcoin Emerges a Conventional Store-of-Value Asset

Due to the hard-coded scarcity, Bitcoin stands out from the conventional store-of-value assets. Chaib noted that programmed scarcity is a critical attribute differentiating Bitcoin from conventional assets such as gold.

The assets can become less scarce with the development of new extraction and production means. On the contrary, Bitcoin’s capped supply is 21 million coins, making it resistant to inflation.

Bitcoin’s economic plan and halving processes are efficient mathematical approaches to making Bitcoin a deflationary asset. Jonas Simanavicius, Syntropy’s co-founder and CTO, said that it becomes the first dependable alternative to gold. 

Is Bitcoin the Next Gold?

Simanavicius told a digital media resource that gold had been the main store of wealth for several years since it is hard to boost its supply and it is international. Further, he noted that before Bitcoin, nothing else came near to having an unsurprisingly gradually-growing supply.

Bitcoin and gold prices increased by 122% and 19% during the past year. TradingView data shows that Bitcoin has risen over 51% year-to-date (YTD) this year, while Gold price has increased 15% YTD. Throughout the years, real estate and valuable metals were rated as the top-value assets store. 

However, Simanavicius said that the digital age is seeking more liquid assets for quicker movements, which will finally benefit Bitcoin. Specifically, he said that over time, Bitcoin has survived, and its backing power of extensive decentralization and computation has risen to the extent that more individuals and institutions recognize its security. 

Besides, advantages such as geopolitical decentralization, instant transactability, and ease of carry overshadow those of other asset classes.