As halving event of Bitcoin drawing ever closer in May, Coinbase has recently pushed the narrative of Bitcoin as the digital gold. In a series of tweets, it covered the main reasons why the halving and subsequent reduction in the supply rate will further assist this link.
Scarcity Means Extra Value
Since the gold standard was broken in 1971, value of the dollar has fallen and the value of gold has increased from a fixed $35/oz to over $1500/oz today. Thanks to its relative scarcity and complexity to procure, gold has more interest than comparable metals like copper.
Like the yellow precious metal, Bitcoin was designed to be scarce, and is artificially difficult to acquire through the mining process of proof-of-work. It also has an advantage over gold, though, in being transferable via a communication channel.
“This past decade, both Bitcoin and gold have been viable safe havens amid global economic uncertainty. Armed with a myriad of technological advantages and accelerating development, Bitcoin is digital gold.”
Halve to Scarce
Bitcoin’s supply is limited by design, with new tokens minted as a reward each time a block of transactions is mined. Two halving events have already undergone the initial reward level of 50 BTC per block, bringing it down to the current 12.5 BTC per block.
Mining incentives for each new block, mined approximately every ten minutes, will be reduced to 6.25 BTC after the halving of May 2020. This will push Bitcoin’s supply issuance to a rate of about 1.7 percent annually.
A term known as stock to flow (or “S2F”) also measures new supply rate over total supply. After the Halving, Bitcoin’s scarcity as measured by S2F will be on par with gold’s.
“Gold’s stock to flow is higher than any other metal commodity, and bitcoin is set to soon follow,” notes Coinbase.
It is worth noting that, Cryptolydian reported a couple of days ago that Tom Lee Co-founder of Fundstrat believes like many others that the next halving would push BTC prices strongly higher.