Coinbase, a digital currency exchange headquartered in San Francisco, has stated that Bitcoin will become close to digital gold in 93 days.
Also, with the Bitcoin halving occasion around the corner, Coinbase sees it as a critical step towards truly becoming digital gold.
In a series of tweet to publicize an accompanying blog-post published on February 7, it stated the crucial explanations why the halving and successive supply rate reduction will further solidify that link.
Scarcity establishes value
Since the gold standard was crushed in 1971, the dollar’s value has decreased and gold’s price, in dollar terms, has increased to over 4000 percent.
Gold has a higher value than other related metals such as copper because it is rare and difficult to get.
The design of bitcoin is such that it should be scarce like gold. It is also artificially hard to obtain it through the Proof-of-Work process of mining.
But it has an edge over gold in the sense that it is transferable through communications channels.
Bitcoin halving in relation to Bitcoin price
The supply of Bitcoin is restricted by design, with new tokens being minted as a reward any time a block of transactions is mined.
The introductory reward level of 50 BTC per block has already undergone two halving events, reducing to 12.5 BTC per block at the moment.
After the May 2020 halving, mining rewards for each new block, mined roughly every ten minutes, will decrease to 6.25 BTC.
This will make the supply issuance of Bitcoin to about a rate of 1.7 percent per annum.
Stock-to-flow (S2F) is a measure of new supply rate over total supply, and post-halving, Bitcoin’s S2F scarcity will be on a par with gold’s.
Coinbase stated that gold’s stock to flow is greater than any other metal commodity, and bitcoin will follow soon.
No value without demand
Just like any commodity, S2F forecasts that the price will fail if there is no request.
As central banks increase the money supply, economies can periodically prosper.
However, if the money supply is more than demand, hyperinflation can happen.
Such events steer the need for safe havens such as gold and Bitcoin, and recent economic fear is reaching all-time highs, according to the Global Economic Policy Uncertainty Index.
This, along with Bitcoin’s myriad of technological advances and accelerating development, justifies Bitcoin’s title as digital gold, according to Coinbase.