With over 90% of Bitcoin (BTC) in circulation, the asset’s inflation rate has declined dramatically to be at least three times that of the United States dollar (USD).
The declining Bitcoin inflation rate results from the cryptocurrency’s fixed supply of 21 million BTCs. Every four years, the rate decreases during the halving event. As a result, the inflation rate of the first cryptocurrency has been steadily declining since its start in 2009, reaching 1.79 percent as of March 4, according to statistics from the crypto monitoring platform WooBull.
In addition, the annual inflation rate for the U.S. dollar in 2023 is 6.4%. The value peaked at 7% in 2021, according to data from USInflationCalculator. This indicates that the inflation rate for the U.S. dollar is 3.57 times that of Bitcoin.
Bitcoin can record a low inflation rate due to the asset’s deflationary nature. The design results in a drop in the inflation rate following halving events. The incentive scheme for miners regulates the rate, which is halved with each halving event. During the halving event, Bitcoin miner incentives are cut in half. This means that the quantity of Bitcoins is mined in half, with the next expected occurrence in May 2024.
Analysts have also observed that Bitcoin’s inflation rate stays low due to its decentralized character, suggesting that the original cryptocurrency can avoid most political and economic concerns associated with the U.S. dollar.
The disparate inflation rates of the assets have sparked a discussion over the optimal investment option and hedge. Supporters of Bitcoin say that BTC is the best asset to guard against inflation.
Despite rising inflation and interest rate hikes, the asset’s price has not yet been reflected. Bitcoin and the cryptocurrency industry have seen considerable losses during the more significant economic crisis.
However, Bitcoin’s 2023 rise has been halted, and the cryptocurrency is now threatened with a retest of lows below $20,000. At press time, the price of Bitcoin was $22,382.
Also Read: The Ethereum Deflation Rate Has Reached New Annual Highs
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