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Due to the worldwide COVID-19 pandemic, many countries are printing more and more fiat money to support the economy. However, this action may cause increase in inflation rate and may even lead to hyperinflation. For example, US printed 9 trillion (22% of all circulating USD in 2020). That’s why saving money from inflation is a hot topic. Bitcoin during 2020 became the symbol of deflationary assets, which is limited in supply and is meant to grow exponentially over time.
Here are the arguments to back up the statement above:
- Limited amount
There is a limited number of Bitcoin coins, the circulating supply of Bitcoin is ~18,6 million.
However, the number of bitcoins available for buying and selling, is much lower. It is estimated that a substantial amount of mined BTC is lost forever ~3M BTC), but as Bitcoin continues to become more and more a Store of Value and investors increasingly HOLD making use of it as a safe haven asset to store wealth, the actual “liquid” Bitcoin supply can be expected to be considerably lower.
Illiquid supply: 14.5 million BTC
Liquid supply: 1.2 million BTC
Highly liquid supply: 3 million BTC
78% of the circulating Bitcoin supply is illiquid. But what does it mean? A sustained rise of illiquid bitcoins is an indication of strong investor holding sentiment and a potential bullish signal.
Bitcoin is easily divisible. Bitcoin is divisible up to 8 decimal points (or 10mln).
Blockchain technology is the key advantage of Bitcoin. “Blockchain is a distributed ledger system that is decentralized and trustless, meaning that no parties participating in the Bitcoin market need to establish trust in one another in order for the system to work properly.”
With the help of third party services crypto-exchanges, wallets, and other tools, Bitcoin is transferable from one party to another within minutes. The process of transferring money in the bank system can take days at a time and have fees. Transferability is the key aspect of any asset which may limit asset usage for certain actions if takes too much resources.
Durability is a major issue for any asset because it usually has a physical form. A dollar bill, while sturdy, can still be torn, burned, or otherwise rendered unusable. Digital forms of payment cannot be harmed physically. For this reason, bitcoin can exist with no risk of been destroyed.
Decentralized blockchain ledger system of Bitcoin is complicated and is incredibly difficult to counterfeit. To do so, someone should confuse all participants in the network of Bitcoin.
Sources:
https://www.somagnews.com/9-trillion-story-22-of-us-dollars-printed-in-2020/#:~:text=%24%209%20Trillion%20Story%3A%2022%25,Printed%20in%202020%20-%20Somag%20News&text=A%20password%20will%20be%20e-mailed%20to%20you.
https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp