Bitcoin Becomes Harder Than Gold
After the Bitcoin halving next spring, Bitcoin’s hardness will be twice that of gold.
When it comes to money, being ‘hard’ is the key. For ages, gold has been the champ in this department. But now, there’s a new player in town: Bitcoin.
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A metric called stock-to-flow ratio measures how ‘hard’ an asset is. Hardness is a measure of how easily a commodity can be produced, which keeps its value intact.
Right now, Bitcoin’s hardness is just a tad below gold’s.
However, Bitcoin is giving gold a run for its money. Unlike gold, every four years, the amount of new bitcoins that can be made gets cut in half. This “quantitative hardening” means Bitcoin gets harder every four years.
This year, the gold market has to absorb about 117 million troy ounces of new supply. In 2024, a bit more, say 119 million troy ounces. And it keeps going up gradually.
But Bitcoin is the opposite. The amount of new bitcoin hitting the market is always shrinking.
- In 2023, about 328,500 bitcoins will be mined.
- After the halving in May 2024, an extra 164,250 bitcoins will be mined each year until 2028.
- Over the following four years, until 2032, 82,128 bitcoins will be mined each year.
- This trend continues until 2140, when the last Bitcoin will be created, making a total of 21 million.
Currently, over 93% of bitcoins that have ever existed have been mined.
Bitcoin supply will grow 7% in the next 117 years. Meanwhile, in sharp contrast, the US money supply has shot up by about 35% since March 2020.
Gold is scarce, no doubt. But only Bitcoin can claim absolutely scarcity. This makes Bitcoin a game-changer.
Unlike gold, which can be pumped out in greater volume in response to higher prices, Bitcoin's supply is set in stone. More demand means the price goes up, plain and simple.
And that’s no surprise, considering you could theoretically send millions of dollars worth of Bitcoin to someone on Mars in an instant and for almost nothing. Try that with Gold.
At the moment, Bitcoin’s market cap is around $528 billion — just 4.2% of gold’s whopping $12.3 trillion market cap. But when Bitcoin boosts its ‘hardness’ to double that of gold, things could get wild. Imagine a single Bitcoin being worth over $620,000.
That might sound unbelievable but think about this: A decade ago, one Bitcoin was worth about a hundred bucks. Since then, the price has gone up about 271x. So, it’s not at all crazy to think it could keep climbing, especially with big players like hedge funds, ETFs, and even whole countries jumping on the Bitcoin train.
Remember, though, in the world of investments, past performance doesn’t guarantee future results. So, to mix metaphors, keep your eyes peeled, fasten your seatbelt, and hold onto your hat. Bitcoin’s price action is shaping up to be an epic ride.
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