A recent blog post from the digital currency exchange Coinbase suggests Bitcoin may soon become ”digital gold”. Specifically, Coinbase suggests that the premier cryptocurrency will take a massive step towards that end in just 93 days.
Many analysts already call Bitcoin ”digital gold”
This is not the first time that analysts refer to Bitcoin as ”digital gold”. In fact, the premier cryptocurrency is routinely said to be a digital equivalent of that precious yellow metal. The reasoning behind this is that Bitcoin, much like gold, provides a stable store-of-value.
As such, the asset class is able to weather periods of market volatility and uncertainty. Numerous investors also suggest that Bitcoin is a modern store-of-value and, put simply, ”digital gold”. With that said, Coinbase now joins the chorus of those hailing Bitcoin as digital gold and says similarities are increasing.
Bitcoin halving will make Bitcoin more like digital gold than ever
Interestingly, Coinbase also goes into the statistics as to why Bitcoin is approaching a status of digital gold. Additionally, Coinbase also hails the upcoming Bitcoin halving as a critical step towards truly becoming digital gold.
The Coinbase post looks at when the gold standard was broken in 1971. Since then, the dollar’s value relative to gold has fallen drastically, which the following chart demonstrates. The value of gold in dollar terms, on the other hand, has risen roughly 4,000% since 1971.
Moreover, the key reason as to gold’s enduring and increasing value is its scarcity, and difficulty to acquire (mine). The scarcity of gold means that governments around the world can’t just produce more gold. Instead, gold has a finite supply, and only 190,000 tons have ever been mined.
Much like gold, Bitcoin also requires mining and is intentionally scarce. However, unlike gold, Bitcoin’s scarcity actually decreases. This is due to Bitcoin’s ”halving” processes, which take place every fourth year.
What will the Bitcoin halving do to the Bitcoin price?
Bitcoin’s next halving event will take place on roughly May 14th- or in about 93 days. Many analysts suggest that this occasion could drive the price of Bitcoin higher than ever. The following chart shows the price performance of Bitcoin over the course of the last two halving events.
One analyst has said that the halving will lead to a Bitcoin price of $55,000. Just a few days ago, another said that Bitcoin’s halving will boost the premier crypto’s price to $30,000 in 2020.
A popular model for measuring how supply rate over total supply affects assets is the ”stock-to-flow” (S2F) measure. What’s more, the Bitcoin halving will effectively double the S2F ratio, due to cutting new supply in half.
In conclusion, the Coinbase post points out that Bitcoin’s halving in roughly 93 days will likely make the premier crypto more like ”digital gold” than ever before. However, unlike gold, Bitcoin also comes with a long list of technological advances that make it more efficient than gold.
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.