Bitcoin Inflation Rate Will Drop Under 2% in 2020; Why Does This Matter?

According to BitcoinBlockHalf.com, Bitcoin is going to be halving once again. This is the third time in history that the digital asset is going to be experiencing a new issuance reduction. At the moment, there are 1,800 new coins generated every single day. Miners process transactions and receive 12.5 BTC for each block they find.

In 455 days, Bitcoin block mining reward will be decreasing down to 6.25. This is equal to 900 BTC per day. Thus, the inflation rate of the most popular digital asset is going to be falling from 3.81% to 1.8%.

This is going to have a very important effect on the market and the whole crypto community. For the first time, Bitcoin is going to have a smaller inflation rate than the target imposed by central banks in developed countries. The central banks from the most important economies in the world limit their inflation rate to close to 2%. Ideally would be to have an inflation rate as close as possible to 2% per year but not larger.

In some cases, countries surpass the inflation target and central banks tend to increase reference rates. If the inflation remains under the goal and does not seem to be reaching that target, reference rates drop.

In developing countries, inflationary policies tend to be more flexible. There are some countries that establish an inflation rate per year of 4% or 5%. Thus, they are more flexible when it comes to handling inflation. There are also some other nations such as Venezuela or Zimbabwe in which the governments do not have any target for their inflation rates.

Bitcoin works in a different way. There is nobody deciding which is going to be the inflation target for the upcoming year. The inflation rate is pre-determined to fall every four years. This provides predictability and makes of Bitcoin a scarce digital currency. Bitcoin has a fixed supply. If the demand for the asset increases, the supply remains the same.

There are going to be issued 21 million BTC. Now there are 17,555,263 BTC in circulation, 83.6% of the total Bitcoins mined. Thus, in the four years after the halving, there are going to be issued 1,312,500 BTC more, reaching 90% of the total Bitcoin supply mined.

Individuals are going to be able to start thinking about Bitcoin as a store of value against inflation. Its issuance will be falling over time, which is clearly going to have an effect on its price. With a stable or increased demand, the price of the most popular virtual currency should start growing once again. There are several experts already explaining how this can affect Bitcoin’s price.

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