Bitcoin’s fourth halving event enhances its scarcity, positioning it as a viable digital alternative to traditional value stores.
The crypto world witnessed the completion of Bitcoin’s fourth halving event, a significant economic procedure that took place at the 840,000th block. This process has drastically reduced the block reward from 6.25 BTC to 3.125 BTC, marking a pivotal moment in Bitcoin’s approach to managing its supply. This deliberate reduction in the rate at which new Bitcoins are created every four years is essential for fostering scarcity and enhancing its value over time.
Historically, Bitcoin’s protocol includes a feature that is akin to economic throttling, termed “halving,” which cuts the reward for mining new blocks in half. This method ensures that the total number of Bitcoin does not exceed 21 million, aiming to prevent inflation and positioning Bitcoin as a deflationary asset. The event occurs every 210,000 blocks, which roughly translates to a four-year interval. This predictable schedule underscores its rarity and supports its potential to act as a reliable store of value, rivalling traditional assets like gold and real estate.
Bitcoin as Digital Gold
The most recent halving emphasizes Bitcoin’s role as a digital counterpart to gold, offering a new era of liquidity and transferability that appeals to the modern investor. Over the past year, the value of Bitcoin has surged by 122%, significantly outpacing the growth of gold, which rose by 19%. As of 2024, Bitcoin’s year-to-date increase stands at an impressive 51%, compared to gold’s 15% rise, as per TradingView data.
BTC/USD 1-Week Chart Compared to Gold. Source: TradingView
Jonas Simanavicius, co-founder and CTO at Syntropy, emphasizes that the digital age demands assets that are not only secure but also readily transferable and decentralized. Bitcoin meets these criteria by combining robust computation with an extensive decentralized network. These features offer a myriad of advantages including instant transactions, immunity from geopolitical influences, and portability that surpass traditional store-of-value assets.
The programmed scarcity integral to Bitcoin’s design is what sets it apart from other traditional assets. While methods for extracting gold can evolve, making it potentially less scarce, Bitcoin’s supply cap is immutable. This fixed limit plays a crucial role in its appeal as an alternative to traditional stores of value. Lastly, as more investors and institutions recognize its security and the conveniences it offers, Bitcoin is increasingly seen as a viable and preferable alternative to conventional assets.