Bitcoin’s
future is perhaps one of the most widely discussed topics in the crypto
community. It has been pronounced “dead” exactly 371 times according to popular
resource Bitcoin Obituaries. However, the world’s largest cryptocurrency by
market cap has survived every attempt to be dethroned and continues to grow
after each down cycle. Leaving behind technical aspects, here are 6 possible
reasons why the future of Bitcoin is bright and why 2020 might turn out to be a
very good year.
Bitcoin
Halving
One of the
most anticipated events will take place on May 17, 2020 – its halving.
Following this event, the rewards that miners get for adding blocks to the
network will be slashed in half, hence affecting the overall supply of
bitcoins. This will be the third halving event in Bitcoin’s relatively brief
history.
The first
one cut the reward for a solved block from 50 BTC to 25 BTC back in 2012. The
second one took place in June 2016 and cut the reward to 12.5 BTC. Naturally,
the upcoming one will see the block reward reduced to 6.25 BTC per block.
As Tech Tic
Technologies reported, after each previous halving, the price of Bitcoin has
increased substantially. This is not unexpected, as basic economics stipulate
that when the supply of an asset decreases while the demand for it remains the
same or increases, its price will go up.
Comparison
to Gold
Traditional
markets have had a rather tumultuous month so far, and an interesting
comparison has arisen. The price of gold, the ultimate hedge from the stock
market, has been rising significantly, and Bitcoin is not far behind. In fact,
many proponents and industry experts have already touted the virtual currency
as a “safe haven” from the declining traditional markets.
Libra’s
Controversy
Facebook’s
own cryptocurrency, which will supposedly launch in 2020, has given the
community a lot to talk about. Though controversial, it brought a lot of
attention to Bitcoin and cryptocurrencies in general. Even though it differs
considerably from Bitcoin, the mass media was shown that cryptocurrencies are
here to stay.
More
importantly, Libra got the attention of regulators. We saw a couple of
congressional hearings held on the matter in the US. Furthermore, even the head
of the UK’s Treasury said that they don’t intend to stop Libra or blockchain
technology in general.
Inflation
Hyperinflation
is a major threat to many countries, with Venezuela and Iran serving as prime
examples in the last few years. While Bitcoin is far from mass adoption,
cryptocurrencies may be the way out for some countries that are looking for a
solution to their economic issues.
One thing
that has to be noted about Bitcoin in particular is that it has a
pre-programmed inflation rate. It’s 3.74% per annum and can’t change, unlike
inflation in traditional fiat currency markets.
Mass
Adoption
As mentioned
above, Bitcoin has a long way to go before reaching mass adoption. However,
news from New Zealand is promising. The fact that the country allows employers
to pay salaries in Bitcoin and that they will be taxed in the same way says a
lot. Moreover, there are quite a few marquee companies getting involved in the
space, including Facebook, Overstock, and Twitter.
Scarcity
Because of
Bitcoin’s first-of-its-kind protocol, only 21,000,000 BTC will ever be mined
and come into existence. Since it’s not limitless, it possesses a similarity
with silver and gold, which have limited supplies as well, even though their
exact amounts are unknown. While potentially similar, Bitcoin can be
transferred digitally with just a few clicks. In a digital world, this could be
the biggest benefit of them all.
Moreover, as
reported by Tech Tic Technologies, Bitcoin is expected to eventually catch up
with gold and silver in terms of its stock-to-flow ratio, potentially sending
its price much higher.
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