Economist: May 2020 will see Bitcoin become the main competitor of world currencies

In recent decades, Central Banks such as the Federal Reserve have failed to keep inflation rates stable. Bitcoin can benefit from this trend. After the next halving of the cryptocurrency, after which the currency will have “economically indisputable reasons” to become a legitimately competitive reserve of value against other world currencies.

Connection between Halving and inflation

May 2020, Bitcoin will see its next halving, where today’s 12.5 Bitcoin reward will fall to 6.25.

This halving, the third in the history of cryptocurrencies, is particularly important, says economist Peter C. Earle of the American Institute for Economic Research.

Keep in mind that the current annual “inflation” rate for Bitcoin is between 3.7 percent and 3.8 percent (on an average of 144 blocks drawn per day at 12.5 BTC each, producing about 1,800 new BTCs per day).

For the context: describing the increase in the number of Bitcoin available as “inflation” here is comparable to the extraction of new gold, compared to the existing gold stock on the ground.

After halving, with Bitcoin inflating at a rate of approximately 1.8 percent per year (half of its current rate), the currency will theoretically inflate at a rate lower than that of the Federal Reserve that aims at 2 percent per year .

Failure of the Central Banks

When considering monetary policy worldwide, the next halving comes at an interesting time.

Despite the efforts made in the last 10 years, the Federal Reserve, and other Central Banks, have tried and failed to design an inflation rate; and as Earle points out, even a passing review of history shows that “inflation is the second cause after the war, where the forces that destroy civilizations are considered.”

Despite this failure, the Central Banks have not changed course. In fact, they have doubled, adopting policies such as quantitative easing to inject liquidity directly into the economy.

On the other hand, the limited offer of Bitcoin has always been an attraction for investors and traders who know the effects of inflation on purchasing power.

The conclusion is as follows: with the Bitcoin production rate, through mining, which takes place at a lower rate than the target rate established by the Federal Reserve, in May 2020, Bitcoin seems to have “economically indisputable reasons” to become a legitimately competitive reserve of value against other world currencies.

Bitcoin: quantitative adjustment

With Bitcoin, by limiting the maximum number of currencies that will exist, and by making its origin adhere to a predictable and transparent protocol, the currency closely approximates a monetary policy known as quantitative adjustment. This being the opposite of the quantitative easing campaign of the Central Banks.

With inflation rates lower than nominal and real inflation rates, the Bitcoin use case begins to seem less and less speculative; Earle also reports the following “Without a doubt, this will add to the increase in the currency and will probably increase its value deposit characteristics, which could cause an upward trend in the price”.

Reference: newsbtc.com

Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.

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