We Are Only Six Months Away From One of the Most Important Moments in Bitcoin
While the current fiat money supply inflates more and more every day, bitcoin’s inflation rate is about to drop from ~1.8% to ~.8%, as it trends down to eventually 0%.
This week we marked bitcoin’s 15th birthday. And while we all celebrate one of the most important financial creations in history, there is another significant event just on the horizon. It’s an event that happens only once every four years, and every time significantly impacts the price of bitcoin.
We are of course talking about the bitcoin halving which will take place on ~April 24, 2024 – less than 6 months from now.
A quick reminder on the halving:
The bitcoin halving is a mechanism that Satoshi Nakimoto setup in order to slowly bring bitcoin’s total supply to a halt, thus leaving the total supply capped at 21 million. This key feature is what separates bitcoin from every other form of fiat money – the inability to be “printed” or artificially created.
Compare this to the current worldwide fiat system where currencies like the US Dollar or the Euro have printed trillions of dollars since Covid.
But while the current fiat money supply inflates more and more every day, bitcoin’s inflation rate is about to drop from ~1.8% to ~.8%, as it trends down to eventually 0%.
This is the power of Satoshi’s bitcoin and why the halving is so important.
The Halving Is Not Priced In
Taking a closer look we can see exactly how the halving drives scarcity.
With the halving poised to occur, we are on the brink of a significant reduction in Bitcoin's annual issuance rate – a drop from 328,000 to 164,000 BTC. This decrease in supply arrives amid a landscape where the demand for Bitcoin is not just stable but arguably on an upward trajectory.
The result? An exacerbated imbalance between supply and demand. The reduction in supply is guaranteed – slashed by half in an instant – but, again, there's no corresponding expectation for a reduction in demand.
According to Glassnode, there are approximately 4.5 million addresses that have greater than .1 bitcoin (~$3,500 worth at today’s prices). That means that less than .05% of the world’s population have any real, meaningful exposure to bitcoin. [Yes, these are rough numbers and you could argue that purchasing power parity in other countries sways how important .1 btc is, but we are just loosely discussing this here.]
Think about that for a second. Less than 1% of the world population has any real exposure to bitcoin… yet 93% of all bitcoin that will ever be issued has already been issued. And as the world economy is getting less secure and money printers are in overdrive, millions of people around the world are looking to opt out of the fiat system.
So is the halving priced in? We’d say no.
A Walk Back In History
As we celebrate bitcoin's 15th birthday it is worth remembering what caused bitcoin to begin in the first place – bank bailouts.
In the bitcoin Genesis block, Satoshi encoded a message referencing the ongoing bailouts after the financial crisis:
Meanwhile, here we are sitting in 2023 and bank bailouts are once again looking more and more likely to be on the horizon.
It’s beginning to look like SVB and First Republic might have only been the start.
Losses in $BAC $760B bond portfolio rose by $25B (24%) in the quarter to $131.6 billion. These losses dwarf the bank’s $7.8B in quarterly earnings and represent an existential threat to the bank — but are not counted against earnings or reg capital.
— Porter Stansberry (@porterstansb)
Oct 17, 2023
Have You Already Missed Out?
As of today, all eyes are on a spot BTC ETF approval – and for good reason. It is expected to boost bitcoin demand significantly from an institutional standpoint.
Yet, amidst these discussions, the profound impact of the halving on Bitcoin’s scarcity and value seem to be significantly overlooked.
We didn’t want to wait to discuss the halving until a few days prior to it happening.
Now is the time to research, learn, and take a deep hard look at your portfolio and decide whether or not it is prepared for what is to come.