With May'south Bitcoin halving result drawing ever closer, Coinbase recently took to pushing the "Bitcoin as digital gold" narrative. In a tweet-storm to promote an accompanying blog-mail published Feb. 7, information technology covered the central reasons why the halving and subsequent supply rate reduction will farther cement that link.

Scarcity creates value

Since the gold standard was cleaved in 1971, the dollar'south value has declined and gold'due south value, in dollar terms, has risen over 4000%. Gold has more value than similar metals such as copper due to its relative scarcity and difficulty to acquire.

Bitcoin has been designed to be scarce like golden and is artificially difficult to acquire through the Proof-of-Work process of mining. However, information technology also has an advantage over gold in beingness transferable through a communications channel.

Coinbase ended:

"Armed with a myriad of technological advantages, accelerating development, and maturing global market, Bitcoin is a store of value to rival gold in the digital age."

Halving increases scarcity

The supply of Bitcoin is limited by design, with new tokens being minted as a advantage every time a block of transactions is mined. The initial reward level of 50 BTC per block has already undergone two halving events, bringing it down to the current 12.v BTC per cake.

After the May 2022 halving, mining rewards for each new cake, mined approximately every ten minutes, will reduce to half-dozen.25 BTC. This will bring the supply issuance of Bitcoin to a charge per unit of around 1.7% per annum.

Stock-to-flow (S2F) is a measure of new supply rate over total supply, and post-halving, Bitcoin'due south S2F scarcity will exist on a par with gilt's.

"Gilded's stock to flow is higher than any other metal commodity, and bitcoin is set up to presently follow," notes Coinbase.

Bitcoin stock-to-flow chart

Bitcoin stock-to-flow chart. Source: medium.com/@100trillionUSD/

No value without demand

S2F forecasts for the toll will fail if there is no demand, and this holds true for fiat money, as much every bit any other commodity. As fundamental banks increase the money supply, economies tin sometimes prosper. However, if coin supply overwhelms demand then hyperinflation events can occur.

Such events bulldoze demand for rubber havens such as gold and Bitcoin, and recent economical fearfulness is reaching all-fourth dimension highs, according to the Global Economic Policy Incertitude Index.

This, along with Bitcoin's myriad of technological advances and accelerating development, justifies Bitcoin'due south title equally digital gilded, according to Coinbase.

Every bit Cointelegraph reported, senior employees of Coinbase and Ripple recently formed a working group to advise The states regulators on policies to encourage innovation in the sector.