Understanding Bitcoin’s Deflationary Pricing Model

It’s no news that Bitcoin is the most popular cryptocurrency in the world – and, one of the most valuable assets as well. Today, millions of people around the world take advantage of Bitcoin to make investments, earn a living, and to send and receive money. 

And thanks to exchanges like Quidax that offer easy access to Bitcoin, investors can easily buy and trade the cryptocurrency from the comfort of their homes. 

But recently, there has been a lot of talk in the crypto community about Bitcoin and its potential as a tool for fighting inflation. Specifically, the discussions have revolved around cryptocurrency and its potential to help investors maintain their wealth even as inflation bites. 

So, what gives? What are the facts and how does this work? 

Inflation: A Problem We All Face

Put simply, inflation is the consistent rise in the prices of goods and services in a country. Here are some interesting facts: 

• Regardless of a country’s economic strength, it will need to keep inflation in check
• In some cases, inflation can be considered a good thing – especially when it’s kept at low levels (usually under 2-3%)
• However, the problem comes when inflation starts to rise rapidly. 

In the United States – the world’s largest economy – inflation has been rising recently, with the levels hitting 3.7% in August 2023. For comparison, Nigeria’s inflation rate hit 25.8% in August 2023 – an 18-year high. 

With inflation at double digits, many Nigerians have been looking for how best to protect themselves and their wealth. Inflation erodes the value of a nation’s currency, and the best way to protect yourself is to keep your money in an asset class that is strong and whose value remains stable over time at least. 

Bitcoin: A Possible Solution

With investors now looking for a possible solution to inflation, many are looking for the best way to buy Bitcoin in Nigeria. And, it’s easy to see why – the crypto market might have struggled last year, but it has rebounded heavily in 2023 and is going strong. Plus, Quidax provides a reliable and trusted way to access the asset – any day, anytime. 

But, can Bitcoin really serve as a way to beat inflation? Well, yes. Here’s why:

Bitcoin’s Supply Limit

One of the major reasons why inflation affects currencies is that there is a growing supply. Governments are able to print more money at will, and this gradually causes the value of the currencies themselves to drop. 

With Bitcoin, this isn’t possible. When it was created, Bitcoin’s code had a protocol that allowed only 21 million BTC to ever be mined. This “hard cap” means that the asset maintains its relative scarcity, and it means that the currency is not subject to inflationary pressures. 

Read also: Bitcoin investment was more profitable than crypto hedge fund in H1 2023

The Halving Mechanism

To maintain the 21 million supply limit, Bitcoin has a mechanism known as the “halving.” About every four years, the rate at which new BTCs are mined is reduced by half. 

This structure ensures that the issuance of new BTC is able to slow down over time. By doing this, Bitcoin is able to create a supply-side constraint that can help drive its value even higher. 

It is also worth noting that there is considerable hype surrounding every halving. As history shows, this hype has led to some impressive price bumps for the asset – and, that could easily happen again. 

Conclusion

Bitcoin’s deflationary pricing model is an important part of its appeal to crypto investors. Its halving mechanism and fixed supply will help to create scarcity, which will in turn drive its value and create price gains for holders. 

The asset might be volatile, but in the long run, Bitcoin can indeed serve as a hedge against inflation.