Mere hours ago (as of the time of publishing this), the 18 millionth Bitcoin (BTC) was mined.
While this milestone may seem irrelevant to those not involved in the cryptocurrency industry, the Bitcoin community has been celebrating this event, filling the Twitter feeds of cryptocurrency investors the world over.
This Friday the 18th million Bitcoin will be mined
There are only #3MillionLeft
Our mission is to make it easy for everyone to be a part of this once in a species revolution
— farbood (@farbood) October 16, 2019
This is for good reason: Bitcoin’s strict algorithmically-enforced scarcity, which many say is what gives the cryptocurrency such an advantage over fiat monies and other cryptocurrencies, is believed to imbue the asset with much of its value.
Related Reading: Bitcoin Price “Death Cross” 10 Days Out as BTC Stagnates at $8,000
Scarcity to Drive Bitcoin Price Sky High: Model
Munich-based financial institution Bayerische Landesbank (BayernLB) has predicted that the block reward halving — a key event in Bitcoin’s scarcity narrative — will give Bitcoin to fuel to jet past its previous all-time highs.
In an extensive paper authored by senior analyst Manuel Andersch, it was explained that due to its characteristics and similarities to gold, Bitcoin’s price might be able to be fairly predicted by a stock-to-flow (new yearly supply over above-ground supply of a commodity) model. The model says that once Bitcoin’s block reward reduction is cut in half next year, the cryptocurrency will have a fair valuation of $90,000 per coin.
BayernLB’s model was derived from one made by PlanB, a pseudonymous quantitative analyst working at a European financial institution.
PlanB recently determined that the stock-to-flow model is cointegrated with the Bitcoin price, implying that there is a rather high likelihood that BTC will rocket higher in the wake of the halving.
The analyst also found that his model fit Bitcoin’s price action to a 95% R2, a statistical metric used to represent the accuracy of a model (100% is perfect, 0% is absolutely inaccurate).
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Increasing the Supply Cap?
While Bitcoin’s supply cap will likely be enforced by HODlers at all costs, there has been some talk of an eventual supply cap increase.
Attendee Matt Luongo, the founder of Fold and the product lead at Keep, released a thread on the subject matter after the event, explaining why more than 21 million BTC could make sense eventually.
Luongo explained that while it would be unfair to assume what will happen with Bitcoin’s transaction fee market in the long-term, a waning number of miners could pose a threat to the blockchain.
I was the guy that said we might have to one day raise the Bitcoin supply cap. Fight me. https://t.co/ysqHHdcggf
— Matt Luongo (@mhluongo) February 4, 2019
Considering the worst-case scenario, Luongo noted that when block rewards become scant, the Bitcoin economy could become “top heavy.” He stated that as transactions on Bitcoin’s main layer, not the Lightning Network or other layers (Liquid), become few and far between, the chain will be susceptible to block reorganizations, as seen with Ethereum Classic and ZenCash.
He thus concluded that a potential solution would be to curb the long-standing supply limit of BTC to “allow some emission for chain security, at the expense of all holders.”
Related Reading: Bitcoin Now the World’s Eleventh Largest Money Supply
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