Bitcoin Tilted Toward Mass Adoption Amid Rising Inflation Globally

Data & Research / 06.09.2020

Bitcoin (BTC) has emerged as a real monetary revolution that is poised to solve many issues plaguing the current financial system, including inflation and market uncertainty. 

As the world’s leading digital asset continues to mature and establish itself as a widely accepted store of value, more investors are entering the Bitcoin market. 

As shown in the chart below by Blockchain.com, the number of unique addresses on the BTC network is on the rise as new investors accumulate coins as part of their long-term investment strategy. 

bitcoin btc new unique addresses growth

This article examines the various factors leading to Bitcoin’s widespread adoption and why this revolutionary crypto asset’s value could skyrocket to the moon in the coming months and years. 

Bitcoin’s Fixed Supply Makes It Resistant to Inflation 

BTC is understood by many seasoned investors as “digital gold,” mainly due to its fixed supply of 21 million coins

This capped supply will prove to be the main attribute that pushes Bitcoin into mainstream acceptance as a hedge against inflation. 

Satoshi Nakamoto, the inventor of Bitcoin, designed the digital currency to undergo reward halving events where the coins’ supply in circulation reduces every four years. 

Unlike central banks, no person or centralized entity can adjust the coin’s monetary inflation rate. This element has resulted in BTC’s inflation dropping lower than the average inflation target central banks’ reference globally at 2%.

The latest halving event that occurred in May 2020 reduced block rewards from 12.5 to 6.25 BTC, further increasing supply pressures. That halving resulted in a drop in the coin’s inflation rate to about 1.77% as per data from woobull.com. 

bitcoin (BTC) inflation chart

The king crypto continues to gain more value since its launch in 2009, and its purchasing power has increased over time, making it deflationary in that sense. Some analysts cite this resistance to inflation as BTC’s most vital attribute that will spark the most significant wealth transfer the world has seen in decades.

Bitcoin enthusiast and author Rhythm Trader wrote in a 2019 blog post,“Millennials have started making a major shift towards the use of unconventional banking, with Bitcoin posed to be the beneficiary of the ‘Great Wealth Transfer’ of our time.”

Bitcoin Adoption Spikes Amid Massive Money Printing

Central banks worldwide are known to manipulate inflation rates by periodically printing vast quantities of fiat reserves. This year has been particularly dismal for the global economy due to the Covid-19 induced lockdowns

The ensuing economic downturn has pushed central banks to engage in never-seen-before quantitative-easing to boost the economy. 

Mike McGlone, a senior commodity strategist at Bloomberg, stated that central banks’ unprecedented stimulus measures are pushing investors into stores-of-value commodities such as gold and Bitcoin. 

McGlone also believes that the Coronavirus pandemic is also accelerating the shift away from physical cash and toward digital currency. 

Similarly, Blockchain analytics firm Chainalysis recently released a report confirming that more people are turning to crypto amid rising inflation and government policies that cause fiat currency instability.

According to the report, adoption is mainly active in Latin American countries like Argentina and Venezuela that are ravaged by hysterical inflation. More individuals in these countries look to cryptocurrencies such as BTC as a safe way to store money and keep their wealth away from collapsing banking institutions. 

Bitcoin Should Register a Valuation Uptick

Bitcoin has rallied in the past few months amid growing adoption, registering an impressive uptick from below $4K in Mid-March to hit highs of about $12K seen last week temporarily. 

This impressive growth confirms projections of an earlier Bloomberg 2020 crypto outlook report published in Jan. 2020 that predicted BTC would outshine most crypto assets in 2020 and establish itself as an appreciating digital version of gold. 

Despite seeing triple-digit percentage gains in recent months, the world’s largest cryptocurrency, which recently hit a $220 billion market cap, is still undervalued. As more new investors hold and trade the digital asset, some in the crypto community predict that the coin will see an increasing valuation uptick in the coming years. 

For instance, Wall Street veteran Chris Burniske recently predicted that BTC would soar to $50K and secure a $1 trillion market cap in the coming years. High institutional investment in BTC, primarily via the rapidly expanding derivatives market, is the leading indicator that the digital asset has gained widespread integration into mainstream markets. 

The Grayscale Bitcoin Trust Fund is currently the largest crypto-asset exchange-traded instrument that exposes institutional investors to BTC. Bloomberg pointed to Grayscale Investment’s aggressive crypto acquisitions in their June Outlook report, highlighting that the fund manages more than 340,000 BTC ($3.25 billion) on behalf of investors.  

What will take BTC Adoption to the Next Level? 

Bloomberg’s latest report on crypto markets asserts that something has to go wrong for BTC not to appreciate. The firm projected that BTC would reach a record high of $28K in 2020 amid hefty quantitative easing by world governments. Going by these estimates, the king coin is a “resting bull” that is yet to reach its true potential in terms of value and adoption. 

A robust underlying blockchain and concise regulation policy should be established to popularize BTC further and pull in more investors away from traditional markets. Efforts are currently underway to enhance the BTC lightning network, aiming to speed up low-value transactions and make the blockchain more scalable. 

The integrated network has had some success in facilitating more people to interact with BTC, with access points on the blockchain surging by about 33% in 2019. That said, the lighting network is still prone to attacks from hackers and needs revamping to secure transactions and boost BTC’s mainstream use. The licensing of centralized entities such as banks and savings associations for crypto safekeeping and storage is also crucial for BTC’s widespread adoption. The recent authorization for federal banks in the U.S to provide crypto custody services seems to be a massive step in the right direction for BTC and the digital assets sphere as a whole.

Author’s Thoughts

The latest developments in the crypto sphere, such as the introduction of accessible crypto custody services in the US and an improving lightning network, are keeping BTC tilted toward mass adoption and value appreciation. 

As the world’s pioneering crypto continues to mature and gain more exposure amid rising inflation in global markets, it seems well poised to emerge as a mainstream asset class and an established store of value. 

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.