How to Predict the Price of Bitcoin Using Inflation Statistics
Ten years ago, the cost of bitcoin was 6 cents. This year it recorded an all-time high of 60k. Considering the current Bitcoin mainstream adoption, what is the fate of Bitcoin ten years from now? Contrary, there are also competitive coins such as Ether (ETH) with more prominent communities.
As mentioned above, the price of Bitcoin has inflated in the past ten years. So what does inflation mean? Contrary to the crypto-space definition, the fiat world defines inflation as a decline in the purchasing power of a currency over time. This article reviews the strategies of predicting the price of Bitcoin using crypto market inflation statistics.
Understanding Inflation in the Crypto-Space
In the fiat currency world, inflation measures the overall impact of price change on modified products and services. It also allows single value representation of increased price levels of goods and services over some time. In the crypto space, inflation has a different meaning from the conventional meaning used in fiat currencies.
For instance, in the case of Bitcoin, inflation means an increase in the Bitcoin supply. Notably, many crypto enthusiasts believe bitcoin is immune to inflation. Besides, deflation in the bitcoin world refers to the maximum supply of Bitcoin. Miners can only produce 21 million bitcoins. So there will be no creation of new Bitcoins and no more rewards from mining operations.
First, let’s review some of the reasons why bitcoin price is mooning at a high rate.
Inflation of Fiat Currency
A probable reason for bitcoin’s price rising is the growing inflation rate of the U.S dollar. Consequently, investors are hedging against this inflation by turning to Bitcoin investment as an alternative.
Investors tend to avoid inflation by converting their fiat currencies into less volatile assets. These assets include precious metals such as gold and, recently, Bitcoin.
Halving and Stock-to-Flow Model
Halving involves cutting the bitcoin rewards into two after every four years. Halving is a synthetic form of inflation that ensures all Bitcoins are released and are in circulation. For instance, in 2009, the reward was 50 bitcoins, and after the first halving, it was 25. Later, it was halved to 12.5 and then 6.25 on 11th May 2020.
As stated above, only 21 million Bitcoins will ever exist, making Bitcoin more scarce than other assets. Additionally, halving will continue until 2140. Bitcoin has successfully followed its stock to flow model, which will see Bitcoin hit $100k soon.
As the mining network grows, the mining difficulty also increases. Bitcoin mining requires a vast amount of energy. This energy cost is paid by miners in fiat currency, making mining extremely expensive.
Bitcoin Adoption as a Means of Payment
Growing adoption as a payment method has led to the appreciation of Bitcoin’s price. For instance, the PayPal platform announced that they would start accepting bitcoin and other cryptocurrencies for transactions.
Predicting Bitcoin Price through Combining Blockchain and Big Data
Bitcoin inflation data has been growing since its introduction to the digital market. For any investor looking forward to using statistics in forecasting the future price of Bitcoin, blockchain data is the way to go.
The blockchain technology in BTC prevents the forging of recorded information, making the data more reliable. Additionally, “blockchain-based big data” is well structured, complete, and abundant, making it an excellent source for historical analysis.
In the digital space, big data refers to immense, diverse information that rises at ever-increasing rates. This data is historical and originates from data mining. Therefore, investors can use it to read price trends and forecast future prices.
Reading blockchain-based big data requires analytical strategies since the data is too much to be read by humans. Some of these techniques include monitoring websites such as blockchain explorers, network statistics charts and plotting tools, and websites that track nodes. These networks can also track Bitcoin statistical data.
Let’s take a look at some of these tools for a better understanding.
Blockchain explorers enable investors to identify all transactions that have taken place since creating cryptocurrency’s distributed ledger. A good example is Blockchain.info that allows users to enter a bitcoin address and view its content.
Network Statistics Charts and Plotting Tools
An excellent example of these tools is Statoshi.info that provides its users with real-time Bitcoin network statistics. This website has dashboards that display bandwidth usage, fee estimates, mempool data, and so more.
Websites that Track Nodes
An example of such a website is the Node Counter. A Node Counter is an analytical website capable of tracking Bitcoin nodes across the network. The nodes include XT, Bitcoin Unlimited (BU) Core nodes, and Bitcoin Classic nodes in a geographical setting.
Each table displays various nodes inside the network alongside pools that signal alternate Bitcoin users and block size proposals. Notably, Node Counter can display data using line graphs and pie charts.
All the mentioned monitoring websites have their limitations and advantages as well. So it is upon the user to gauge which one suits their needs.
Bitcoin investors are very keen to observe any volatility within the crypto-verse. Digital market dynamics have led developers to create analytical tools to help them forecast the uncertainties around the crypto market.
Considering the rate at which Bitcoin has been surging, it is safe to say that it will continue with the same trend and probably hit 100k in the future. Competition from Ether is not likely to affect Bitcoin’s growth since many investors favor first movers. Besides, Ethereum’s gas fee is relatively high.
The above information gives an insight on how to move around Bitcoin price forecasting. Before investing, Bitcoin investors should do extensive research and choose for themselves because crypto markets are full of uncertainties.