Because of its predictability, cryptocurrency investors often overlook Bitcoin (BTC) supply inflation. Understanding that predictable inflation still has an economic impact can improve investment results in this market.
Specifically, Finbold looked at Bitcoin’s supply inflation from a different perspective. Our goal was to understand the practical implications of these economic aspects and provide valuable insights to BTC holders. This is achieved by calculating the exact price that Bitcoin would trade if it ever reached its highest market cap.
The inflationary supply of a commodity requires proportionately more demand to maintain its value (or price). These two factors influence whether a commodity price rises or falls. Each cryptocurrency, including Bitcoin, has its unique economic structure.
Notably, Bitcoin had a highest-ever market cap of $1.302 trillion on November 10, 2021, according to TradingView’s index. Meanwhile, according to CoinMarketCap, BTC traded as high as $68,789. A reverse calculation suggests a circulating supply of around 18.927 million BTC at this point.
CRYPTOCAP – Daily market cap of BTC. Source: TradingView
Bitcoin supply inflation and its economic impact
Let’s examine BTC supply inflation and its economic impact. As of November 30, Bitcoin had a circulating supply of 19.557 million coins. This results in supply inflation of 630,000 BTC (3.32%) in two years, or around 1.66% per year.
Bitcoin offer. Source: CoinMarketCap
The price projection also shows the relevant economic impact of this inflation. Should the leading cryptocurrency reach its peak speculative demand of $1.302 trillion market cap, BTC would trade at a proportionally lower price than its corresponding all-time high.
Taking circulating supply into account at the time of publication, Bitcoin would trade for $66,574 at its highest capitalization. Interestingly, a loss of $2,215 (3.2%) from the previous price in 2021.
However, this still suggests a potential 77% increase from the current price of $37,600.
It is important to understand that the forecast assumes the same demand as 2021 for Bitcoin. In this context, there is no guarantee that this demand will ever occur again. On the other hand, it is also possible that demand will increase in subsequent years.
Disclaimer: The content of this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
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