Over the last few years, Bitcoin established a key narrative for itself as an inflation hedge. The narrative became especially strong during the Covid-19 pandemic, which saw M2 money supply in the United States more than double over a few years.

However, with the orange coin’s prices tumbling over 70% since it’s all-time-high, some have dismissed the its labels as an “inflation hedge” as nothing more than a marketing slogan.

Often termed “digital gold”, Bitcoin seems to have failed in this aspect, despite inflation numbers across the globe coming in at record highs. So why do people still cling on to this seemingly lost narrative of Bitcoin as an inflation hedge when it has seemingly underperformed all expectations?

Also Read: NFTs Are Exploding … On The Bitcoin Network

Understanding Exactly How Scarce Bitcoin is

By now, most of us know about the Bitcoin “halving” cycles, which occur approximately once every four years. During halvings, rewards paid out to Bitcoin miners are halved, which decreases the new supply of Bitcoin and has historically led to bull rallies.

However, it is truly difficult to fully contextualize how effective the halvings are.

Did you know, for example, that more than 90% of all Bitcoin have already been mined? As stipulated in the Bitcoin whitepaper, only 21 million Bitcoin will ever exist, of which 19.3 million, or 92%, area already in circulating supply.

From the time of writing (6th March 2023) till the next halving approximately 400 days later, there will be 60,438 blocks mined, with a reward of 6.25 Bitcoin per block for a total of ~370,000 Bitcoin.

In terms of dollar value, that translates to ~$8.5 billion, barely a third of the average daily Bitcoin trading volume in the last few months.

By 2048, 99.9% of all Bitcoin would have been mined, with the last 0.1%, or 21000 Bitcoins being mined over the next 100 years. The last Bitcoin itself will be mined over a period of 40 years.

Bitcoin Dormancy Surpasses Available Supply on Exchanges

As whales, institutions, and entire countries continue to allocate toward long-term Bitcoin holdings, the available supply for trading continues to dwindle across exchanges.

As Bitcoin continued to crash, whales begun accumulation, especially at the $16,000 to $20,000 range, with more than 60,000 Bitcoin added by smart money in just the last 3 months.

Furthermore, the amount of Bitcoin that has remained dormant for a decade or longer recently passed available Bitcoin on exchanges, at 2.5 million Bitcoin. This includes the original 1 million Bitcoins mined by Satoshi Nakamoto, the pseudonymous creator of Bitcoin, that since remained untouched in over a decade.

At the time of writing, the approximately 2.5 million Bitcoin translates to 13.2% of supply, which some analysts suggest could never be reactivated again. This could be due to multiple factors, such as the loss of private keys, passing on of the owner, or incorrect tranasctions.

It looks like that with the deaths of Mircea Popescu and John McAfee a significant amount of $BTC might be lost forever.

RIP https://t.co/8KGPows3Kh

— Alexander Mardar (@amardar1) June 28, 2021

High-profile cases such as known Bitcoin billionaire Mircea Popescu’s passing and TV personality Alex Jones losing 10,000 Bitcoins are just some of the many instances where Bitcoin is permanently taken out of the circulation.

Interestingly, approximately 6 million Bitcoin, or ~30% of circulating supply, has not moved in the last 5 years or more. While we cannot expect all 6 million of these coins to remain dormant forever, it is likely that a significant amount of Bitcoin will continue to be taken out of the circulating supply every year due to various reasons.

Can Bitcoin Hold The Narrative as an Inflation Hedge?

This article speaks mostly to the scarcity of Bitcoin and the theoretical reduction of circulating supply over time. Equally as important (or even more so), is of course the demand for Bitcoin.

The leading cryptocurrency has increasingly fallen out of favour from both retail and institutional investors due to it’s lack of smart contract support, which prevents key aspects of Web3 such as smart contracts and DeFi to function on the blockchain.

However, advances in technology regarding Bitcoin are being made in strides, and the recent hype around Bitcoin-native NFTs, named ordinals, have landed them a valuation of $4.5 Billion by 2025.

Furthermore, the inflation hedge narrative does not necessarily have to be the only driving force for Bitcoin’s demand. The leading cryptocurrency still remains the de-facto method for many institutions and companies to gain exposure to Web3, due to how straightforward and simple it is.

SEC Chairman Gary Gensler: Everything other than #Bitcoin…[is a security].

— James Lavish (@jameslavish) February 26, 2023

Additionally, the SEC, chaired by Gary Gensler, seems to be taking regulatory action against every cryptocurrency under the sun, except for Bitcoin. This could be a major driver for institutional investors to allocate toward Bitcoin instead of other cryptocurrencies to remain compliant with U.S regulations.

Also Read: We Asked 5 Industry Leaders For Their 2023 Market Outlook

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

It’s 2023 and there is no doubt that we are in the midst of a multi-year bear market. While this has become painfully obvious with the collapse of CeDeFi, the new narratives and thought leaders in crypto have yet to be properly etched out.

However, many crypto participants have been quick to latch onto trends, nostalgic of the gains made or missed in the bull market.

If you’re still in crypto however, it’s time to re-evaluate your view of the market, and where the bear will take us.

Also Read: This Bear Market Is Trying To Teach You Something

“Web3.0” is Dead, Long Live Crypto

Love it or hate it, the term “web3.0” comes from a centralized, capitalistic point of view. The incessant need to rebrand “crypto” originated from its negative connotations with cyber criminals, drugs, and online gambling.

Furthermore, the infancy of crypto meant that there were a lot of rough patches that the industry as a whole had to figure out.

2) We're going back to "crypto" (native, organic, punk rock) vs. "Web3" (bad juju, consultant approved, weak) in 2023.

More Personal Wallets, Privacy, DeFi, DePIN.

Less exchanges, black box lenders, and ponzinomics.

— Ryan Selkis (@twobitidiot) December 22, 2022

Web3.0 was a term used sparsely in conjunction with the ideals of crypto – decentralization and self-custody.

With only builders and long-term believers remaining, it is nigh time that these ideals lead the entire space, and we return to what crypto was originally about.

Once we reach proper product-market fit is achieved in crypto, we won’t need buzz words like “web3.0” – it will simply sell itself.

Fundamentals are in, and Retail Will Be Destroyed

With the collapse of most decentralized and centralized ecosystems, there will likely be a reemergence of importance in “DYOR”, with extreme checks and balances for funds still looking to invest.

Gone are the days of spray and pray tactics which guaranteed any VC a 100x on launch day. Instead, there will likely be an equities-like evaluation of any major project alongside extremely critical scrutiny.

While memes can, and will continue to succeed, the constant 1000x pumps pushed by crypto influencers will die in the bear.

What is @bonk_inu and how has it taken over @solana? This new dogcoin has a > $50M market cap and rising! #SOL #Solana #BONKhttps://t.co/boioqYvW7f

— BSC News (@BSCNews) January 3, 2023

A key example is Bonk Inu, a doge-like memecoin native to the Solana Network. Despite it’s narrative-grabbing rise, it has managed barely double digit returns since its release.

Products like GMX, Cap Finance, and Uniswap, instead, may see a return to stardom, as we migrate our funds back to Dino-Defi, if anything at all.

7/ Dying yields meant on-chain asset managers became invisible to most of crypto

However, as the market cycle shifts away from memes to fundamentals, asset managers could stand to net higher returns https://t.co/dniovi6ehT

— Chain Debrief (@ChainDebrief) January 3, 2023

With the return of fundamentals, one thing is for sure – retail’s advantage will slowly be chiseled away, much like with equity markets.

There’s No Point in DCA-ing

“Time in the market beats timing the market” is a popular saying amongst crypto influencers.

The phrase is borrowed from the stock market, which has a historic upward trend, and an average return of 10%.

In crypto, however, most coins fall spectacularly from grace.

A quick look at the top coins of 2019 shows that many of them have failed to outperform even Bitcoin, aside from Ethereum.

As such, fans of the DCA method have two major outcomes they have to decide between

• DCA into a non-blue chip that is likely to fail
• DCA into ETH/ Bitcoin and not outperform the market

While the latter option is likely a safe 5-10x, factoring in the rugs, volatility, and headaches along the way, it may be best to chase those kinds of multiples elsewhere.

Closing Thoughts

If you’re still here in 2023, it means that you haven’t (yet) given up on crypto. You’re here despite FTX, despite rugs, and despite >99% crashes.

However, pure conviction is not the end all be all. Whether you are a speculator or a builder in the space, theories need to be re-written and past portfolio all time highs have to be relinquished.

Coming into the new year, we should all approach Web3.0, I mean crypto, with a fresh slate.

Also Read: Key Takeaways From Messari’s Top 10 DeFi Trends In 2023

[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]

Featured Image Credit: ChainDebrief